Delaware
|
98-0412432
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
200
E. Broward Blvd., Suite 1200
Ft.
Lauderdale, FL
|
33301
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Class
|
Outstanding as of November 5, 2010
|
|
Common
Stock, $0.0001 par value per share
|
209,369,998 shares
|
Page
|
||
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements.
|
3
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
24
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
31
|
Item
4.
|
Controls
and Procedures.
|
31 |
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings.
|
33
|
Item
1A.
|
Risk
Factors.
|
33
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
33
|
Item
3.
|
Defaults
Upon Senior Securities.
|
33
|
Item
4.
|
(Removed
and Reserved)
|
33
|
Item
5.
|
Other
Information.
|
33
|
Item
6.
|
Exhibits.
|
33
|
SIGNATURES
|
35
|
At September 30, 2010
|
At December 31, 2009
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 2,265,411 | $ | 297,426 | ||||
Accounts
receivable - related party
|
205,857 | 1,083,487 | ||||||
Inventory
|
214,732 | 855,763 | ||||||
Prepaid
asset - related party - current portion
|
187,627 | 187,627 | ||||||
Prepaid
expenses and other current assets
|
95,932 | 667,605 | ||||||
Total
Current Assets
|
2,969,559 | 3,091,908 | ||||||
Fixed
Assets - net
|
81,495 | 75,908 | ||||||
Other
Assets:
|
||||||||
Goodwill
|
- | 11,142,273 | ||||||
Intangible
assets - net
|
73,291 | 10,668 | ||||||
Intangible
asset - related party - net
|
155,693 | 199,455 | ||||||
Prepaid
asset - related party - net of current portion
|
312,712 | 453,432 | ||||||
Other
assets
|
100,602 | 113,793 | ||||||
Total
Other Assets
|
642,298 | 11,919,621 | ||||||
Total
Assets
|
$ | 3,693,352 | $ | 15,087,437 | ||||
Liabilities
and Stockholders' Equity (Deficit)
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 1,211,028 | $ | 1,432,428 | ||||
Accounts
payable - related party
|
82,760 | 45,984 | ||||||
Accrued
expenses
|
389,624 | 241,038 | ||||||
Deferred
revenue
|
801,218 | 1,576,462 | ||||||
Derivative
liability
|
3,456,041 | - | ||||||
Total
Current Liabilities
|
5,940,671 | 3,295,912 | ||||||
Stockholders'
Equity (Deficit):
|
||||||||
Convertible
Series A preferred stock, ($0.0001 par value, 25,000,000 shares
authorized, 400,000 and 3,400,000 issued and outstanding,
respectively)
|
40 | 340 | ||||||
Convertible
Series B preferred stock, ($0.0001 par value, 4,000,000 and -0- shares
authorized, respectively, 2,943,750 and -0- shares issued and outstanding,
respectively) Liquidation preference $2,943,750
|
294 | - | ||||||
Common
stock, ($0.0001 par value, 300,000,000 shares authorized, 209,369,998 and
183,208,004 shares issued and outstanding, respectively)
|
20,937 | 18,321 | ||||||
Additional
paid in capital
|
25,118,105 | 19,080,568 | ||||||
Accumulated
deficit
|
(27,130,698 | ) | (7,272,073 | ) | ||||
Accumulated
other comprehensive loss
|
(255,997 | ) | (35,631 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
(2,247,319 | ) | 11,791,525 | |||||
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | 3,693,352 | $ | 15,087,437 |
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenue
|
$ | 4,117,668 | $ | 6,862,012 | $ | 29,146,123 | $ | 9,311,589 | ||||||||
Cost
of revenue
|
1,626,391 | 1,777,555 | 10,056,116 | 2,785,674 | ||||||||||||
Gross
Profit
|
2,491,277 | 5,084,457 | 19,090,007 | 6,525,915 | ||||||||||||
Sales
and marketing expenses
|
3,454,216 | 3,910,549 | 18,529,338 | 5,604,099 | ||||||||||||
General
and administrative expenses
|
1,273,009 | 2,176,055 | 5,588,802 | 4,714,556 | ||||||||||||
Loss
from Operations
|
(2,235,948 | ) | (1,002,147 | ) | (5,028,133 | ) | (3,792,740 | ) | ||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
expense
|
- | (159,793 | ) | - | (235,226 | ) | ||||||||||
Loss
on foreign exchange
|
(6,287 | ) | - | (12,855 | ) | - | ||||||||||
Registration
rights penalty
|
- | (218,400 | ) | - | (218,400 | ) | ||||||||||
Loss
on settlement of debt
|
- | (550,175 | ) | - | (550,175 | ) | ||||||||||
Impairment
of fixed assets and prepaid expenses
|
(219,324 | ) | - | (219,324 | ) | - | ||||||||||
Impairment
of goodwill and intangible assets
|
(11,142,273 | ) | - | (11,142,273 | ) | (48,500 | ) | |||||||||
Derivative
expense pertaining to embedded conversion feature of convertible Series B
preferred stock issuance
|
(512,291 | ) | - | (512,291 | ) | - | ||||||||||
Change
in fair value of derivative liability - embedded conversion
feature
|
- | 31,787 | - | (55,399 | ) | |||||||||||
Warrant
expense arising from repricing of investor warrants
|
- | (16,393 | ) | - | (58,230 | ) | ||||||||||
Total
Other Expense - Net
|
(11,880,175 | ) | (912,974 | ) | (11,886,743 | ) | (1,165,930 | ) | ||||||||
Net
Loss
|
$ | (14,116,123 | ) | $ | (1,915,121 | ) | $ | (16,914,876 | ) | $ | (4,958,670 | ) | ||||
Basic
and Diluted Loss per Common Share:
|
||||||||||||||||
Net
loss
|
$ | (14,116,123 | ) | $ | (1,915,121 | ) | $ | (16,914,876 | ) | $ | (4,958,670 | ) | ||||
Preferred
stock dividends - Series B
|
(2,943,750 | ) | - | (2,943,750 | ) | - | ||||||||||
Net
loss available to common stockholders
|
(17,059,873 | ) | (1,915,121 | ) | (19,858,626 | ) | (4,958,670 | ) | ||||||||
Net
loss per common share - basic and diluted
|
$ | (0.08 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | (0.04 | ) | ||||
Weighted
average number of common shares outstanding during the period - basic and
diluted
|
201,883,585 | 128,650,331 | 193,640,623 | 124,255,979 | ||||||||||||
Comprehensive
Loss:
|
||||||||||||||||
Net
loss
|
$ | (14,116,123 | ) | $ | (1,915,121 | ) | $ | (16,914,876 | ) | $ | (4,958,670 | ) | ||||
Foreign
currency translation adjustment
|
(76,447 | ) | 47,114 | (220,366 | ) | 43,878 | ||||||||||
Comprehensive
Loss
|
$ | (14,192,570 | ) | $ | (1,868,007 | ) | $ | (17,135,242 | ) | $ | (4,914,792 | ) |
For the Nine Months Ended September 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (16,914,876 | ) | $ | (4,958,670 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Impairment
of goodwill and intangible assets
|
11,142,273 | 48,500 | ||||||
Impairment
of fixed assets and prepaid expenses
|
219,324 | - | ||||||
Loss
on settlement of debt
|
- | 550,175 | ||||||
Warrant
expense arising from repricing of investor warrants
|
- | 58,230 | ||||||
Registration
rights penalty
|
- | 218,400 | ||||||
Derivative
expense pertaining to embedded conversion feature of convertible Series B
preferred stock issuance
|
512,291 | - | ||||||
Change
in fair value of derivative liability - embedded conversion
feature
|
- | 55,399 | ||||||
Loss
(gain) on settlement of accounts payable
|
8,405 | (21,561 | ) | |||||
Stock
based compensation expense
|
1,687,338 | 498,626 | ||||||
Amortization
of debt discount
|
- | 69,428 | ||||||
Amortization
of debt issuance costs
|
- | 27,591 | ||||||
Amortization
of prepaid asset - related party
|
140,720 | 140,720 | ||||||
Depreciation
and amortization
|
73,443 | 53,128 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Decrease
(increase) in:
|
||||||||
Accounts
receivable - related party
|
877,685 | (102,802 | ) | |||||
Inventory
|
633,043 | (803,132 | ) | |||||
Prepaid
and other current assets
|
476,256 | (483,941 | ) | |||||
Other
assets
|
- | 13,632 | ||||||
Increase
(decrease) in:
|
||||||||
Accounts
payable
|
342,975 | 704,209 | ||||||
Accounts
payable - related party
|
(209,875 | ) | (275,563 | ) | ||||
Accrued
expenses
|
109,286 | 137,717 | ||||||
Deferred
Revenues
|
(783,015 | ) | 2,096,578 | |||||
Net
Cash Used In Operating Activities
|
(1,684,727 | ) | (1,973,336 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Cash
paid to acquire intangible assets
|
- | (4,207 | ) | |||||
Cash
paid to purchase fixed assets
|
(191,919 | ) | (12,279 | ) | ||||
Net
Cash Used In Investing Activities
|
(191,919 | ) | (16,486 | ) |
For the Nine Months Ended September 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Bank
overdrafts
|
- | (27,319 | ) | |||||
Proceeds
from sale of common stock
|
1,151,667 | |||||||
Cash
paid for direct offering costs
|
(51,579 | ) | ||||||
Proceeds
from media line of credit
|
- | 500,000 | ||||||
Proceeds
from revolving line of credit
|
- | 271,403 | ||||||
Repayment
of line of credit
|
- | (266,047 | ) | |||||
Proceeds
from convertible note payable
|
- | 250,000 | ||||||
Cash
paid as debt issue costs
|
(27,591 | ) | ||||||
Repayment
of other notes payable
|
- | (50,000 | ) | |||||
Proceeds
from issuance of convertible Series B preferred stock
|
2,943,750 | 250,000 | ||||||
Proceeds
from issuance of common stock and warrants in private
placement
|
(17,216 | ) | 810,000 | |||||
Cash
paid for direct offering costs pertaining to private
placement
|
- | (42,804 | ) | |||||
Net
Cash Provided By Financing Activities
|
4,026,622 | 1,667,642 | ||||||
Net
Increase (Decrease) in Cash
|
2,149,976 | (322,180 | ) | |||||
Effect
of Exchange Rates on Cash
|
(181,991 | ) | 44,774 | |||||
Cash
- Beginning of Period
|
297,426 | 778,436 | ||||||
Cash
- End of Period
|
$ | 2,265,411 | $ | 501,030 | ||||
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
||||||||
Cash
Paid During the Period for:
|
||||||||
Interest
|
$ | - | $ | 201,380 | ||||
Taxes
|
$ | - | $ | - | ||||
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
||||||||
Shares
vested to foreign subsidiary managers
|
$ | 25 | $ | - | ||||
Accrual
of covenant not to compete
|
$ | 50,000 | $ | - | ||||
Conversion
of preferred stock into common stock
|
$ | 300 | $ | 220 | ||||
Shares
issued in connection with convertible Series B preferred
stock
|
$ | 1,378 | $ | - | ||||
Settlement
of accounts payable with common stock
|
$ | 317,784 | $ | 128,938 | ||||
Derivative
liability arising from convertible Series B preferred
stock
|
$ | 2,943,750 | $ | - | ||||
Derivative
liability arising from convertible note payable debt
discount
|
$ | - | $ | 69,529 | ||||
Accrual
of dividends on convertible Series B preferred stock
|
$ | - | $ | 7,336 | ||||
Shares
issued in connection with repricing
|
$ | - | $ | 326 | ||||
Related
party accounts payable converted into private placement
shares
|
$ | - | $ | 50,000 | ||||
Purchase
of convertible note payable by shareholder
|
$ | - | $ | 250,000 | ||||
Conversion
of media line of credit to common stock
|
$ | - | $ | 500,000 | ||||
Conversion
of series B preferred stock and accrued dividends to common
stock
|
$ | - | $ | 257,336 | ||||
Write
off of derivative liability upon repayment of convertible note
payable
|
$ | - | $ | 124,827 |
a)
|
The economic characteristics and
risks of the embedded derivative instrument are not clearly and closely
related to the economic characteristics and risks of the host
contract,
|
b)
|
The hybrid instrument that
embodies both the embedded derivative instrument and the host contract is
not remeasured at fair value under otherwise applicable GAAP with changes
in fair value reported in earnings as they occur,
and
|
c)
|
A separate instrument with the
same terms as the embedded derivative instrument would be considered a
derivative instrument subject to certain requirements (except for when the
host instrument is deemed to be
conventional).
|
a)
|
Equity if they (i) require
physical settlement or net-share settlement, or (ii) gives us a choice of
net-cash settlement or settlement in our own shares (physical settlement
or net-share settlement), or
as
|
b)
|
Assets or liabilities if they (i)
require net-cash settlement (including a requirement to net cash settle
the contract if an event occurs and if that event is outside our control),
or (ii) give the counterparty a choice of net-cash settlement or
settlement in shares (physical settlement or net-share
settlement).
|
September 30, 2010
|
December 31, 2009
|
|||||||
Convertible
Preferred Stock
|
147,587,500 | 3,400,000 | ||||||
Common
Stock Purchase Warrants
|
92,268,753 | 21,800,003 | ||||||
Stock
Options
|
74,081,233 | 13,215,834 | ||||||
313,937,486 | 38,415,837 |
Level 1:
|
Quoted prices in active markets
for identical assets or liabilities. An active market for an asset or
liability is a market in which transactions for the asset or liability
occur with sufficient frequency and volume to provide pricing information
on an ongoing basis.
|
Level 2:
|
Observable inputs other than
Level 1 inputs. Examples of Level 2 inputs include quoted prices in active
markets for similar assets or liabilities and quoted prices for identical
assets or liabilities in markets that are not
active.
|
Level 3:
|
Unobservable inputs based on our
assessment of the assumptions that market participants would use in
pricing the asset or
liability.
|
At September 30, 2010
|
At December 31, 2009
|
|||||||||||||||
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|||||||||||||
Level
1
|
||||||||||||||||
None
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Level
2
|
||||||||||||||||
Goodwill
|
— | — | 11,142,273 | — | ||||||||||||
Level
3
|
||||||||||||||||
Derivative
liability
|
— | 3,456,041 | — | — | ||||||||||||
$ | — | $ | 3,456,041 | $ | 11,142,273 | $ | — |
Three Months Ended
September 30, 2010
|
Nine Months Ended
September 30, 2010
|
|||||||||||||||
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|||||||||||||
Balance
at December 31, 2009
|
$ | - | $ | - | $ | 11,142,273 | $ | - | ||||||||
Impairment
of goodwill
|
- | - | (11,142,273 | ) | - | |||||||||||
Derivative
liability
|
- | 3,456,041 | - | - | ||||||||||||
Balance
at September 30, 2010
|
$ | - | $ | 3,456,041 | $ | - | $ | - |
Nine
|
||||
Months Ended
|
||||
September 30, 2009
|
||||
Revenues
|
$ | 12,251,253 | ||
Net
Loss
|
(5,337,045 | ) | ||
Basic
and Diluted Loss from Continuing Operations per Common
Share
|
$ | (0.03 | ) | |
Basic
and Diluted Weighted Average Shares
Outstanding
|
158,540,060 |
September 30, 2010
|
December 31,
2009
|
Estimated
Useful Life
|
||||||||||
Leasehold
Improvements
|
$ | 50,852 | $ | 39,694 |
*
|
|||||||
Security
Equipment
|
29,795 | 26,005 |
7years
|
|||||||||
Computers
|
7,821 | 6,024 |
3years
|
|||||||||
Furniture
and Fixtures
|
-0- | 2,397 |
7years
|
|||||||||
Office
Equipment
|
3,386 | 3,386 |
3years
|
|||||||||
91,854 | 77,506 | |||||||||||
Less:
Accumulated Depreciation
|
(10,359 | ) | (1,598 | ) | ||||||||
Fixed
Assets, Net
|
$ | 81,495 | $ | 75,908 |
|
·
|
Currency fluctuations,
devaluations, conversion and expropriation
restrictions;
|
|
·
|
Confiscatory taxation or other
adverse tax policies;
|
|
·
|
Political and economic
instability;
|
|
·
|
Inflation;
|
|
·
|
Trade restrictions and economic
embargoes imposed by the United States and other
countries;
|
|
·
|
Expropriation and nationalization
of our assets or of our customers in that
country;
|
|
·
|
Governmental activities that
limit or disrupt markets, payments, or limit the movement of
funds;
|
|
·
|
Governmental activities that may
result in the deprivation of contract
rights;
|
|
·
|
Civil unrest, acts of terrorism,
force majeure, war or other armed conflict;
and
|
|
·
|
Natural disasters including those
related to earthquakes, hurricanes, tsunamis and
flooding.
|
|
·
|
Each
agreed to a reduced salary of $150,000 per year,
and
|
|
·
|
Each
is now employed on a month-to-month basis, eliminating all severance
rights.
|
|
·
|
Seniority
to all classes of common and preferred stock existing or issued in the
future;
|
|
·
|
Voting
rights and powers equal to the voting rights and powers of our common
stock. Each share of 2010 Series B PS is entitled to the number of votes
that the holder would be entitled to upon the conversion of the shares
into common stock;
|
|
·
|
A
stated liquidation value of $1 per share, and a liquidation preference of
the greater of $1 per share, or the amount that would be due if all 2010
Series PS shares had been converted to common stock immediately prior to
the liquidation event;
|
|
·
|
No
stated dividends;
|
|
·
|
An
option by the holder to convert each share into common shares at a price
of $0.02 per share, effective upon the increase of our authorized capital
to 650,000,000 shares of common
stock;
|
|
·
|
Conversion
price protection whereby if in the twelve months following issuance, we
sell any stock for a price less than $0.02 per share, then the exercise
price will be adjusted to reflect the lowest price for which the shares
were sold;
|
Expected
dividends
|
0 | % | ||
Expected
volatility
|
151.12 | % | ||
Expected
term – embedded conversion option
|
1.0 years | |||
Risk
free interest rate
|
0.49 | % |
Warrants
|
Weighted
Average Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
||||||||||
Outstanding
– December 31, 2009
|
21,800,003 | $ | 0.35 | 2.3 | ||||||||
Granted
|
73,593,750 | 0.035 | ||||||||||
Exercised
|
— | |||||||||||
Forfeited
or Cancelled
|
(3,125,000 | ) | 0.23 | |||||||||
Outstanding
– September 30, 2010
|
92,268,753 | $ | 0.109 | 2.6 | ||||||||
Exercisable
– September 30, 2010
|
89,143,753 | $ | 0.104 | 2.7 |
Risk-free
interest rate
|
0.17 - 2.46 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
197.39 - 207.65 | % | ||
Expected
life
|
6
mos - 5 years
|
|||
Expected
forfeitures
|
0 | % |
Risk-free
interest rate
|
1.40 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
191.01 | % | ||
Expected
life
|
4.34 years
|
|||
Expected
forfeitures
|
0 | % |
|
·
|
4,535,715
to the members of our board of directors for future services. These
options vest one-year after the date of
grant.
|
|
·
|
52,710,472
to our employees for future services including 12,963,070 to Douglas
Feirstein, our Chief Executive Office, 12,963,070 to Dan Brauser, our
Chief Financial Officer, 13,279,434 to Chuck Wallace, our Chief Operating
Officer, and 6,714,949 to Michael Brachfeld, our Chief Accounting Officer.
Of these options, 734,930 vested immediately and the rest vest quarterly
in equal increments over a four-year
term.
|
|
·
|
535,000
to non–employee contractors for future services. Of these options, 83,750
vested immediately and the rest vest over a period of three to nine
months, as services are provided.
|
Risk-free
interest rate
|
1.59-1.85% | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
174.82-197.89 | % | ||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0 | % |
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Balance
at December 31, 2009
|
13,215,834 | $ | 0.450 | 4.8 | ||||||||||||
Granted
|
61,681,187 | 0.037 | ||||||||||||||
Forfeited
or Cancelled
|
(815,788 | ) | 0.270 | |||||||||||||
Balance
at September 30, 2010
|
74,081,233 | 0.046 | 4.4 | $ | — | |||||||||||
Exercisable
at September 30, 2010
|
6,565,473 | $ | 0.114 | 4.4 | $ | — |
Number of Options
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Non-Vested
– December 31, 2009
|
12,595,364 | $ | 0.270 | |||||
Granted
|
61,681,187 | 0.063 | ||||||
Vested
|
(6,054,783 | ) | 0.177 | |||||
Cancelled
or Forfeited
|
(706,008 | ) | 0.270 | |||||
Non-Vested
– September 30, 2010
|
67,515,760 | $ | 0.072 |
United States
|
Canada
|
Europe
|
Consolidated
|
|||||||||||||
Revenue
for the nine months ended September 30, 2010
|
$ | 12,733,984 | $ | 8,820,695 | $ | 7,591,444 | $ | 29,146,123 | ||||||||
Total
Assets at September 30, 2010
|
$ | 3,353,859 | $ | 261,593 | $ | 77,900 | $ | 3,693,352 | ||||||||
Revenue
for the nine months ended September 30, 2009
|
$ | 4,599,457 | $ | 2,209,529 | $ | 2,502,603 | $ | 9,311,589 | ||||||||
Total
Assets at December 31, 2009
|
$ | 13,143,253 | $ | 558,884 | $ | 1,385,300 | $ | 15,087,437 |
For the Three Months Ended June 30,
|
Change
|
Change
|
||||||||||||||
2010
|
2009
|
(Dollars)
|
(Percentage)
|
|||||||||||||
Revenue
|
$ | 4,117,668 | $ | 6,862,012 | $ | (2,744,344 | ) | -40 | % | |||||||
Cost
of Revenue
|
1,626,391 | 1,777,555 | (151,164 | ) | -9 | % | ||||||||||
Gross
Profit
|
2,491,277 | 5,084,457 | (2,593,180 | ) | -51 | % | ||||||||||
Sales
and Marketing
|
3,454,216 | 3,910,549 | (456,333 | ) | -12 | % | ||||||||||
General
and Administrative
|
1,273,009 | 2,176,055 | (903,046 | ) | -41 | % | ||||||||||
Operating
Loss
|
(2,235,948 | ) | (1,002,147 | ) | (1,233,801 | ) | 123 | % | ||||||||
Interest
Income (Expense), net
|
- | (159,793 | ) | 159,793 | -100 | % | ||||||||||
Other
Expense
|
(11,880,175 | ) | (753,181 | ) | (11,126,994 | ) | 1477 | % | ||||||||
Net
Loss
|
$ | (14,116,123 | ) | $ | (1,915,121 | ) | $ | (12,201,002 | ) | 637 | % |
|
1.
|
The number of leads generated
from an advertisement,
|
|
2.
|
The rate at which those leads
convert into actual packs submitted by members of the public (the
“Sellers”), and
|
|
3.
|
The average revenue generated
from the packs received.
|
For the Nine Months Ended September 30,
|
Change
|
Change
|
||||||||||||||
2010
|
2009
|
(Dollars)
|
(Percentage)
|
|||||||||||||
Revenue
|
$ | 29,146,123 | $ | 9,311,589 | $ | 19,834,534 | 213 | % | ||||||||
Cost
of Revenue
|
10,056,116 | 2,785,674 | 7,270,442 | 261 | % | |||||||||||
Gross
Profit
|
19,090,007 | 6,525,915 | 12,564,092 | 193 | % | |||||||||||
Sales
and Marketing
|
18,529,338 | 5,604,099 | 12,925,239 | 231 | % | |||||||||||
General
and Administrative
|
5,588,802 | 4,714,556 | 874,246 | 19 | % | |||||||||||
Operating
Loss
|
(5,028,133 | ) | (3,792,740 | ) | (1,235,393 | ) | 33 | % | ||||||||
Interest
Income (Expense), net
|
- | (235,226 | ) | 235,226 | -100 | % | ||||||||||
Other
Expense
|
(11,886,743 | ) | (930,704 | ) | (10,956,039 | ) | 1177 | % | ||||||||
Net
Loss
|
$ | (16,914,876 | ) | $ | (4,958,670 | ) | $ | (11,956,206 | ) | 241 | % |
|
1.
|
The number of leads generated
from an advertisement,
|
|
2.
|
The rate at which those leads
convert into actual packs submitted by members of the public (the
“Sellers”), and
|
|
3.
|
The average revenue generated
from the packs received.
|
Item 1.
|
Legal
Proceedings.
|
Item 1A.
|
Risk
Factors.
|
Item 2.
|
Unregistered Sales of Equity
Securities and Use of
Proceeds.
|
Name or Class of
Investor
|
Date Sold
|
No. of Securities
|
Consideration
|
|||
Consultant(1)
|
7/26/10
|
335,000
five-year stock options exercisable at $0.065 per share
|
Consulting
services
|
|||
March
2010 Private Placement Investors(1)
|
8/9/10 through
9/8/10
|
13,775,000
shares of common stock
|
In
order to give the investors an effective price per share of $0.06 per
share from March investment for investing in August 2010 Private
Placement
|
|||
Consultant(1)
|
9/10/10
|
200,000
five-year stock options exercisable at $0.034 per share
|
Consulting
services
|
Item 3.
|
Defaults Upon Senior
Securities.
|
Item 4.
|
(Removed and
Reserved).
|
Item 5.
|
Other
Information.
|
Item 6.
|
Exhibits.
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed or
Furnished
|
||||
No.
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Herewith
|
2.1
|
Share
Exchange Agreement dated July 23, 2008 **
|
8-K
|
7/29/08
|
2.1
|
||||||
2.2
|
Share
Exchange Agreement dated May 5, 2009 **
|
10-Q
|
8/19/09
|
2.2
|
||||||
3.1
|
Certificate
of Incorporation
|
10-QSB
|
6/7/06
|
3.1
|
||||||
3.2
|
Certificate
of Amendment – Increase in Capital
|
10-QSB
|
6/7/06
|
3.1
|
||||||
3.3
|
Certificate
of Amendment – Effective Profitable Software
|
10-QSB
|
6/7/06
|
3.1
|
||||||
3.4
|
Certificate
of Amendment – Money4Gold Holdings, Inc.
|
8-K
|
7/29/08
|
3.1
|
||||||
3.5
|
Certificate
of Amendment – Increase in Capital
|
10-K
|
3/31/10
|
3.5
|
||||||
3.6
|
Certificate
of Correction
|
10-Q
|
11/19/08
|
3.2
|
||||||
3.7
|
Certificate
of Amendment – Increase in Capital
|
10-Q
|
8/19/09
|
3.3
|
||||||
3.8
|
Certificate
of Amendment – Upstream Worldwide, Inc.
|
S-1A
|
7/12/10
|
3.8
|
||||||
3.9
|
Amended
and Restated Certificate of Designation – Series B
|
Filed
|
3.10
|
Amended
and Restated Bylaws
|
10-Q
|
5/20/09
|
3.3
|
||||||
10.1
|
Form
of Executive Option Agreement*
|
Filed
|
||||||||
10.2
|
Form
of Director Option Agreement
|
10-Q
|
8/20/10
|
10.2
|
||||||
10.3
|
Form
of Director Restricted Stock Agreement
|
10-Q
|
8/20/10
|
10.3
|
||||||
10.4
|
Stock
Purchase Agreement – March 2010
|
10-Q
|
5/14/10
|
10.2
|
||||||
10.5
|
Registration
Rights Agreement – March 2010
|
10-Q
|
5/14/10
|
10.3
|
||||||
10.6
|
Amendment
to CEO and CFO Employment Agreements*
|
Filed
|
||||||||
10.7
|
Securities
Purchase Agreement – August 2010
|
Filed
|
||||||||
10.8
|
Form
of Warrant – August 2010
|
Filed
|
||||||||
31.1
|
Certification
of Principal Executive Officer (Section 302)
|
Filed
|
||||||||
31.2
|
Certification
of Principal Financial Officer (Section 302)
|
Filed
|
||||||||
32.1
|
Certification
of Principal Executive Officer and Principal Financial Officer
(Section 906)
|
Furnished
|
(i)
|
the
representations and warranties contained in any agreements filed with this
report were made for the purposes of allocating contractual risk between
the parties and not as a means of establishing
facts;
|
(ii)
|
the
agreement may have different standards of materiality than standards of
materiality under applicable securities
laws;
|
(iii)
|
the representations are qualified
by a confidential disclosure schedule that contains nonpublic information
that is not material under applicable securities
laws;
|
(iv)
|
facts
may have changed since the date of the agreements;
and
|
(v)
|
only parties to the agreements
and specified third-party beneficiaries have a right to enforce the
agreements.
|
UPSTREAM
WORLDWIDE, INC.
|
||
November
12, 2010
|
/s/ Douglas
Feirstein
|
|
Douglas
Feirstein
|
||
Chief
Executive Officer
(Principal
Executive Officer)
|
||
November
12, 2010
|
/s/ Daniel Brauser
|
|
Daniel
Brauser
|
||
Chief
Financial Officer
(Principal
Financial Officer)
|