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 September 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
(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
--------------------------
(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 November 10, 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 - September 30, 2009 and
December 31, 2008 F-1
Condensed Statement of Operations -
Nine Months and Three months ended September 30, 2009
and 2008 F-2
Condensed Statement of Changes in Shareholders' Equity -
September 30, 2009 F-3
Condensed Statement of Cash Flows for the Nine months ended F-4
September 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 1.A. Risk Factors - Not Applicable
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.
(A Development Stage Company)
Condensed Balance Sheets
(Unaudited)
September 30, 2009 December 31, 2008
(unaudited) (Derived from
audited statements)
---------------------- ---------------------
Assets
Current assets
Cash and cash equivalents $ 26,997 $ 11,882
Accounts receivable 792 383
Prepaid expenses -- 1,854
---------------------- ---------------------
Total current assets 27,789 14,119
Property and equipment, net 7,609 17,591
Intangible assets, net 101,912 53,934
---------------------- ---------------------
Total assets $ 137,310 $ 85,644
====================== =====================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,286 $ 953
Accrued payroll -- 36,000
Other current liabilities 2,754 2,754
Convertible promissory note 100,000 --
Discount on convertible promissory note (32,500) --
Current portion - capital lease obligation 2,530 2,697
---------------------- ---------------------
Total current liabilities 75,070 42,404
Capital lease obligation, less current portion -- 1,542
---------------------- ---------------------
Total liabilities 75,070 43,946
---------------------- ---------------------
Shareholders' equity:
Preferred stock -- --
Common stock 946,252 816,305
Additional paid-in capital 253,275 134,892
Deficit accumulated during development stage (1,137,287) (909,499)
---------------------- ---------------------
Total shareholders' equity 62,240 41,698
---------------------- ---------------------
Total liabilities and shareholders' equity $ 137,310 $ 85,644
====================== =====================
See accompanying notes to unaudited condensed financial statements.
F-1
TOMBSTONE TECHNOLOGIES, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
For The Nine Months Ended For The Three Months Ended January 1, 2009
September 30, September 30, (inception) to
-------------------------------------- -----------------------------------
2009 2008 2009 2008 September 30, 2009
----------------- ----------------- ---------------- ----------------
Sales $ 792 $ -- $ 792 $ -- $ 792
Cost of Sales 201 -- 201 -- 201
----------------- ----------------- ---------------- ----------------------------------------
Gross Profit 591 -- 591 -- 591
Continuing operations:
Selling, general and
administrative
expenses 157,413 264,123 29,198 54,739 157,413
----------------- ----------------- ---------------- ----------------------------------------
Loss from continuing
operations (156,822) (264,123) (28,607) (54,739) (156,822)
Other income and (expense):
Interest income 5 3,723 -- 391 5
Other income -- -- -- -- --
Interest expense --
Interest expense-
amortization of
discount on
promissory notes (67,500) -- (47,917) -- (67,500)
Interest expense-other (2,987) (352) (1,946) -- (2,987)
Impairment loss (484) -- (484) -- (484)
----------------- ----------------- ---------------- ----------------------------------------
(70,966) 3,371 (50,347) 391 (70,966)
Loss before income taxes
and discontinued
operations (227,788) (260,752) (78,954) (54,348) (227,788)
Income tax provision -- -- -- -- --
----------------- ----------------- ---------------- ----------------------------------------
Loss before discontinued
operations (227,788) (260,752) (78,954) (54,348) (227,788)
----------------- ----------------- ---------------- ----------------------------------------
Discontinued operations:
Loss from operations
of playing card
component, net of
taxes -- (58,453) -- (3,584) --
----------------- ----------------- ---------------- ----------------------------------------
Net loss $ (227,788) $ (319,205) $ (78,954) $ (57,932) $ (227,788)
================= ================= ================ ================ ====================
Basic and diluted loss
per share $ (0.07) $ (0.10) $ (0.02) $ (0.02) $ (0.07)
================= ================= ================ ================ ====================
Basic and diluted weighted
average common
shares outstanding 3,427,171 3,230,000 3,878,000 3,230,000 3,427,171
================= ================= ================ ========================================
See accompanying nots to unaudited condensed financial statements
F-2
TOMBSTONE TECHNOLOGIES, INC.
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' 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 to Indis for
software development 140,000 37,870 -- -- 37,870
June, 2009, shares issued for services
by officers 476,170 85,711 -- -- 85,711
September, 2009 shares issued for services
by officers 6,830 1,366 -- -- 1,366
September, 2009 shares issued in lieu of
final payment to Indis 25,000 5,000 -- -- 5,000
Stock options issued and extended -- -- 18,383 -- 18,383
Discount on convertible promissory notes -- -- 100,000 -- 100,000
Net loss -- -- -- (227,788) (227,788)
--------------- -------------- ------------- --------------- -----------
Balance at September 30, 2009 3,878,000 $ 946,252 $ 253,275 $ (1,137,287) $ 62,240
=============== ============== ============= =============== ===========
See accompanying notes to unaudited condensed financial statements
F-3
TOMBSTONE TECHNOLOGIES, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
-----------------------------------------
2009 2008
------------------- ------------------
Cash flows from operating activities:
Net cash flows used in operating activities $ (68,319) $ (260,232)
------------------- ------------------
Cash flows from investing activities:
Purchase of property and equipment -- (3,086)
Purchase of intangible asset (14,857) (400)
------------------- ------------------
Net cash flows used in investing activities (14,857) (3,486)
------------------- ------------------
Cash flows from financing activities:
Proceeds from convertible promissory notes, net of discount 100,000 --
Cash payments on capital lease (1,709) (1,472)
------------------- ------------------
Net cash flows from financing activities 98,291 (1,472)
------------------- ------------------
Net change in cash and cash equivalents 15,115 (265,190)
------------------- ------------------
Cash and Cash Equivalents:
Beginning of period 11,882 313,498
------------------- ------------------
End of period $ 26,997 $ 48,308
=================== ==================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ -- $ --
=================== ==================
Interest $ 2,720 $ 352
=================== ==================
Noncash investing and financing transactions:
Common stock issued for deferred software development $ 42,870 $ --
=================== ==================
See accompanying notes to unaudited condensed financial statements
F-4
TOMBSTONE TECHNOLOGIES, INC.
Notes to Condensed Financial Statements
September 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 September 30, 2009, the results of
operations for the nine months and three months ended September 30, 2009 and
2008, and cash flows for the nine months ended September 30, 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 nine months ended September 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 nine months ended September 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 $1,137,287 as of
September 30, 2009. The Company recognized revenues of $792 from its operational
activities during the nine months ended September 30, 2009. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Codification ("ASC") 105, "Generally Accepted Accounting
Principals" (formerly Statement of Financial Accounting Standards ("SFAS") No.
168, "The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles"). ASC 105 establishes the FASB ASC as the single
source of authoritative nongovernmental U.S. GAAP. The standard is effective for
interim and annual periods ending after September 15, 2009. We adopted the
provisions of the standard on September 30, 2009, which did not have a material
impact on our financial statements.
There were various other accounting standards and interpretations issued in
2009, none of which are expected to have a material impact on the Company's
financial position, operations or cash flows.
Note 2: Related Parties
-----------------------
During the third quarter of 2009, the Company issued a former officer a total of
6,830 shares of common stock in lieu of $1,366 in salaries ($0.20 per share).
During the second quarter of 2009, 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).
F-5
TOMBSTONE TECHNOLOGIES, INC.
Notes to Condensed Financial Statements
September 30, 2009
(Unaudited)
During the second quarter of 2009, 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).
Note 3: Intangible Assets
-------------------------
On May 15, 2008, 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. On July 6, 2009, Tombstone issued 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.
As a result of the final payment being made the intellectual property has been
transferred to Tombstone. At that time, the Company capitalized the deferred
charges in connection with OIEPrint as intangible assets and began to amortize
them accordingly. At September 30, 2009, intangible assets had a net value of
$101,912.
Note 4: Convertible Promissory Notes
------------------------------------
During the nine months ended September 30, 2009, Tombstone issued Convertible
Promissory Notes payable to unrelated third parties totaling $100,000 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 $32,500 discount on convertible
promissory notes and $67,500 interest expense in the accompanying financial
statements for the nine-month period ended September 30, 2009.
The following is a summary of convertible promissory notes at September 30, 2009
and December 31, 2008:
September 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 -
Notes issued in July 2009 40,000 -
-------------------------------------------
Total convertible promissory notes $ 100,000 $ -
===========================================
F-6
TOMBSTONE TECHNOLOGIES, INC.
Notes to Condensed Financial Statements
September 30, 2009
(Unaudited)
Note 5: Shareholders' Equity
----------------------------
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.
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. 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 nine
months ended September 30, 2009 is as follows:
Exercise Price Weighted Weighted
Per Share Average Average
Exercise Remaining Aggregate
Number of Price Per Contractual Intrinsic
Shares Share Life Value
Outstanding at December 31, 2008 5,020,000 $0.65 - $1.50 $2.56 0.75 years --
Granted 129,999 $0.10 - $0.20 $0.15 3.40 years $8,000
Exercised -- -- -- -- --
Cancelled/Expired (3,460,000) $2.00 - $5.00 $3.50 --- --
--------------- ---------------- ------------- -------------- -------------
Outstanding at September 30, 2009 1,689,999 $0.10 - $1.50 $0.65 2.92 years $6,000
=============== ================ ============= ============== =============
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 and expired in May, 2009. 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
nine-month period ended September 30, 2009.
F-7
TOMBSTONE TECHNOLOGIES, INC.
Notes to Condensed Financial Statements
September 30, 2009
(Unaudited)
The fair values of grants made in the nine months ended September 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
Options and Warrants Expired
During the nine months ended September 30, 2009, options and warrants
exercisable for 3,460,000 shares of the Company's common stock expired.
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, 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 nine months ended September 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 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.
Note 7: Subsequent Events
--------------------------
The Company has evaluated it activities subsequent to the quarter ended
September 30, 2009 and found no reportable subsequent events.
F-8
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.
PLAN OF OPERATIONS
At September 30, 2009, we had cash on hand of $26,997. 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.
As of September 30, 2009, we raised $100,000 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
have paid investors interest expense of $2,720 as of September 30, 2009. The
final principle payment to the investors will be payable to the investor one
year from their investment date. The investor also has the option, based on
their conversion terms, to convert to restricted shares of common stock at $0.10
per share with immediate convertibility (i.e. $2,500 = 25,000 shares.)
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.
On September 1, 2009, as a result of the resignation of Mr. Willis as the
Company's Chief Executive Officer, Mr. John Harris was appointed as the Chief
Executive Officer of the Company. Mr. Harris has served as a Director and the
President of the Company since its inception. Prior to Mr. Willis's appointment
as Chief Executive Officer, Mr. Harris served as the Chief Executive Officer of
the Company from its inception through April 6, 2009.
RESULTS OF OPERATIONS
For the Three Months Ended September 30, 2009 Compared to the Three Months Ended
September 30, 2008
During the three months ended September 30, 2009, we recognized $792 from its
operational activities involving the services using the OIE Print software.
During the three months ended September 30, 2008, we recognized $5,246 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
1
of its customized playing card activities and a focus on the development of our
OIE Print software, as a result sales of our customized playing cards are
recognized in discontinued operations.
During the three months ended September 30, 2009, we incurred $29,198 in selling
and general administrative expenses compared to $54,739 during the nine months
ended September 30, 2008. The decrease of $25,541 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 September 30, 2009, we recognized a net loss of
$78,954 compared to $54,348 for the three months ended September 30, 2008. The
increase of $24,606 was a result of the decreases of selling and general and
administrative expenses of $25,542 offset by an increase of $50,347 in interest
expenses and amortization expenses as a result of the issuance of convertible
promissory notes.
For the Nine Months Ended September 30, 2009 Compared to the Nine Months Ended
September 30, 2008
During the nine months ended September 30, 2009, we recognized sales of $792
compared to sales of $53,397 during the nine months ended September 30, 2008
from the sale of our customized playing cards. The decrease in sales of $52,605
was a result of the discontinuance of the customized playing cards part of the
Company, as a result sales of our customized playing cards are recognized in
discontinued operations.
During the nine months ended September 30, 2009, we incurred operational losses
of $156,822 compared to $264,123 during the nine months ended September 30,
2008. The decrease of $107,301 is a result of the discontinuance of the
customized card printing operations as of December 31, 2008. The Company's
employees agreed that no wages or payroll taxes would be accrued or paid during
the nine month ended September 30, 2009. The resolution also included issuance
of 123,000 shares of restricted common stock to Michael Willis, a former officer
of the Company, in lieu of accrued salary from April 6, 2009 through July 6,
2009 and is posted as additional paid in capital and stock based compensation.
During the nine months ended September 30, 2009, we recognized a net loss of
$227,788 compared to a net loss of $319,205 during the nine months ended
September 30, 2008. The decrease of $91,417 is a result of the $107,301 decrease
in operational expenses offset by an increase of $70,619 in interest expenses,
as a result of the issuance of convertible promissory notes, and an impairment
loss.
LIQUIDITY
At September 30, 2009, we had total current assets of $27,789 consisting of cash
on hand of $26,997 and $792 in accounts receivables. At September 30, 2009, we
had total current liabilities of $75,070, consisting of accounts payable of
$2,286, other current liabilities of $2,754, Net Convertible Notes Payable, of
$67,500, and lease obligations of $2,530. At September 30, 2009, we had a
working capital deficit of $47,281.
Net cash used in operating activities during the nine months ended September 30,
2009 was $68,319, compared to net cash used in operating activities during the
nine months ended September 30, 2008 of $260,232.
Net cash used in investing activities during the nine months ended September 30,
2009 was $14,857 compared to net cash used in investing activities during the
nine months ended September 30, 2008 of $3,486. During the nine months ended
September 30, 2009, we used $14,857 in the purchase of the OIEPrint software.
During the nine months ended September 30, 2008 we used $3,086 in the purchase
of property and equipment and $400 in the purchase of the OIEPrint software.
2
During the nine months ended September 30, 2009, we received $98,291 from our
financing activities compared to using $1,472 during the nine months ended
September 30, 2008.
During the nine months ended September 30, 2009, we raised funds through a
private financing consisting of $100,000 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 have
paid investors interest expense of $2,720 as of September 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 nine months ended September 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 nine months ended September 30, 2009, we issued 123,000 shares of our
restricted stock to an employee, a former officer and director, in lieu of
accrued salary from April 6, 2009 through September 30, 2009 of $12,983. These
shares have been accounted for as a contribution of capital and have been
accounted for in additional paid in capital.
During the nine months ended September 30, 2009, we issued 25,000 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 $5,000. As a
result of making this final payment of the OIEPrint Software, began to
capitalize our expenditures in connection with the development of the OIEPrint
Software and as result moved such expenditures from Deferred Charges to
Intangible Assets. At September 30, 2009, the net value of such intangible
assets was $101,912.
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. Harris and Cox our Chief Executive
Officer and Chief Financial Officer for the quarter ended September 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. 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
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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 September
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 September 30, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 1A. RISK FACTORS
NONE
ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from July 1,
2009 through September 30, 2009.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
----------------- -------------------- ---------------- ----------------------- -----------------------------
September 2009 Common Stock 25,000 Payment on Software Business Associate
Contract
----------------- -------------------- ---------------- ----------------------- -----------------------------
September 2009 Common Stock 6,830 Services of Officers Former Officer
----------------- -------------------- ---------------- ----------------------- -----------------------------
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: November 10, 2009 By: /s/ John N. Harris
--------------------------------------
Harris, President & Chief Executive Officer
Dated: November 10, 2009 By: /Neil A. Cox
---------------------------------------
Neil A. Cox Chief Financial Officer & Chief
Accounting Officer
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