Authentic Holdings, Inc. - Quarter Report: 2010 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
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xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2010
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oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number: 000-52047
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PREMIERE PUBLISHING GROUP, INC.
(Exact name of small business issuer in its charter)
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Nevada
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11-3746201
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(State or other jurisdiction
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(I.R.S. Employer Identification No.)
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of incorporation
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or organization)
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264 Union Blvd, First Floor, Totowa NJ 0712
(Address of principal executive offices)
(973-390-0072)
(Issuer’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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x
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(Do not check if a smaller reporting company)
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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 shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
54,246,846 shares outstanding as of May 23, 2010.
INDEX
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Page
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PART I
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FINANCIAL INFORMATION
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3
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Item 1.
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Financial Statements
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3
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Consolidated Balance Sheets
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3
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Condensed Consolidated Statements of Operations (Unaudited)
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4
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Condensed Consolidated Statements of Cash Flows (Unaudited)
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5
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Notes to the Condensed Consolidated Financial Statements (Unaudited)
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6
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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10
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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11
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Item 4.
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Controls and Procedures
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11
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Item 4T.
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Controls and Procedures
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12
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PART II
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OTHER INFORMATION
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12
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Item 1.
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Legal Proceedings
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12
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Item 1A.
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Risk Factors
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12
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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12
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Item 3.
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Defaults Upon Senior Securities
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12
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Item 4.
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Submission of matters to a Vote of Security Holders
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12
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Item 5.
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Other Information
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12
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Item 6.
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Exhibits
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12
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Signatures
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14
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2
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PREMIERE PUBLISHING GROUP, INC. and Subsidiaries
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Consolidated Balance Sheets at March 31, 2010 (Unaudited)
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and at December 31, 2009 (Audited)
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March 31
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December 31
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2010
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2009
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ASSETS
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(Unaudited)
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Current Assets:
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Total Current Assets
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-- | -- | ||||||
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Total Assets
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$ | -- | $ | -- | ||||
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LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
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Current Liabilities
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Cash overdraft
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$ | 2,834 | $ | 2,834 | ||||
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Accounts payable
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1,131,011 | 1,131,011 | ||||||
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Acrued officers compensation
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480,000 | 420,000 | ||||||
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Secured note and accrued interest payable
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801,473 | 786,762 | ||||||
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Unsecured notes and accrued interest payable
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83,702 | 82,192 | ||||||
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Convertible notes and accrued interest payable
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(net of discount of $141,433 and 138,422)
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776,967 | 764,199 | ||||||
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Total Current Liabilities
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3,275,987 | 3,186,998 | ||||||
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Commitments and Contingencies
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-- | -- | ||||||
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Stockholders' Deficit
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Common Stock - $0.001 par value, 75,000,000 shares authorized,
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54,246,846 shares issued and outstanding
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$ | 54,247 | $ | 54,247 | ||||
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Additional Paid-In Capital
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4,957,161 | 4,957,161 | ||||||
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Accumulated (Deficit)
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(8,287,395 | ) | (8,198,406 | ) | ||||
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Total Stockholders' Deficit
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(3,275,987 | ) | (3,186,998 | ) | ||||
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Total Liabilities and Stockholders' Deficit
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$ | -- | $ | -- | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
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Condensed Consolidated Statements of Operations and Discounted Operations
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(Unaudited)
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Three Months Ended March 31
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2010
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2009
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Revenues from Discontinued Operations
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Advertising, circulation, events and other
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$ | - | $ | - | ||||
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Operating Expenses
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Selling, general and administrative
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60,000 | 65,915 | ||||||
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Total Operating Expenses
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60,000 | 65,915 | ||||||
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Loss From Operations from Operations
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(60,000 | ) | (65,915 | ) | ||||
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Other Income (Expenses)
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Interest income, expense and financing costs
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(28,989 | ) | 28,635 | |||||
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Change in value of warrants and derivative liabilities
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-- | (28,400 | ) | |||||
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Total Other Income (Expenses ) from Discontinued Operations
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(28,989 | ) | 235 | |||||
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Income (Loss) Before Provision For Income Taxes
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(88,989 | ) | (66,150 | ) | ||||
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Provision For Income Taxes
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-- | -- | ||||||
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Net (Loss) from Operations
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$ | (88,989 | ) | $ | (66,150 | ) | ||
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Net (Loss) Per Common Share
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$ | (0.001 | ) | $ | (0.001 | ) | ||
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Weighted Average Common Shares Outstanding
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54,246,846 | 54,246,846 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
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Condensed Consolidated Statements of Cash Flows
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(Unaudited)
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Three Months Ended March 31
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2010
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2009
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Cash Flows from Operating Activities
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Net (Loss)
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$ | (88,989 | ) | $ | (66,150 | ) | ||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization expense
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-- | -- | ||||||
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Amortization of debt issue costs
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3,011 | 5,915 | ||||||
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Change in value of warrant and derivative liabilities
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(28,400 | )- | ||||||
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Changes in assets and liabilities:
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Prepaid expenses and other assets
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-- | -- | ||||||
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Accounts payable
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60,000 | 60,000 | ||||||
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Accrued expenses
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-- | |||||||
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Accrued officers compensation
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-- | |||||||
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Accrued interest
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25,978 | 28,635 | ||||||
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Net cash used by Operating Activities
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-- | -- | ||||||
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Net (Decrease) Increase in Cash
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$ | - | $ | -- | ||||
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Cash at Beginning of Period
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-- | -- | ||||||
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Cash at End of Period
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$ | -- | $ | -- | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
5
For the three Months Ended March 31, 2010
(Unaudited)
Note 1 - Unaudited Financial Information
Premiere Publishing Group, Inc. (“Premiere”) was incorporated in Nevada on March 25, 2005. Premiere and its wholly owned subsidiary Poker Life LLC, (“Poker Life”) a New York limited liability company (collectively, the “Company”) have limited operations.
Going Concern
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company incurred a net loss of $344,434 and $492,256 for the years ended December 31, 2009 and 2008, respectively and as of March 31, 2010 the Company has an accumulated deficit of $8,287,395 and a working capital deficit of $3,275,987 Consequently, the aforementioned items raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to repay its substantial indebtedness, acquire an operating business and raise capital through equity and debt financing or other means on desirable terms. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to, liquidate available assets, restructure the company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Discontinued Operations
The Company discontinued all publishing activities, its sole business activity, during 2007.
Plan of Operations
We have ceased all publishing operations, and our operations consist solely of attempting to preserve our status as a public company, seek to compromise our debt and identify a business combination with an operating company. We will use our limited resources to pay for our minimal operations and legal, accounting and professional services required to prepare and file our reports with the SEC. Our remaining resources, however, will be sufficient to sustain us as an inactive company for only the short-term. If we are unable to locate additional financing within the short-term, we will be forced to suspend all public reporting with the SEC and possibly liquidate.
Our indebtedness is substantial which must be settled prior to undertaking an acquisition of an operating company. As of the date of this report, we have not settled any of our obligations and may unable to do so. Failure to settle these obligations may also require us to suspend current filing with the SEC and force us to liquidate.
6
Our primary objective is to identify a suitable operating company with a view to achieving long-term growth. As of the date of this report, we have not identified a particular industry and have determined not to restrict our search for a target company to any specific business, industry or geographical location. As of the date of this report, we have not engaged in any specific discussions with any potential company regarding a transaction. In addition, although we have not developed any definitive criteria for evaluating a successful target.
Note 5 – Capital Stock
Common Stock
As of March 31, 2010 the Company has 54,246,846 shares of its $0.001 par value common stock issued and outstanding.
Registration Rights
The Company has granted piggy-back registration rights to the holders of the Divine Notes in respect of the shares of common stock in which the Divine Notes may be converted, which rights expire in November 2011. The cost to the Company of registering such shares shall not exceed $55,000. The Company is also obligated to register upon demand 28,000,000 shares of common stock at the sole expense of the Company.
Note 6 – Accounts and Notes Payable
Accounts Payable
The Company’s consolidated accounts payable at March 31, 2010 is $1,131,011.
Secured Note Payable
The Company (Premiere, Poker Life and Sobe, jointly and severally) entered into a settlement agreement with R.R. Donnelly & Sons Company (“Donnelly”) on June 6, 2007. As part of the settlement, the Company issued to Donnelly a Secured Promissory Note in the principal sum of $601,048, with an interest rate of 9% per annum and a requirement for monthly payments of $43,577 and granted Donnelly a first lien security interest in all of the Company’s assets. The Company was unable to meet the monthly payments and Donnelly obtained judgment in the amount of $653,841. The accompanying financial statements include $14,711 of interest expense for the three months ended March 31, 2010, and a total balance due at March 31, 2010 of $801,473.
Unsecured Notes Payable
The Company has an unsecured note payable in the principal amount of $77,842. This note was issued to a vendor on August 23, 2007. The note bears interest at the rate of 10% per annum and required monthly payments of $4,500 with final payment due on July 15, 2008. The Company has made no payments under this note and the note is in default. The accompanying financial statements include $1,510 of interest expense for the three months ended March 31, 2010 with a total balance due at March 31, 2010 of $84,602.
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Convertible Notes Payable
The Company’s convertible notes payable consist of two series of unsecured convertible promissory notes; (i) $250,000 in principal amount of 8% convertible notes issued in 2005 to two investors as part of the Company’s 2005 bridge note financing (the “Bridge Notes”), and (ii) $480,000 in aggregate principal amount of 6% convertible notes issued in 2006 and 2007 to sixteen investors pursuant to a private placement offering conducted by Divine Capital Markets LLC (the “Divine Notes”).
The Bridge Notes
The Company has $250,000 of principal amount of 8% convertible promissory Bridge Notes with an original maturity date of October, 2005. The principal amount of each Bridge Note is convertible, at the option of the holder at anytime into shares of the Company’s common stock at the rate of $0.25 per share. The Company may at its election, pay the interest due on the Bridge Notes in shares of common stock at the rate of $0.50 per share. The estimated number of shares potentially issuable upon an election to convert all of the Bridge Notes would be approximately 1,100,000 shares of common stock. The accompanying financial statements include $5,034 of interest expense for the three months ended March 31, 2010, respectively with an aggregate balance due at March 31, 2010 of $355,217.
The Divine Notes
The Company has $480,000 of principal amount of 6% convertible promissory Divine Notes with an original maturity date of November, 2009. The principal amount of each Divine Note is convertible, at the option of the holder into shares of the Company’s common stock. The convertible notes accrue interest at 6% per annum and are due three years after issuance. The Company paid $69,800 in fees and commissions to Divine Capital Markets LLC as debt issue costs. Debt issue costs are being amortized over the term of the notes. The accompanying financial statements include $7,200 of accrued interest expense for the three months ended March 31, 2010, respectively with an aggregate balance due at March 31, 2010 of $521,782 (with the unamortized discount of $110,032).
Upon the occurrence of an event of default, the full unpaid amount of the Divine Notes becomes, at the election of the holder, immediately due and payable. The Company is in default under the terms of the Divine Notes and the notes are included in the accompanying financial statements as current liabilities.
The Divine Notes are convertible into shares of the Company’s common stock at a ratio determined by dividing the dollar amount being converted by 75% of the lowest closing bid of the Company’s common stock for the fifteen (15) trading days immediately preceding the date of conversion. The estimated conversion price at March 31, 2010 is $0.001125 per share and the estimated number of shares potentially issuable upon an election to convert all of the Divine Notes would be approximately 737,669,650 shares of common stock. The Company does not have a sufficient number of authorized and unissued shares of common stock to meet this obligation, and will be required to amend its articles of incorporation (which requires shareholder approval) in order to increase its number of authorized shares in order to meet such obligation.
Accrued Derivative Liability
The accrued derivative liability of $110,032 represents the March 31, 2010 unamortized fair value of the liability associated with the beneficial conversion feature associated with the conversion provision of the Company’s convertible notes and is recorded as a debt discount. The fair value of the beneficial conversion feature is measured at each reporting period with changes in fair value recognized in net income.
8
The Company had an employment agreement with its sole executive officer who is the Company’s sole employee, executive officer and a director. The agreement provides for the payment of annual compensation in the amount of $200,000 and other benefits. The Company’s financial resources were not sufficient to permit the payment of this compensation and the officer has terminated service as the Company’s sole executive officer.
On August 7, 2007 the Company entered into a Consulting Agreement together with an Investors Rights Agreement with Totowa Consulting Group, Inc. (“Totowa”). The agreements provide for Totowa to assist the Company in its negotiations with creditors and to advise the Company as to financing, cash flow management and business and financial planning. The term of the Consulting Agreement is for 24 months with a monthly fee of $20,000 and provides for the payment of the first seven months in advance with the issuance of 28,000,000 shares of restricted fully vested common stock. The accompanying financial statements include consulting fee expense of $60,000 for the three months ended March 31, 2010.
The Consulting Agreement includes a provision for anti-dilution in value, whereby additional shares may be issued to Totowa in the event the trading price of the Company’s common stock declines to an amount less than the original issuance value of one-half of one cent ($0.005) per share as measured by the market price at the six month anniversary of the Agreement.
The Investor Rights Agreement, among other things, (i) prohibits Totowa from transferring its shares to anyone other than certain permissible persons for a period of one year from the date of the Agreement, (ii) grants Totowa registration rights in respect of its shares, and (iii) in the event the Company issues additional voting securities at any time during a period of seven years from the date of the Agreement, grants Totowa the right to purchase further securities in number sufficient for Totowa to maintain ownership of 51% of the outstanding voting securities of the Company at a purchase price equal to the price of Totowa’s original issuance of one-half cent per share.
None
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The following discussion of our plan of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report.
Forward Looking Statements
Because the Company intends to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding forward looking statements found in the following discussion and elsewhere in this report and in any other statement made by, or on the behalf of the Company, 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 the Company's 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 behalf of the Company. The Company disclaims any obligation to update forward-looking statements.
Readers are also urged to carefully review and consider the various disclosures made by the Company in this report that seek to advise interested parties of the risks and other factors that affect the Company's business. Interested parties should also review the Company's reports on Forms 10-KSB, 10-QSB, 10-Q and 8-K and other reports that are periodically filed with or furnished to the Securities and Exchange Commission. The risks affecting the Company's business include, among others: continuation as a going concern; obtaining financing and obtaining such financing on suitable terms; successful compromise or payment of the Company's substantial debt; the Company's continuing compliance with applicable laws and regulations; intellectual property challenges and claims; and success in identifying and acquiring a suitable acquisition or merger company. All forward-looking statements, whether made in this report or elsewhere, should be considered in context with the various disclosures made by the Company about its business.
Plan of Operation
Our business is the preparation for publication of specific interest magazines for others and the publication and distribution of our own magazine, titled "Poker Life Magazine." Our business is conducted through our principal operating subsidiary Poker Life LLC, a New York limited liability company. We also published the Trump Magazine under the terms of a license agreement with Donald Trump through our subsidiary Sobe Life LLC ("Sobe"), a Illinois limited liability company. Sobe has ceased operations and is the subject of an involuntary bankruptcy proceeding filed on September 20, 2007. The Company does not intend to oppose the involuntary proceeding and has written off and abandoned its interest in Sobe.
10
We have temporarily suspended publication of Poker Life Magazine and presently are earning no revenue. Before resuming publication we require additional financing and arrangements for the settlement of our debts. We have begun negotiations with our current creditors for the settlement of the amounts owed them. Such negotiations are continuing and we are unable to predict the outcome of these negotiations. In the event we are not successful in settling our liabilities, the Company may be forced to reorganize under the provisions of Chapter 11 of the Bankruptcy Code.
Our current funds are less than necessary for the continued operation of our business and are not sufficient to permit us to continue publishing. Our present operations depend upon the continued support of our shareholders and executive officer, and our continuation as a going concern is dependent upon continued financial support from these parties.
In order to resume publication and provide for future business, the Company requires additional financing. In addition, the Company will have to provide for the payment of its substantial debt which as of March 31, 2010 totals $3,275,987 of current liabilities.
We do not currently have any commitments for financing and we may not be able to find such financing and, if available, such financing may not be available on reasonable terms. Obtaining additional financing is subject to a number of factors, including market conditions and overall investor sentiment, and such factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
The Company has no market risk sensitive instruments.
11
ITEM 4(T). CONTROLS AND PROCEDURES
Evaluation of and Report on Internal Control over Financial Reporting
The management of Premiere Publishing Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Based on its assessment, management concluded that, as of March 31, 2010, the Company’s internal control over financial reporting is effective based on those criteria.
12
This quarterly does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting identified in connection with the requisite evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION
None
13
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Premiere Publishing Group, Inc.
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Dated: May 24, 2010
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By:
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/s/ Omar Barrientos
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Omar Barrientos
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President, Chief Executive Officer and Director
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14