NEVADA
|
68-0576847
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
5700
W. Plano Parkway, Suite 2600, Plano, Texas
|
75093
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
||
Small reporting
company x
|
FO RM 10-Q/A
|
||||
CONTENTS
|
||||
PART
I — FINANCIAL INFORMATION (Unaudited)
|
PAGE
|
|||
Item
1
|
—
|
|||
2
|
||||
3
|
||||
4
|
||||
5
|
||||
Item
2
|
—
|
21
|
||
Item
3
|
—
|
24
|
||
Item
4
|
—
|
24
|
||
PART
II — OTHER INFORMATION
|
||||
Item
1
|
—
|
26
|
||
Item
1A
|
—
|
26
|
||
Item
2
|
—
|
26
|
||
Item
3
|
—
|
26
|
||
Item
4
|
—
|
26
|
||
Item
5
|
—
|
26
|
||
Item
6
|
—
|
26
|
||
EX-31.1
Section 302 Certification
|
||||
EX-31.2
Section 302 Certification
|
||||
EX-32.1
Section 906 Certification
|
||||
EX-32.2
Section 906 Certification
|
December 31,
2007
|
September 30,
2007
|
|||||||
(Unaudited)
|
||||||||
(As
Restated)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 3,297,089 | $ | 3,850,666 | ||||
Accounts
receivable, net
|
1,808 | 251,050 | ||||||
Prepaid
expenses and advances
|
113,417 | 34,564 | ||||||
Total
current assets
|
3,412,314 | 4,136,280 | ||||||
Equipment,
net
|
329,153 | 296,758 | ||||||
Intangible
assets, net
|
72,526 | 73,191 | ||||||
Loans
to related parties
|
69,432 | 69,432 | ||||||
Other
assets
|
114,848 | 97,292 | ||||||
Total
assets
|
$ | 3,998,273 | $ | 4,672,953 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Notes
payable to related parties
|
$ | 25,000 | $ | 395,000 | ||||
Accounts
payable and accrued expenses
|
1,085,386 | 1,449,399 | ||||||
Total
current liabilities
|
1,110,386 | 1,844,399 | ||||||
Deferred
revenue — related party
|
- | 1,000,000 | ||||||
Minority
interest
|
1,601,269 | 348,093 | ||||||
Stockholders’
equity
|
||||||||
Common
shares — $0.001 par value; authorized 500,000,000 shares; and 329,217,550
and 318,522,499 shares issued and outstanding ,
respectively
|
329,217 | 318,522 | ||||||
Additional
paid-in capital
|
74,644,952 | 72,383,030 | ||||||
Stock
subscription receivable
|
(10,000 | ) | (190,000 | ) | ||||
Retained
(deficit)
|
(73,677,551 | ) | (71,031,091 | ) | ||||
Total
stockholders’ equity
|
1,286,618 | 1,480,461 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 3,998,273 | $ | 4,672,953 |
2007
|
2006
|
|||||||
Revenues:
|
(As
Restated)
|
(As
Restated)
|
||||||
Software
licensing fees
|
$ | 1,000,000 | $ | 640,000 | ||||
Custom
engineering fees
|
57,342 | 233,250 | ||||||
Other
|
13,771 | 7,626 | ||||||
Total
revenues
|
1,071,113 | 880,876 | ||||||
Expenses:
|
||||||||
General,
administrative and selling expenses
|
2,066,686 | 1,093,428 | ||||||
General,
administrative and selling expenses stock based
compensation
|
1,083,409 | 1,084,074 | ||||||
Research
and development
|
651,268 | 84,600 | ||||||
Amortization
and depreciation
|
38,087 | 23,347 | ||||||
Total
operating expenses
|
3,839,450 | 2,285,449 | ||||||
(Loss)
from operations
|
(2,768,337 | ) | (1,404,573 | ) | ||||
Interest
income
|
20,389 | - | ||||||
Interest
expense
|
- | (7,848 | ) | |||||
Net
(loss) before minority interest
|
(2,747,948 | ) | (1,412,421 | ) | ||||
Minority
interest
|
306,824 | - | ||||||
Net
(loss)
|
$ | (2,441,124 | ) | $ | (1,412,421 | ) | ||
Basic
and diluted net (loss) per share
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted
average shares outstanding, basic and diluted
|
324,093,718 | 205,085,889 |
2007
|
2006
|
|||||||
(As
Restated)
|
(As
Restated)
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss) for period
|
$ | (2,441,124 | ) | $ | (1,412,421 | ) | ||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Stock
and options issued for services
|
105,209 | - | ||||||
Stock
based compensation
|
1,083,409 | 1,084,074 | ||||||
Amortization
and depreciation
|
38,087 | 23,347 | ||||||
Minority
interest
|
(306,824 | ) | - | |||||
Changes
in assets and liabilities:
|
||||||||
Deferred
revenue
|
(1,000,000 | ) | 150,000 | |||||
Accounts
receivable
|
249,242 | (448,220 | ) | |||||
Prepaid
expenses
|
(78,854 | ) | 928 | |||||
Other
assets
|
(17,555 | ) | 4,400 | |||||
Accounts
payable and accrued expenses
|
(356,357 | ) | 443,962 | |||||
Total
cash used in operating activities
|
(2,724,767 | ) | (153,930 | ) | ||||
Net
cash used in investing activities:
|
||||||||
Purchase
of equipment
|
(51,997 | ) | 1,411 | |||||
Purchase
of intangible assets
|
(17,821 | ) | (35,991 | ) | ||||
Net
cash used in investing activities
|
(69,818 | ) | (34,580 | ) | ||||
Cash
flows provided by financing activities:
|
||||||||
Payments
on notes payable to related parties
|
(100,000 | ) | (97,985 | ) | ||||
Proceeds
from sale of stock
|
714,000 | - | ||||||
Minority
capital raised
|
1,447,008 | - | ||||||
Receipt
of stock subscriptions receivable
|
180,000 | - | ||||||
Net
cash provided (used in) by financing activities
|
2,241,008 | (97,985 | ) | |||||
Net
(decrease) in cash
|
(553,577 | ) | (286,495 | ) | ||||
Cash,
beginning of period
|
3,850,666 | 291,426 | ||||||
Cash,
end of period
|
$ | 3,297,089 | $ | 4,931 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | - | $ | 7,848 | ||||
Non-cash
transactions:
|
||||||||
Issuance
of common stock to retire debt
|
$ | 270,000 | $ | - |
Three
months ended December 31, 2007
|
||||||||||||
As previously
reported
|
Reclassifications
and
adjustments
|
As restated
|
||||||||||
ASSETS
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
|
$ | 3,297,089 | $ | - | $ | 3,297,089 | ||||||
Accounts
receivable
|
1,808 | - | 1,808 | |||||||||
Prepaid
expenses and advances
|
113,417 | - | 113,417 | |||||||||
Total
current assets
|
3,412,314 | - | 3,412,314 | |||||||||
Equipment,
net
|
329,153 | - | 329,153 | |||||||||
Intangible
assets, net
|
72,526 | - | 72,526 | |||||||||
Loans
to related parties
|
69,432 | - | 69,432 | |||||||||
Other
assets
|
114,848 | - | 114,848 | |||||||||
Total
assets
|
$ | 3,998,273 | $ | - | $ | 3,998,273 | ||||||
LIABILITIES
AND STOCKHOLDERS EQUITY
|
||||||||||||
Current
liabilities:
|
||||||||||||
Notes
payable to related parties
|
$ | 25,000 | $ | - | $ | 25,000 | ||||||
Accounts
payable and accrued expenses
|
1,082,451 | 2,935 | 1,085,386 | |||||||||
Total
current liabilities
|
1,107,451 | 2,935 | 1,110,386 | |||||||||
Minority
interest
|
1,413,741 | 187,528 | 1,601,269 | |||||||||
Stockholders'
equity
|
||||||||||||
Common
stock
|
329,217 | - | 329,217 | |||||||||
Additional
paid in capital
|
75,458,285 | (813,333 | ) | 74,644,952 | ||||||||
Stock
subscription receivable
|
(10,000 | ) | - | (10,000 | ) | |||||||
Retained
(deficit)
|
(74,300,421 | ) | 622,870 | (73,677,551 | ) | |||||||
Total
stockholders’ equity
|
1,477,081 | (190,463 | ) | 1,286,618 | ||||||||
Total
liabilities and stockholders' equity
|
$ | 3,998,273 | $ | - | $ | 3,998,273 |
Three
months ended December 31, 2007
|
||||||||||||
As previously
reported
|
Reclassifications
and
adjustments
|
As restated
|
||||||||||
Revenues:
|
||||||||||||
Software
licensing fees
|
$ | 1,000,000 | $ | - | $ | 1,000,000 | ||||||
Custom
engineering fees
|
44,842 | 12,500 | 57,342 | |||||||||
Other
|
41,116 | (27,345 | ) | 13,771 | ||||||||
Total
revenues
|
1,085,958 | (14,845 | ) | 1,071,113 | ||||||||
Expenses:
|
||||||||||||
General,
administrative and selling expenses
|
2,037,182 | 29,504 | 2,066,686 | |||||||||
General,
administrative and selling expenses stock based
compensation
|
1,996,741 | (913,332 | ) | 1,083,409 | ||||||||
Research
and development
|
670,963 | (19,695 | ) | 651,268 | ||||||||
Amortization
and depreciation
|
31,762 | 6,325 | 38,087 | |||||||||
Total
operating expenses
|
4,736,648 | (897,198 | ) | 3,839,450 | ||||||||
Loss
from operations
|
(3,650,690 | ) | 882,353 | (2,768,337 | ) | |||||||
Interest
income
|
- | 20,389 | 20,389 | |||||||||
Interest
expense
|
- | - | - | |||||||||
Net
loss before minority interest
|
(3,650,690 | ) | 902,742 | (2,747,948 | ) | |||||||
Minority
interest
|
381,359 | (74,535 | ) | 306,824 | ||||||||
Net
(loss)
|
$ | (3,269,331 | ) | $ | 828,207 | $ | (2,441,124 | ) | ||||
Basic
and diluted net loss per share
|
$ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||
Weighted
average shares outstanding, basic and diluted
|
324,093,718 | - | 324,093,718 |
Three
months ended December 31, 2007
|
||||||||||||
As previously
reported
|
Reclassifications
and
adjustments
|
As restated
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
(loss) for period
|
$ | (3,269,331 | ) | $ | 828,207 | $ | (2,441,124 | ) | ||||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Stock
and options issued for services
|
105,209 | - | 105,209 | |||||||||
Stock
based compensation
|
1,996,741 | (913,332 | ) | 1,083,409 | ||||||||
Amortization
and depreciation
|
31,762 | 6,325 | 38,087 | |||||||||
Minority
interest
|
(381,359 | ) | 74,535 | (306,824 | ) | |||||||
Changes
in assets and liabilities:
|
||||||||||||
Deferred
revenue
|
(1,000,000 | ) | - | (1,000,000 | ) | |||||||
Accounts
receivable
|
249,242 | - | 249,242 | |||||||||
Prepaid
expenses
|
(78,854 | ) | - | (78,854 | ) | |||||||
Other
assets
|
(17,555 | ) | - | (17,555 | ) | |||||||
Accounts
payable and accrued expenses
|
(366,947 | ) | 10,590 | (356,357 | ) | |||||||
Total
cash used in operating activities
|
(2,731,092 | ) | 6,325 | (2,724,767 | ) | |||||||
Net
cash used in investing activities:
|
||||||||||||
Purchase
of equipment
|
(51,922 | ) | (75 | ) | (51,997 | ) | ||||||
Purchase
of intangible assets
|
(11,571 | ) | (6,250 | ) | (17,821 | ) | ||||||
Net
cash used in investing activities
|
(63,493 | ) | (6,325 | ) | (69,818 | ) | ||||||
Cash
flows provided by financing activities:
|
||||||||||||
Payments
on notes payable to related parties
|
(100,000 | ) | - | (100,000 | ) | |||||||
Proceeds
from sale of stock
|
714,000 | - | 714,000 | |||||||||
Minority
capital raised
|
1,447,008 | - | 1,447,008 | |||||||||
Receipt
of stock subscriptions receivable
|
180,000 | - | 180,000 | |||||||||
Net
cash provided by financing activities
|
2,241,008 | - | 2,241,008 | |||||||||
Net
decrease in cash
|
(553,577 | ) | - | (553,577 | ) | |||||||
Cash,
beginning of period
|
3,850,666 | - | 3,850,666 | |||||||||
Cash,
end of period
|
$ | 3,297,089 | $ | - | $ | 3,297,089 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Cash
paid for interest
|
$ | - | $ | - | $ | - | ||||||
Non-cash
transactions:
|
||||||||||||
Issuance
of common stock to retire debt
|
$ | 270,000 | $ | - | $ | 270,000 |
Three
months ended December 31, 2006
|
||||||||||||
As previously
reported
|
Reclassifications
and
adjustments
|
As restated
|
||||||||||
Revenues:
|
||||||||||||
Software
licensing fees
|
$ | 2,240,000 | $ | (1,600,000 | ) | $ | 640,000 | |||||
Custom
engineering fees
|
233,250 | - | 233,250 | |||||||||
Other
|
7,626 | - | 7,626 | |||||||||
Total
revenues
|
2,480,876 | (1,600,000 | ) | 880,876 | ||||||||
Expenses:
|
||||||||||||
General,
administrative and selling expenses
|
1,093,428 | - | 1,093,428 | |||||||||
General,
administrative and selling expenses stock based
compensation
|
1,084,074 | - | 1,084,074 | |||||||||
Research
and development
|
84,600 | - | 84,600 | |||||||||
Amortization
and depreciation
|
23,347 | - | 23,347 | |||||||||
Total
operating expenses
|
2,285,449 | - | 2,285,449 | |||||||||
Income
(loss) from operations
|
195,427 | (1,600,000 | ) | (1,404,573 | ) | |||||||
Interest
expense
|
(7,848 | ) | - | (7,848 | ) | |||||||
Net
income (loss) before minority interest
|
187,579 | (1,600,000 | ) | (1,412,421 | ) | |||||||
Minority
interest
|
- | - | - | |||||||||
Net
income (loss)
|
$ | 187,579 | $ | (1,600,000 | ) | $ | (1,412,421 | ) | ||||
Basic
and diluted net loss per share
|
$ | - | $ | - | $ | (0.01 | ) | |||||
Weighted
average shares outstanding,
|
||||||||||||
basic
and diluted
|
205,085,889 | - | 205,085,889 |
Three
months ended December 31, 2006
|
||||||||||||
As previously
reported
|
Reclassifications
and
adjustments
|
As restated
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss) for period
|
$ | 187,579 | $ | (1,600,000 | ) | $ | (1,412,421 | ) | ||||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Stock
and options issued for services
|
1,084,074 | - | 1,084,074 | |||||||||
Stock
based compensation
|
23,347 | - | 23,347 | |||||||||
Amortization
and depreciation
|
- | - | - | |||||||||
Minority
interest
|
- | - | - | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
Deferred
revenue
|
150,000 | - | 150,000 | |||||||||
Accounts
receivable
|
(2,048,220 | ) | 1,600,000 | (448,220 | ) | |||||||
Prepaid
expenses
|
928 | - | 928 | |||||||||
Other
assets
|
4,400 | - | 4,400 | |||||||||
Accounts
payable and accrued expenses
|
443,962 | - | 443,962 | |||||||||
Total
cash used in operating activities
|
(153,930 | ) | - | (153,930 | ) | |||||||
Net
cash used in investing activities:
|
||||||||||||
Purchase
of equipment
|
1,411 | - | 1,411 | |||||||||
Purchase
of intangible assets
|
(35,991 | ) | - | (35,991 | ) | |||||||
Net
cash used in investing activities
|
(34,580 | ) | - | (34,580 | ) | |||||||
Cash
flows provided by financing activities:
|
||||||||||||
Payments
on notes payable to related parties
|
(97,985 | ) | - | (97,985 | ) | |||||||
Proceeds
from sale of stock
|
- | - | - | |||||||||
Minority
capital raised
|
- | - | - | |||||||||
Receipt
of stock subscriptions receivable
|
- | - | - | |||||||||
Net
cash (used in) financing activities
|
(97,985 | ) | - | (97,985 | ) | |||||||
Net
decrease in cash
|
(286,495 | ) | - | (286,495 | ) | |||||||
Cash,
beginning of period
|
291,426 | - | 291,426 | |||||||||
Cash,
end of period
|
$ | 4,931 | $ | - | $ | 4,931 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Cash
paid for interest
|
$ | 7,848 | $ | - | $ | 7,848 | ||||||
Non-cash
transactions:
|
||||||||||||
Issuance
of common stock to retire debt
|
$ | - | $ | - | $ | - |
|
·
|
Persuasive
evidence of a contractual arrangement
exists;
|
|
·
|
Delivery
of the service has occurred in accordance with the Company’s contractual
obligations and title has passed to the
customer;
|
|
·
|
The
fee or revenue recognized is fixed or determinable;
and,
|
|
·
|
The
right to payment is unconditional and collectability is
probable.
|
|
·
|
Obtain
additional debt and equity
financing.
|
|
·
|
Market
its principal product, VUELIVE (previously EspreLive), to customers
wishing to build applications using video and provide custom engineering
services to those customers as
requested.
|
|
·
|
Engage
in partnerships with firms in key vertical markets. These
partners will be market experts and have well defined application
strategies that require VUELIVE to develop
them.
|
|
·
|
Launch
Blideo as an application service
provider.
|
|
·
|
Establish
independent sales agreements with representatives to sell its products and
services. The Company will actively pursue the engagement of
additional independent sales representatives who can distribute the
Company’s existing video products and services, both domestically and
internationally.
|
December 31,
2007
|
September 30,
2007
|
|||||||
Contingent repurchase
agreement to Video Software Partners, secured by certain software
products, payable on February 1, 2008, interest imputed at
10%
|
$ | - | $ | 370,000 | ||||
Note
payable to a related individual, at 10%, due November 25, 2004, extended
year to year, unsecured
|
25,000 | 25,000 | ||||||
$ | 25,000 | $ | 395,000 |
December 31,
2007
|
September 30,
2007
|
|||||||
Accounts
payable - trade
|
$ | 650,034 | $ | 543,487 | ||||
Accrued
expenses - other
|
191,494 | 242,151 | ||||||
Due
to investment banker
|
- | 139,825 | ||||||
Accrued
vacation pay
|
76,640 | 76,640 | ||||||
Accrued
payroll and payroll taxes
|
127,615 | 297,296 | ||||||
Customer
advances
|
- | 150,000 | ||||||
Accrued
interest
|
9,139 | - | ||||||
Accrued
rent
|
30,464 | - | ||||||
$ | 1,085,386 | $ | 1,449,399 |
Outstanding
Stock Options
|
Exercisable
Stock Options
|
|||||||||
Options
|
Weighted
Average
Exercise Price
|
Options
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding
at beginning of period
|
73,824,634
|
$
|
.1197
|
29,862,536
|
$
|
.1197
|
||||
Granted
|
6,080,000
|
$
|
.0895
|
|
6,643,474
|
$
|
.0872
|
.
|
||
Outstanding
at end of period
|
79,904,634
|
$
|
.1174
|
36,506,010
|
$
|
.1174
|
Outstanding
Stock Options
|
Exercisable
Stock Options
|
|||||||||||||||||||||||||
Exercise
Price Range
|
Shares
|
Life
|
Weighted
Average exercise Price
|
Shares
|
Life
|
Weighted
Average exercise Price
|
||||||||||||||||||||
$
|
0.010
- $0.085
|
48,479,634
|
8.46
|
$
|
0.08
|
15,973,512
|
8.46
|
$
|
0.08
|
|||||||||||||||||
$
|
0.100
- $0.200
|
25,945,000
|
7.90
|
$
|
0.10
|
19,135,283
|
7.90
|
$
|
0.10
|
|||||||||||||||||
$
|
0.210
- $1.333
|
5,480,000
|
7.20
|
$
|
0.54
|
1,397,215
|
7.20
|
$
|
0.61
|
|||||||||||||||||
79,904,634
|
36,506,010
|
Outstanding
Warrants
|
Exercisable
Warrants
|
|||||||||||||||
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding
at October 1, 2007
|
44,019,716 | $ | 0.10 | 44,019,716 | 0.10 | |||||||||||
Granted
during period
|
4,938,272 | 0.10 | 4,938,272 | 0.10 | ||||||||||||
Exercised
during the period
|
(892,858 | ) | 0.10 | (892,858 | ) | 0.10 | ||||||||||
Outstanding
at December 31, 2007
|
48,065,130 | $ | 0.10 | 48,065,130 | $ | 0.10 |
December
31,
2007
|
September
30,
2007
|
|||||||
Net
operating loss carryforward
|
$ | 20,094,000 | $ | 19,433,000 | ||||
In-process
research and development
|
1,329,000 | 1,528,000 | ||||||
Transition
adjustment
|
217,000 | 217,000 | ||||||
$ | 21,640,000 | $ | 21,178,000 | |||||
Less
valuation allowance
|
(21,640,000 | ) | (21,178,000 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
|
·
|
In
April 2007, we entered into a license agreement for the exclusive right to
use our technology for the entertainment market for an initial amount of
$1,000,000 and a further $450,000 contingent on our delivering certain
design proofs of concept. The license agreement granted the license holder
a put option which could have required us to repurchase the license for
$2,000,000 at any time after January 31, 2008, and before April 31, 2010.
The revenue from this license was deferred and is included on our balance
sheet as deferred revenue at September 30, 2007. In December 2007, we
concluded an agreement with the licensee to waive the put option in return
for a waiver of the balance due under the license of $450,000, and
accordingly we recorded the full license fee of $1,000,000 in the quarter
ended December 31, 2007.
|
|
·
|
$57,342
for the design of our customers’ applications, including a major US
telecommunications carrier.
|
|
·
|
Obtain
additional debt and equity
financing.
|
|
·
|
Market
our principal product, VUELIVE (previously EspreLive), to customers
wishing to build applications using video and provide custom engineering
services to those customers as
requested.
|
|
·
|
Engage
in partnerships with firms in key vertical markets. These
partners will be market experts and have well-defined application
strategies that require VUELIVE to build them. Potential
customers have been identified and we are in active negotiations with
them. No assurance can be given, however, that we will be
successful in entering into satisfactory commercial arrangements with
these or other customers.
|
|
·
|
Establish
independent sales agreements with representatives to sell its products and
services. We will actively pursue the engagement of additional
independent sales representatives who can distribute our existing video
products and services, both domestically and
internationally. Potential partners have been identified and we
are in active negotiations with them. No assurance can be
given, however, that we will be successful in entering into satisfactory
commercial arrangements with these or other
partners.
|
Date
|
Date
|
|||||
/s/ William
Hopke
|
November
21, 2008
|
/s/
BG Moore
|
November
21, 2008
|
|||
William
Hopke
|
BG
Moore
|
|||||
President
|
Chief
Financial Officer
|