UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 333-38184
TOMBSTONE TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 51-0431963
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(State of Incorporation) (IRS Employer ID Number)
2400 Central Avenue, Suite G, Boulder, CO 80301
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(Address of principal executive offices)
303-684-6644
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(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of April 29, 2009, there were 3,370,000 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Condensed Balance Sheets - March 31, 2009 and
December 31, 2008 F-1
Condensed Statements of Operations -
Three months ended March 31, 2009 and 2008 F-2
Condensed Statements of Cash Flows -
Three months ended March 31, 2009 and 2008 F-3
Condensed Statement of Changes in Shareholders' Equity -
Three months ended March 31, 2009 F-4
Notes to the Condensed Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk -
Not Applicable 2
Item 4. Controls and Procedures 2
Item 4T. Controls and Procedures 3
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 4
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 4
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 4
Item 4. Submission of Matters to a Vote of Security Holders -
Not Applicable 4
Item 5. Other Information - Not Applicable 4
Item 6. Exhibits 5
SIGNATURES 6
PART I
ITEM 1. FINANCIAL STATEMENTS
TOMBSTONE TECHNOLOGIES, INC.
Balance Sheets
March 31, 2009 December 31, 2008
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Assets
Current assets
Cash and cash equivalents.................................................$ 5,556 $ 11,882
Accounts receivable....................................................... -- 383
Prepaid expenses.......................................................... 920 1,854
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Total current assets............................................ 6,476 14,119
Property and equipment.................................................... 32,803 32,803
Accumulated depreciation.................................................. (17,804) (15,212)
Net assets of discontinued operations..................................... -- --
Deferred Charges.......................................................... 96,320 53,450
Intangible assets......................................................... 484 484
--------------------- ----------------------
Total assets....................................................$ 118,279 $ 85,644
===================== ======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable..........................................................$ 17,071 $ 953
Other current liabilities................................................. 38,769 38,754
Convertible Promissory Note............................................... 7,500 --
Unearned revenue.......................................................... --
Current portion - capital lease obligation................................ 2,697 2,697
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Total current liabilities....................................... 66,037 42,404
Capital lease obligation, less current portion............................... 989 1,542
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Total liabilities...............................................$ 67,026 $ 43,946
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Shareholders' equity:
Preferred stock........................................................... -- --
Common stock.............................................................. 854,175 816,305
Additional paid-in capital................................................ 134,892 134,892
Deficit accumulated during development stage.............................. (937,814) (909,499)
--------------------- ----------------------
Total shareholders' equity...................................... 51,253 41,698
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Total liabilities and shareholders' equity......................$ 118,279 $ 85,644
===================== ======================
See accompanying notes to financial statements
F-1
TOMBSTONE TECHNOLOGIES, INC.
Statements of Operations
(Unaudited)
For the Three Months
Ended
March 31,
----------------------------------
2009 2008
---------------- ----------------
Continuing operations:
Selling, general and administrative expenses............$ (28,185)$ (68,406)
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Loss from continuing operations.............. (28,185) (68,406)
Other income and (expense):
Interest income......................................... 5 2,380
Interest expense........................................ (135) (184)
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(130) 2,196
Loss before income taxes and
discontinued operations............................... (28,315) (66,210)
Income tax provision........................................ -- --
---------------- ----------------
Loss before discontinued operations................... (28,315) (66,210)
---------------- ----------------
Discontinued operations:
Loss from operations of playing card
component, net of taxes............................... -- (48,896)
---------------- ----------------
Net loss.....................................$ (28,315)$ (115,106)
================ ================
Basic and diluted loss per share............................$ (0.01)$ (0.04)
================ ================
Basic and diluted weighted average
common shares outstanding............................... 3,253,333 3,230,000
================ ================
See accompanying notes to financial statements
F-2
TOMBSTONE TECHNOLOGIES, INC.
Statements of Cash Flows
(Unaudited)
For the Three Months
Ended
March 31, March 31,
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2009 2008
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Cash flows from operating activities:
Net Cash Flows used in operating activities...................... (13,267) (46,818)
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Cash flows from investing activities:
Purchase of property and equipment......................................... -- (2,979)
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Net cash flows used in investing activities...................... -- (2,979)
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Cash flows from financing activities:
Short Term Debt 7,500 --
Cash payments on capital lease............................................. (559) --
Net cash flows used in...........................................
financing activities........................................... 6,941 --
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Net change in cash and cash equivalents.......................... (6,326) (49,797)
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Cash and cash equivalents:
Beginning of period........................................................ 11,882 312,647
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End of period..............................................................$ 5,556 $ 262,850
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes.............................................................$ -- $ --
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Interest.................................................................$ -- $ --
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Noncash investing and financing information:
Common stock issued for deferred software development....................$ 37,870 $ --
================== ==================
See accompanying notes to financial statements
F-3
TOMBSTONE TECHNOLOGIES, INC.
Statement of Changes in Shareholders' Equity
(Unaudited)
Additional
Common Stock Paid-in Accumulated
--------------------------------
Shares Amount Capital Deficit Total
--------------- -------------- ------------- -------------
--------------- -------------- ------------- --------------- -------------
Balance at January 1, 2009................... 3,230,000 $ 816,305 $ 134,892 $ (909,499) $ 41,698
Contributed services by vendors........ 140,000 37,870 -- -- 37,870
Net loss............................... -- -- -- (28,315) (28,315)
--------------- -------------- ------------- --------------- -------------
Balance at March 31, 2009.................... 3,370,000 $ 854,175 $ 134,892 $ (937,814) $ 51,253
=============== ============== ============= =============== =============
F-4
TOMBSTONE TECHNOLOGIES, INC.
Note to Condensed Financial Statements
March 31, 2009
(Unaudited)
Note 1: Basis of Presentation
-----------------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Regulation S-K. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of the
Company, the accompanying unaudited condensed financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 2009, the results of operations
for the three months ended March 31, 2009 and 2008, and cash flows for the three
months ended March 31, 2009 and 2008. These financial statements should be read
in conjunction with the audited financial statements and notes thereto contained
in the Company's annual report on Form 10-K for the year ended December 31,
2008. There have been no updates or changes to our audited financial statements
for the year ended December 31, 2008.
There is no provision for dividends for the quarter to which this quarterly
report relates.
The results of operations for the three months ended March 31, 2009 are not
necessarily indicative of the results to be expected for the full year.
Going Concern
The Company's financial statements for the three months ended March 31, 2009
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company reported an accumulated deficit of $937,814 as of March
31, 2009. The Company did not recognize revenues from its activities during the
three months ended March 31, 2009. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
Note 2: Inventories
-------------------
As of March 31, 2009, there were no inventories on hand to report.
F-5
TOMBSTONE TECHNOLOGIES, INC.
Note to Condensed Financial Statements
March 31, 2009
(Unaudited)
Note 3: Convertible Promissory Note
-----------------------------------
The following is a summary of convertible promissory notes at March 31, 2009 and
December 31, 2008:
March 31, 2009 December 31, 2008
Convertible promissory note payable to unrelated third party, $ 5,000 $ 0
with interest accruing at 8% per annum (paid quarterly) due
for repayment 12 months from the date of issuance. The note
was issued on March 18, 2009, immediately convertible into
restricted shares of common stock at $0.10 per share.
Convertible promissory note payable to unrelated third party $ 2,500 $ 0
with interest accruing at 8% per annum (paid quarterly) due
for repayment 12 months from the date of issuance. The note
was issued on March 30, 2009, immediately convertible into
restricted shares of common stock at $0.10 per share.
------------------------- --------------------------
Total convertible promissory notes $ 7,500 $ 0
Note 4: Shareholders' Equity
----------------------------
As of March 31, 2009 we had $854,175 Common Stock no par value, additional paid
in capital of $134,892, and accumulated loss of $(937,814), for net shareholder
equity in the Company of $51,253.
We recorded shares issued of 140,000 issued to Indis Baltic on March 3, 2009,
with a value of $37,870, as indicated in the contract with Indis Baltic.
Note 5: Income Taxes
--------------------
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109 (SFAS No. 109), "Accounting for Income Taxes." The
Company incurred net operating losses during the periods shown on the condensed
financial statements resulting in a deferred tax asset, which was reserved;
therefore the net benefit and expense resulted in $-0- income taxes.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2008, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
OVERVIEW
At March 31, 2009, we had cash on hand of $5,556. We intend to use our cash
funds to continue operations. We intend to continue to develop the business
opportunities presented by our OIEPrint(TM) software. The development of the
business opportunities includes continued marketing efforts and product testing
over the next twelve months.
In the continuance of our business operations we do not intend to purchase or
sell any significant assets and we do not expect a significant change in the
number of employees of the Company.
We are dependent on raising additional equity and/or debt to fund our ongoing
operating expenses. There is no assurance that we will be able to raise the
necessary equity and/or debt that we will need to be able to negotiate
acceptable settlements with our outstanding creditors or fund our ongoing
operating expenses. We cannot make any assurances that we will be able to raise
funds through such activities.
In addition, the United States is experiencing severe instability in the
commercial and investment banking systems which is likely to continue to have
far-reaching effects on the economic activity in the country for an
indeterminable period. The long-term impact on the United States economy and the
Company's operating activities and ability to raise capital cannot be predicted
at this time, but may be substantial.
On April 7, 2009, Mr. Michael Willis was appointed as Chief Executive Officer of
the Company after the resignation of Mr. John Harris as the Chief Executive
Officer.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2009 Compared to the Three Months Ended
March 31, 2008
During the three months ended March 31, 2009, we did not recognize any sales
from our operational activities. During the three months ended March 31, 2008,
we did recognize sales of $35,785 from the sale of our customized playing cards.
The decrease in sales of $35,785 was a result of the discontinuance of our
1
activities in the printing of customized playing cards and a focus on the
development of our OIE Print software.
During the three months ended March 31, 2009, we incurred operational losses of
$28,185 compared to $68,406 during the three months ended March 31, 2008. The
decrease of $40,221 is a result of the decrease of $40,221 in general and
selling expenses combined with the discontinuance of the customized card
printing operations as of December 31, 2008. No wages were paid or accrued
during the quarter ended March 31, 2009.
During the three months ended March 31, 2009, we recognized a net loss of
$28,315 compared to a net loss of $115,106 during the three months ended March
31, 2008. The decrease of $86,791 is a result of the decreased operational
activity discussed above offset by the decrease in sales.
LIQUIDITY
At March 31, 2009, we had total current assets of $6,476, consisting of cash on
hand of $5,556, and $920 in prepaid expenses. At March 31, 2009, we had total
current liabilities of $66,037, consisting of accounts payable of $17,071 and
other current liabilities of $38,769, convertible notes payable of $7,500, and
the current portion of lease obligations of $2,697. At March 31, 2009, we have a
working capital deficit of $59,561.
Net cash used in operating activities during the three months ended March 31,
2009 was $13,267, compared to net cash used in operating activities during the
three months ended March 31, 2008 of $46,818.
The Company did not use or receive cash from investing activities in the three
months ended March 31, 2009. During the three months ended March 31, 2008, the
Company used $2,979 in its investing activities, in the purchase of property and
equipment.
During the three months ended March 31, 2009, we received $6,941 from our
financing activities. During the three months ended March 31, 2008, we did not
use or receive any funds from financing activities.
During the three months ended March 31, 2009, we entered into convertible
promissory notes totaling $7,500. The convertible promissory notes have a term
of one year and accrue interest at 8% per annum. The convertible promissory
notes have a conversion rate of $0.10 per share.
During the three months ended March 31, 2008, we issued 140,000 shares of our
restricted common stock to Indis Baltic for the completion of their work on the
development of the OIE Print Software. The shares had a value of $37,870.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
2
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), Mr. Harris, our Chief Executive Officer at
March 31, 2009 and Mr. Cox our Chief Financial Officer, for the quarter ended
March 31, 2009, carried out an evaluation under the supervision and with the
participation of our management, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report. Based on the
foregoing evaluation, Messrs. Harris and Cox have concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information required to be included in our periodic SEC filings and to ensure
that information required to be disclosed in our periodic SEC filings is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure as a result of the deficiency in our internal control over
financial reporting discussed below.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and directors; and
(iii)provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended March 31,
2009. We believe that internal control over financial reporting is effective. We
have not identified any, current material weaknesses considering the nature and
extent of our current operations and any risks or errors in financial reporting
under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
3
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from January
1, 2009 through March 31, 2009.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------ -------------------- ---------------- ----------------------- -----------------------------
3/3/2009 Common Stock 140,000 Software Development Business Associate
------------------ -------------------- ---------------- ----------------------- -----------------------------
Exemption From Registration Claimed
All of the sales by the Company of its unregistered securities were made by the
Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"). All of the individuals and/or entities listed above that
purchased the unregistered securities were almost all existing shareholders, all
known to the Company and its management, through pre-existing business
relationships, as long standing business associates, and employees. All
purchasers were provided access to all material information, which they
requested, and all information necessary to verify such information and were
afforded access to management of the Company in connection with their purchases.
All purchasers of the unregistered securities acquired such securities for
investment and not with a view toward distribution, acknowledging such intent to
the Company. All certificates or agreements representing such securities that
were issued contained restrictive legends, prohibiting further transfer of the
certificates or agreements representing such securities, without such securities
either being first registered or otherwise exempt from registration in any
further resale or disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5. OTHER INFORMATION
NONE.
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ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOMBSTONE TECHNOLOGIES, INC.
(Registrant)
Dated: May 14, 2009 By: /s/ Michael Willis
------------------------------------------
Michael Willis, Chief Executive Officer
Dated: May 14, 2009 By: /s/ Neil A. Cox
---------------------------------------------
Neil A. Cox, Chief Financial Officer &
Chief Accounting Officer
6