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 June 30, 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)
5380 Highlands Drive, Longmont, CO 80503
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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 for 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 July 31, 2009, there were 3,878,000 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Condensed Balance Sheets - June 30, 2009 and
December 31, 2008 F-1
Condensed Statement of Operations -
Six Months and Three months ended June 30, 2009 and 2008 F-2
Condensed Statement of Changes in Shareholders' Equity -
June 30, 2009 F-3
Condensed Statement of Cash Flows for the Six months ended F-4
June 30, 2008 and 2009
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 3
Item 4. Controls and Procedures 3
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
Item 3. Defaults Upon Senior Securities - Not Applicable 4
Item 4. Submission of Matters to a Vote of Security Holders -
Not Applicable 5
Item 5. Other Information - Not Applicable 5
Item 6. Exhibits 5
SIGNATURES 6
PART I
ITEM 1. FINANCIAL STATEMENTS
TOMBSTONE TECHNOLOGIES, INC.
(Formerly Tombstone Cards, Inc.)
(A Development Stage Company)
Condensed Balance Sheets
(Unaudited)
June 30, 2009 December 31, 2008
(unaudited) (Derived from
audited statements)
--------------------- ----------------------
Assets
Current assets
Cash and cash equivalents $ 8,589 $ 11,882
Accounts receivable -- 383
Prepaid expenses 920 1,854
--------------------- ----------------------
Total current assets 9,509 14,119
Property and equipment 32,803 32,803
Accumulated depreciation (22,617) (15,212)
Deferred charges 106,177 53,450
Intangible assets 484 484
--------------------- ----------------------
Total assets $ 126,355 $ 85,644
===================== ======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,074 $ 953
Accrued payroll -- 36,000
Other current liabilities 2,754 2,754
Convertible promissory note 60,000 --
Discount on convertible promissory note (40,417) --
Current portion - capital lease obligation 2,456 2,697
--------------------- ----------------------
Total current liabilities 30,867 42,404
Capital lease obligation, less current portion 661 1,542
--------------------- ----------------------
Total liabilities $ 31,528 $ 43,946
--------------------- ----------------------
Shareholders' equity:
Preferred stock -- --
Common stock 939,886 816,305
Additional paid-in capital 213,275 134,892
Deficit accumulated during development stage (1,058,333) (909,499)
--------------------- ----------------------
Total shareholders' equity 94,828 41,698
--------------------- ----------------------
Total liabilities and shareholders' equity $ 126,355 $ 85,644
===================== ======================
See accompanying notes to unaudited condensed financial statements
F-1
TOMBSTONE TECHNOLOGIES, INC.
(Formerly Tombstone Cards, Inc.)
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
For the Six Months Ended For the Three Months Ended January 1, 2009
June 30, June 30, (inception) to
-------------------------- ------------------------------
2009 2008 2009 2008 June 30, 2009
------------ ----------- --------------- ------------ ----------------
Continuing operations:
Selling, general and administrative expenses $ 128,215 $ 209,383 $ 100,030 $ 140,810 $ 128,215
------------ ------------- ------------ ------------ -------------
Loss from continuing operations (128,215) (209,383) (100,030) (140,810) (128,215)
Other income and (expense):
Interest income 5 3,332 -- 952 5
Interest expense
Interest expense-amortization of discount
on promissory notes (19,583) -- (19,583) -- (19,583)
Interest expense-other (1,041) (352) (906) (168) (1,041)
------------ ------------- ------------ ------------ -------------
(20,619) 2,980 (20,489) 784 (20,619)
Loss before income taxes and discontinued
operations (148,834) (206,403) (120,519) (140,026) (148,834)
Income tax provision -- -- -- -- --
------------ ------------- ------------ ------------ -------------
Loss before discontinued operations (148,834) (206,403) (120,519) (140,026) (148,834)
------------ ------------- ------------ ------------ -------------
Discontinued operations:
Loss from operations of playing card
component, net of taxes -- (54,869) -- (5,973) --
------------ ------------- ------------ ------------ -------------
Net loss $ (148,834) $ (261,272) $ (120,519) $ (145,999) $ (148,834)
============ ============= ============ ============ =============
Basic and diluted loss per share $ (0.04) $ (0.08) $ (0.03) $ (0.05) $ (0.04)
============ ============= ============ ============ =============
Basic and diluted weighted average
common shares outstanding 3,319,341 3,230,000 3,449,362 3,230,000 3,319,341
============ ============= ============ ============ =============
See accompanying notes to unaudited condensed financial statements
F-2
TOMBSTONE TECHNOLOGIES, INC.
(Formerly Tombstone Cards, Inc.)
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
For the Six Months Ended January 1, 2009
June 30, (inception) to
-----------------------------------
2009 2008 June 30, 2009
---------------- ---------------- ----------------
Cash flows from operating activities:
Net cash flows used in operating activities $ (57,171) $ (203,391) $ (57,171)
---------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment -- (3,086) --
Purchase of intangible asset (5,000) (400) (5,000)
---------------- ---------------- ----------------
Net cash flows used in investing activities (5,000) (3,486) (5,000)
---------------- ---------------- ----------------
Cash flows from financing activities:
Proceeds from convertible promissory notes 60,000 -- 60,000
Cash payments on capital lease (1,122) (1,472) (1,122)
---------------- ---------------- ----------------
Net cash flows from financing activities 58,878 (1,472) 58,878
---------------- ---------------- ----------------
Net change in cash and cash equivalents (3,293) (208,349) (3,293)
---------------- ---------------- ----------------
Cash and Cash Equivalents:
Beginning of period 11,882 313,498 11,882
---------------- ---------------- ----------------
End of period $ 8,589 $ 105,149 $ 8,589
================ ================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ -- $ -- $ --
================ ================ ================
Interest $ 1,041 $ 352 $ 1,041
================ ================ ================
Noncash investing and financing transactions:
Common stock issued for deferred software development $ 37,870 $ -- $ 37,870
================ ================ ================
See accompanying notes to un audited condensed financial statements
F-3
TOMBSTONE TECHNOLOGIES, INC.
(Formerly Tombstone Cards, Inc.)
(A Developoment Stage Company)
Condensed 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
March 2009, shares issued for
software development 140,000 37,870 -- -- 37,870
June 2009, shares issued for
services by officers 476,170 85,711 -- -- 85,711
Stock options issued and extended -- -- 18,383 -- 18,383
Discount on convertible promissory
notes -- -- 60,000 -- 60,000
Net loss -- -- -- (148,834) (148,834)
-------------- -------------- ------------- -------------- ---------------
Balance at June 30, 2009 3,846,170 $ 939,886 $ 213,275 $ (1,058,333) $ 94,828
============== ============== ============= ============== ===============
See accompanying notes to unaudited condensed financial statements
F-4
TOMBSTONE TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements
June 30, 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 June 30, 2009, the results of operations for
the six months and three months ended June 30, 2009 and 2008, and cash flows for
the six months ended June 30, 2009. 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.
The Company had returned to a development stage company due to the change of
business plan and strategies in January, 2009.
There is no provision for dividends for the quarter to which this quarterly
report relates.
The results of operations for the six months ended June 30, 2009 are not
necessarily indicative of the results to be expected for the full year.
Going Concern
The Company's financial statements for the six months ended June 30, 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 $1,058,333 as of June
30, 2009. The Company did not recognize revenues from its activities during the
six months ended June 30, 2009. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
Note 2: Related Parties
-----------------------
On June 30, the Company issued to two officers a total of 360,000 shares of
common stock in lieu of $36,000 accrued salaries ($0.10 per share).
On June 30, the Company issued to one officer a total of 116,170 shares of
common stock in lieu of $11,617 salaries ($0.10 per share).
F-5
TOMBSTONE TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements
June 30, 2009
(Unaudited)
Note 3: Intangible Assets
-------------------------
On May 15, 2008, Tombstone Technologies, Inc. (Tombstone) entered into an
Intellectual Property Transfer Agreement with InDis Baltic, a Lithuania company,
to purchase all of the rights, title and interest in and to the technology,
intellectual property and the proprietary technology contained in the computer
software known as OIEPrint. OIEPrint was developed as part of a development
agreement between Tombstone and InDis Baltic. As part of the Intellectual
Property Transfer Agreement, Tombstone agreed to pay the following:
1. $7,500 immediately upon mutual acceptance of Transfer Agreement,
2. $7,500 upon final acceptance of the Technology,
3. 140,000 shares of restricted common stock of Tombstone upon final
acceptance of the Technology, and
4. $10,000 in 90 days from the final acceptance of the Technology.
On March 3, 2009, Tombstone issued 140,000 shares of restricted common stock of
Tombstone to InDis Baltic as indicated in the above agreement and recorded it as
a deferred charge. On June 30, 2009, Tombstone recorded half of the final
payment $5,000 for OIEPrint, which is a deferred charge in the accompanying
financial statements. In addition, Tombstone agreed to issue 25,000 shares of
common stocks to InDis Baltic as the other half of the final payment in an
agreement signed on July 6, 2009. (See Note 7)
Note 4: Convertible Promissory Notes
------------------------------------
During the six months ended June 30, 2009, Tombstone issued Convertible
Promissory Notes payable to unrelated third parties totaling $60,000 with
interest accruing at 8% per annum (paid quarterly) maturing twelve months from
date of issuance. The notes are immediately convertible to restricted shares of
common stock at $0.10 per share.
A beneficial conversion feature (difference between conversion price and the
quoted stock price on the date of commitment) embedded in the convertible
promissory notes was measured and recorded as $40,417 discount on convertible
promissory notes and $19,583 interest expense in the accompanying financial
statements for the six-month period ended June 30, 2009.
The following is a summary of convertible promissory notes at June 30, 2009 and
December 31, 2008:
June 30, 2009 December 31, 2008
------------------- ----------------------
Notes issued in March 2009 $ 7,500 $ -
Notes issued in April 2009 25,000 -
Notes issued in May 2009 27,500 -
------------------------------------------
Total convertible promissory notes $ 60,000 $ -
=================== ======================
F-6
TOMBSTONE TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements
June 30, 2009
(Unaudited)
Note 5: Shareholders' Equity
----------------------------
Shares of Common Stock for Software Development
-----------------------------------------------
In March, 2009, we issued 140,000 shares of common stock for software
development.
Stock Options
-------------
Pursuant to our Employee/Consultant Stock Option Plan, stock options generally
are granted with an exercise price equal to the market price of our common stock
at the date of grant. Substantially all of the options granted to employees and
consultants are exercisable pursuant to an immediate vesting schedule with a
maximum contractual term of 5 years. The fair value of these options is
estimated using the Black-Scholes option pricing model which incorporates the
assumptions noted in the table below. The risk-free interest rate for periods
within the expected life of the option is based on the U.S. Treasury bond rate
in effect at the time of grant. We do not pay dividends and do not expect to do
so in the future. Expected volatilities are based on the historical volatilities
of appropriate industry sector index. The expected term of the options granted
during 2009 is approximately 3 years calculated using the simplified method
allowed under Staff Accounting Bulletin No. 107 Share-Based Payment, or SAB No.
107.
We use historical volatility of appropriate industry sector index as we believe
it is more reflective of market conditions and a better indicator of volatility.
We use the simplified calculation of expected life described in the SAB No. 107.
If we determined that another method used to estimate expected volatility was
more reasonable than our current methods, or if another method for calculating
these input assumptions was prescribed by authoritative guidance, the fair value
calculated for share-based awards could change significantly. Higher volatility
and longer expected lives result in an increase to share-based compensation
determined at the date of grant.
A summary of changes in the number of stock options outstanding for the six
months ended June 30, 2009 is as follows:
Weighted Weighted
Average Average
Exercise Remaining Aggregate
Number of Exercise Price Price Per Contractual Intrinsic
Shares Per Share Share Life Value
Outstanding at December 31, 2008 5,020,000 $0.65 - $1.50 $0.95 1.83 years --
Granted 129,999 $0.10 - $0.20 -- 1.72 years $8,000
Exercised -- -- -- -- --
Cancelled/Expired --- --- --- --- --
--------------- ----------------- ------------- --------------- -------------
Outstanding at June 30, 2009 5,149,999 $0.20 - $1.50 $0.65 2.04 years $6,000
=============== ================= ============= =============== =============
F-7
TOMBSTONE TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements
June 30, 2009
(Unaudited)
New Stock Options Granted
-------------------------
During the second quarter of 2009, we granted to two consultants and one
officer, options to purchase 129,999 shares of our common stock at an exercise
price of $0.10 to $0.20 per share, in exchange for services. The option to
purchase 129,999 shares of our common stock vested immediately on grant date in
April 2009 and expires in August 2012. Our Board of Directors valued our common
stock at $0.20 and $0.26 per share on the grant date. We, utilizing appropriate
option pricing software, estimated the fair value of the options at $0.05 to
$0.26 per share for an aggregate grant-date fair value of $8,009. We recorded
$8,009 in stock-based compensation in the accompanying financial statements for
the six-month period ended June 30, 2009.
The fair values of grants made in the six months ended June 30, 2009 were
computed using the following assumptions for our stock option plans:
Risk-free interest rate 0.16% to 0.41%
Dividend yield 0.00%
Volatility factor 25.00%
Weighted average expected life 0.04 to 0.08 years
Amendment to Stock Option Plan
------------------------------
On May 27, 2009, our Board of Directors approved an amendment to the Company's
Employee/Consultant Stock Option Plan to increase the number of shares
authorized from 1,000,000 to 1,500,000.
Modification to Existing Options
--------------------------------
The Board also modified 1,029,999 outstanding stock options under the Company's
Employee/Consultant Stock Option Plan by extending their terms until August 31,
2012. Based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123(R), the fair value of the modification totaled
$10,374, which is being recognized as stock-based compensation expense in the
accompanying financial statements for the six-month period ended June 30, 2009.
The fair values of modifications made in the six months ended June 30, 2009 were
computed using the following assumptions for our stock option plans:
Risk-free interest rate 1.50%
Dividend yield 0.00%
Volatility factor 25.00%
Weighted average expected life 2.29 years
Note 6: 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-8
TOMBSTONE TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements
June 30, 2009
(Unaudited)
Note 7: Subsequent Events
-------------------------
Convertible Promissory Notes
----------------------------
In July 2009, the Company issued Convertible Promissory Notes payable to
unrelated third parties totaling $40,000 with interest accruing at 8% per annum
(paid quarterly) due for repayment twelve months from date of issuance. The
notes are immediately convertible to restricted shares of common stock at $0.10
per share.
Intangible Assets
-----------------
On July 6, 2009, the Company recorded 25,000 shares of restricted stock issued
to Indis Baltic along with a final payment of $5,000 to complete the
Intellectual Property Transfer Agreement dated May 15, 2008. (See Note 3)
F-9
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 June 30, 2009, we had cash on hand of $8,589. 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.
During the six months ended June 30, 2009, we raised funds through a private
financing consisting of $60,000 in Convertible Promissory Notes that will mature
after one year. Payments of interest at the rate of 8.0% per annum will be
accrued and paid each quarter to each investor beginning June 30, 2009. We paid
the convertible promissory note holders on June 30, 2009, the sum of $1,041,
which included $15 of accrued interest for the quarter ended March 31, 2009, and
$1,026 of interest for the quarter ended June 30, 2009. The final principle
payment to the investors will be payable to the investor one year from their
investment date. The convertible promissory notes provide for the holder to
convert the promissory note into restricted shares of the Company's common stock
at a rate of $0.10 per share, at any time prior to the payment of the
convertible promissory note by the Company. These funds are to be used to
support operations of the Company.
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.
1
RESULTS OF OPERATIONS
For the Three Months Ended June 30, 2009 compared to the Three Months Ended June
30, 2008
During the three months ended June 30, 2009, we did not recognize any sales from
its operational activities. During the three months ended June 30, 2008, we
recognized $12,366 in sales from its operational activities in customized
playing cards, which is recognized as a part of discontinued operations as a
result of the Company's discontinuance of its customized playing card activities
and a focus on the development of our OIE Print software.
During the three months ended June 30, 2009, we incurred $100,030 in selling and
general administrative expenses compared to $140,810 during the June 30, 2008.
The decrease of $40,780 was a result of the decrease in our activities in
connection with the customized playing cards combined as discussed above.
During the three months ended June 30, 2009, we recognized a net loss of
$120,519 compared to $145,999 for the three months ended June 30, 2008. The
decrease of $25,480 was a result of the decreases of $40,780 offset by an
increase of $19,583 in interest expenses and amortization expenses as a result
of the issuance of convertible promissory notes.
For the Six Months Ended June 30, 2009 compared to the Six Months Ended June 30,
2008
During the six months ended June 30, 2009, we did not recognize any sales from
our operational activities. During the six months ended June 30, 2008, we
recognized sales of $48,151 during the six months ended June 30, 2008 from the
sale of our customized playing cards, which is recognized as a part of
discontinued operations as a result of the Company's discontinuance of its
customized playing card activities and a focus on the development of our OIE
Print software.
During the six months ended June 30, 2009, we incurred general and
administrative expenses of $128,215 compared to $209,383 during the six months
ended June 30, 2008. The decrease of $81,168 is a result of a $67,050 decrease
in professional fees combined with smaller decreases in the general and
administrative expenses resulting from the discontinuance of the customized card
printing operations as of December 31, 2008
During the six months ended June 30, 2009, we recognized a net loss of $148,834
compared to a net loss of $261,272 during the six months ended June 30, 2008.
The decrease of $112,438 is a result of the $81,168 decrease in general and
administrative expenses and the $54,869 decrease in losses from discontinued
expenses offset by an increase of $19,583 in interest expenses as a result of
the issuance of convertible promissory notes.
LIQUIDITY
At June 30, 2009, we had total current assets of $9,509, consisting of cash on
hand of $8,589 and $920 in prepaid expenses. At June 30, 2009, we had total
current liabilities of $30,867, consisting of accounts payable of $6,074,
accrued liabilities of $2,754, convertible promissory notes of $60,000, discount
on convertible promissory note of ($40,417) and the current portion of lease
obligations of $2,456.
Net cash used in operating activities during the six months ended June 30, 2009
was $57,171, compared to net cash used in operating activities during the six
months ended June 30, 2008 of $203,391.
During the six months ended June 30, 2009, we used net cash of $5,000 in
investing activities to complete the purchase of our software. Net cash used in
investing activities during the six months ended June 30, 2008 was $3,486.
During the six months ended June 30, 2008, we used $3,086 in the purchase of
property and equipment.
2
During the six months ended June 30, 2009, we received $58,878 from our
financing activities. During the six months ended June 30, 2008, we used funds
of $1,472 in our financing activities.
During the six months ended June 30, 2009, we raised funds through a private
financing consisting of $60,000 in Convertible Notes that will mature after one
year. Payments of interest at the rate of 8.0% per annum will be accrued and
paid each quarter to each investor beginning June 30, 2009. We paid the
convertible promissory note holders on June 30, 2009, the sum of $1,041, which
included $15 of accrued interest for the quarter ended March 31, 2009, and
$1,026 of interest for the quarter ended June 30, 2009. The final principle
payment to the investors will be payable to the investor one year from their
investment date. The convertible promissory notes provide for the holder to
convert the promissory note into restricted shares of the Company's common stock
at a rate of $0.10 per share, at any time prior to the payment of the
convertible promissory note by the Company. These funds are to be used to
support operations of the Company.
During the six months ended June 30, 2009, the Board of Directors of the Company
issued to the officers and directors (2 individuals), in lieu of monies owed for
salaries at December 31, 2008 total $36,000, the issuance of a total of 360,000
restricted shares of our common stock (valued at $0.10 per share). These shares
have been accounted for as a contribution of capital and have been accounted for
in additional paid in capital.
During the six months ended June 30, 2009, we issued 116,170 shares of our
restricted stock to an officer in lieu of accrued salary from April 6, 2009
through June 30, 2009 of $11,617. These shares have been accounted for as a
contribution of capital and have been accounted for in additional paid in
capital.
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
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), Messrs. Willis and Cox our Chief Executive
Officer and Chief Financial Officer for the quarter ended June 30, 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.
Willis 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
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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
(iii)provide reasonable assurance regarding prevention or timely detection
of unauthorized
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended June 30,
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.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended June 30, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
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ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from April
1, 2009 through June 30, 2009.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------ -------------------- ---------------- ----------------------- --------------------------
$36,000 in
June 30, 2009 outstanding
Common Stock 360,000 compensation Officers & Directors
------------------ -------------------- ---------------- ----------------------- --------------------------
June 30, 2009 Common Stock 116,170 $11,617 in Officer
outstanding
compensation
------------------ -------------------- ---------------- ----------------------- --------------------------
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.
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
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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: August 12, 2009 By: /s/ Michael Willis
-------------------------------------
Michael Willis, Chief Executive Officer
Dated: August 12, 2009 By: /s/ Neil A. Cox
--------------------------------------
Neil A. Cox, Chief Financial Officer &
Chief Accounting Officer
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