Beyond Commerce, Inc. - Quarter Report: 2008 March (Form 10-Q)
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________
FORM
10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act
of 1934 for
the
quarterly period ended March
31, 2008
Commission
file number: 000-52490
BOOMJ,
Inc.
(Formerly
Reel Estate Services, Inc.)
(Exact
name of registrant as specified in its charter)
|
Nevada
|
98-0512515
|
|
(State
of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
9029
South Pecos
Suite
2800
Henderson,
Nevada 89074
(Address
of principal executive offices, including zip
code)
|
(702)
463-7000
(Registrant’s
telephone number, including area code)
SECURITIES
REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT
Title
of each class
NONE
SECURITIES
REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON
STOCK $0.001 PAR VALUE
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 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
Indicate
by check mark whether the registrant is a large accelerated filer, 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.
|
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Large
accelerated filer o
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Accelerated
filer o
|
|
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Non-accelerated
filer o
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(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 o
No
x
As
of May
15, 2008, there were outstanding 37,114,496 shares of the registrant’s common
stock.
-1-
BOOMJ,
INC.
FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 2008
Table
of
Contents
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Page
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PART
I FINANCIAL INFORMATION
|
|
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Item
1. Unaudited Interim Financial
Statements
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|
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Condensed
Balance
Sheet at March 31, 2008 (Unaudited)
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3
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Condensed
Statements of Operations for the Three Month Period ended March
31, 2008 & 2007 (Unaudited)
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4
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Condensed
Statements of Cash Flows for the Three Month Period ended March
31, 2008 & 2007 (Unaudited)
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5
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Notes
to the Condensed Financial Statements
(Unaudited)
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6
-
12
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Item
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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12
- 15
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Item
3. Quantitative and Qualitative Information About
Market Risk
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15
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Item4T.
Controls and Procedures
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15
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PART
II OTHER INFORMATION
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Item
1. Legal
Proceedings
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16
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Item
1A. Risk Factors
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16
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Item
2. Unregistered Sales of Equity Securities
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16
- 17
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Item
3. Defaults
upon Senior Securities
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17
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Item
4. Submission
of Matters to Vote of Security Holders
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17
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Item
5. Other
Information
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18
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Item
6. Exhibits
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18
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SIGNATURES
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19
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-2-
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BOOMJ,
INC.
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||||
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CONDENSED
BALANCE SHEET
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||||
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As
of March 31, 2008
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||||
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Unaudited
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||||
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ASSETS
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||||
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Current
assets :
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||||
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Cash
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$
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21,105
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||
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Accounts
receivable
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39,770
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|||
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Prepaid
loan cost
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337,074
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|||
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Other
current assets
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48,317
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|||
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Total
current assets
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$
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446,266
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||
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Property,
website and computer equipment
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820,952
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|||
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Less:
Accumulated depreciation and amortization
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(179,472
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)
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||
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Property,
website and equipment - net
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$
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641,480
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||
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Other
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25,226
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|||
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Total
assets
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$
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1,112,972
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||
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LIABILITIES
AND STOCKHOLDERS’ DEFICIT
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||||
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Current
liabilities :
|
||||
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Short
term borrowings
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$
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2,535,899
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||
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Accounts
payable - trade
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989,037
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|||
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Accrued
expenses
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337,138
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|||
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Total
current liabilities
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$
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3,862,074
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||
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Commitments
and contingencies
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||||
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Stockholders’
Deficit :
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||||
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Common
stock, $0.001 par value, 75,000,000 shares authorized,
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||||
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37,014,496
issued and outstanding
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37,014
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|||
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Additional
paid in capital
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4,800,943
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|||
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Accumulated
deficit
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(7,587,059
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)
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||
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Total
Stockholders' deficit
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$
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(2,749,102
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)
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Total
Liabilities and Stockholders' Deficit
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$
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1,112,972
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||
See
accompanying notes of these unaudited condensed financial
statements.
-3-
BOOMJ,
INC.
CONDENSED
STATEMENTS OF OPERATIONS
Unaudited
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For
the three
month
period
ended
March
31,
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For
the three
month
period
ended
March
31,
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||||||
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2008
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2007
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||||
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Revenues
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$
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760,949
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$
|
--
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|||
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Operating
expenses
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|||||||
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Cost
of products sold
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$
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820,818
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$
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--
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|||
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Selling
general & administrative
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1,646,447
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342,463
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|||||
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Selling
general & administrative – related party
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58,992
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73,542
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|||||
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Professional
fees
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269,423
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331,738
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|||||
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Depreciation
and amortization
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41,908
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23,688
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|||||
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Total
costs and operating expenses
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$
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2,837,588
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$
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771,431
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|||
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Loss
from operations
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(2,076,639
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)
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(771,431
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)
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|||
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Non-operating
income (expense)
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|||||||
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Interest
expense
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(482,050
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)
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(493
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)
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|||
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Interest
income
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21
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442
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|||||
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Total
non-operating income (expense)
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$
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(482,029
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)
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$
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(51
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)
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Loss
from operations before income taxes
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(2,558,668
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)
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(771,482
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)
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|||
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Provision
for income tax
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--
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--
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|||||
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Net
loss
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$
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(2,558,668
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)
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$
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(771,482
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)
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Net
loss available to common stockholders
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$
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(2,558,668
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)
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$
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(771,482
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)
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Basic
and diluted net loss per common share
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$
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(0.07
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)
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$
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(0.04
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)
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Weighted
average shares of capital outstanding –
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|||||||
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basic
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36,674,849
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21,961,440
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See
accompanying notes of these unaudited condensed financial
statements.
-4-
BOOMJ,
INC.
CONDENSED
STATEMENTS OF CASH FLOWS
Unaudited
For
the three
month
period
ended
March
31,
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For
the three
month
period
ended
March
31,
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||||||
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2008
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2007
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|||||
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|||||||
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Net
cash used in operating activities
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(1,991,887
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)
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(418,310
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)
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|||
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Cash
flows from investing activities:
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|||||||
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Cash paid to purchase property and equipment
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(71,655
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)
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(93,595
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)
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|||
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Net
cash used in investing activities
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(71,655
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)
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(93,595
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)
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|||
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|||||||
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Cash
flows from financing activities:
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|||||||
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Issuance of stock - net of offering costs
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78,400
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410,000
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|||||
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Cash
received from short term borrowings
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1,920,000
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100,000
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|||||
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Payment on short term borrowings - related party
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(25,000
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)
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--
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||||
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Net
cash provided by financing activities
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1,973,400
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510,000
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|||||
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|||||||
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Net
decrease in cash & cash equivalents
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(90,142
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)
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(1,904
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)
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|||
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|||||||
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Cash
& cash equivalents, beginning balance
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111,247
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54,309
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|||||
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Cash
& cash equivalents, ending balance
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$
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21,105
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$
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52,405
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|||
See
accompanying notes of these unaudited condensed financial
statements.
-5-
BOOMJ,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 DESCRIPTION
OF BUSINESS AND BASIS OF PRESENTATION
BoomJ,
Inc. (the “Company”) launched its web site BOOMj.com, which the Company believes
is America’s first social, political, financial e-commerce and lifestyle network
focused on providing diversified media, compelling content and advertising
targeting Baby Boomers and Generation Jones.
The
Company formerly known as Reel Estate Services, Inc. (“RES”) was incorporated in
Nevada on January 12, 2006. At the date of recapitalization on December 28,
2007, RES was a public shell company, defined as an inactive, publicly-quoted
company with nominal assets and liabilities.
On
December 28, 2007, RES entered into an Agreement and Plan of Reorganization
(the
“Reorganization Agreement”), with Time Lending Sub, Inc., a newly-formed Nevada
corporation (hereinafter “RES Sub”) and Linda Rutter, the owner of 1,500,000
shares of RES Common Stock and the sole Director and officer of RES (the
“Principal”), and BOOMj.com, Inc., a Nevada corporation (“BOOMj.com”), pursuant
to which RES Sub agreed to merge with and into BOOMj.com (the “Merger”). In
connection with the Merger, RES agreed to issue its shares of common stock,
at a
rate of 2.02 shares of RES common stock for each share of BOOMj.com common
stock, in exchange for all of the issued and outstanding stock of BOOMj.com.
In
addition, prior to the Merger, RES agreed to cancel 1,500,000 shares held by
Linda Rutter, an officer and director of RES, of the 3,150,000 issued and
outstanding shares of RES. The cancellation was preformed in two tranches,
in
exchange for $125,000 cash payment at the closing of the Merger, 750,000 shares
of Principal’s RES Common Stock were cancelled upon receipt of the payment; the
remaining 750,000 shares of Principal’s RES Common Stock were cancelled upon
payment to Principal of $125,000 on January 31, 2008. All shares amounts
presented in these financial statements, unless otherwise noted, reflect the
recapitalization.
Upon
the closing of the Merger, the Principal received a five-year warrant to
purchase 825,000 shares of RES Common Stock and the strike price of such
warrants is $0.93 per share.
Prior
to the merger, BOOMj.com had 17,058,448 shares of common stock (“BOOM Common
Stock”) outstanding, which were exchanged for 34,458,067 shares of RES Common
Stock through RES Sub. All warrants that were issued by BOOMj.com prior to
the
merger remained outstanding as of December 31, 2007 and the terms of those
warrants have not been modified to date. Management plans to exchange the
original warrants to purchase BOOM Common Stock into warrants to purchase common
stock of the Company.
Subsequent
to the merger, RES changed its name to BoomJ, Inc.
In
the Reorganization Agreement, concurrent with the closing of the transaction,
(a) all current officers of RES resigned from their positions with RES and
(b)
BOOMj.com’s officers were appointed by the existing members of the Board of
Directors of RES, and (c) the Existing Members of BOOMj.com’s current board of
directors were appointed to the Board of the Company.
RES
is the legal acquirer as the two entities merged. However, since RES was a
public shell company with a nominal amount of net assets, the merger has been
treated as a recapitalization of BOOMj.com and an acquisition of the assets
and
liabilities of RES by BOOMj.com. Though RES was the legal acquirer in the
Merger, BOOMj.com was the accounting acquirer since its shareholder ended up
owning a majority of the outstanding common shares of RES. Therefore at the
date
of the merger the historical financial statements of BOOMj.com became those
of
RES for the period prior to the merger. Subsequent to the Merger the
consolidated financial statements include both entities.
The
Company presently maintains its corporate office in Henderson, Nevada, and
has
its technical department located in an office in Santa Ana,
California.
-6-
NOTE
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
condensed financial statements and the notes thereto for the periods ended
March
31, 2008 included herein have been prepared by management and are unaudited.
Such condensed financial statements reflect, in the opinion of management,
all
adjustments necessary to present fairly the financial position and results
of
operations as of and for the periods indicated and in order to make the
financial statements not misleading. All such adjustments are of a normal
recurring nature. These interim results are not necessarily indicative of the
results for any subsequent period or for the fiscal year ending December 31,
2008.
Certain
information and footnote disclosures normally included in the condensed
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. These condensed
financial statements should be read in conjunction with the audited financial
statements and the notes thereto for the fiscal year ended December 31, 2007
in
the Form 10-KSB, filed with the SEC on April 4, 2008.
In
the first quarter of 2008, the Company was no longer considered in the
development stage Company under statement of Financial Accounting Standard
No. 7
due to the level of revenues obtained in 2008.
On
January 1, 2008, the Company adopted FSP EITF 00-19-2 “Accounting for
Registration Payment Arrangements” and management has determined that currently
it has no impact on the company’s financial statements.
NOTE
3 PROPERTY
AND EQUIPMENT
Property
and equipment at March 31, 2008 consisted of the following:
|
Office
and computer equipment
|
$
|
136,386
|
||
|
Website
|
684,567
|
|||
|
Less:
accumulated depreciation
|
(179,472
|
)
|
||
|
|
$
|
641,481
|
Depreciation
expense for the three-month periods ended March 31, 2008 and 2007 were $41,908
and 23,688 respectively.
NOTE
4
Basic and Diluted Net Loss Per Common Share
Basic
and diluted net loss per common share is calculated in accordance with the
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), “Earnings
per share.” Basic net loss per common share is based upon the weighted average
number of common shares outstanding during the period. Dilution is computed
by
applying the treasury stock method. Under this method, options and warrants
are
assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average market price during the period. However, shares
associated with convertible debt and stock warrants are not included because
the
inclusion would be anti-dilutive (i.e. reduce the net loss per common share)
The
total number of such shares excluded from diluted net loss per common share
were
8,410,420 at March 31, 2008.
NOTE
5 OTHER
ASSETS
Other
assets primarily consisted of rent and utility deposits of $4,272 and $20,953
for the Company's Santa Ana and Nevada offices respectively, at March 31, 2008.
Also included in this line item is $23,868 for credit card
reserves.
NOTE
6 ACCRUED
EXPENSES
Accrued
expenses consist of the following at March 31, 2008:
|
Accrued
website costs
|
$
|
50,000
|
||
|
Accrued
interest
|
53,267
|
|||
|
Accrued
payroll and related expenses
|
227,068
|
|||
|
Other
|
6,803
|
|||
|
$
|
337,138
|
-7-
In
December 2006, the Company entered into a contract with Corgenic, Inc for the
development of the website in exchange for 500,000 shares of Series A
Convertible 10% Cumulative Preferred Stock ($0.001 par value) at $0.50 per
share
with piggyback registration rights. Initially there were 400,000 shares issued
to Corgenic, Inc. with 100,000 retained until after the completion of testing
of
the website. The obligation to issue the additional shares is reported in
accrued expenses as of December 31, 2007 and 2006. To date, this liability
remains on the balance sheet because the completion of this portion of the
website has not been completed to the Company’s satisfaction.
NOTE
7 NOTES
PAYABLE
|
Note
payable ($500,000) to Centurion Credit Resources, LLC, bearing an
annual
interest rate of 12%, secured less discount of $6,797
|
$
|
493,203
|
||
|
Note
payable ($140,000) to Carole Harder bearing an annual interest rate
of
12%, unsecured, less discount of $22,361
|
117,639
|
|||
|
Convertible
Promissory Notes ($2,280,000), bearing an annual interest rate of
12%,
secured, less discount of $354,944
|
1,925,057
|
|||
|
|
2,535,899
|
|||
|
Less:
current portion
|
(2,535,899
|
)
|
||
|
|
||||
|
Long-term
debt
|
$
|
--
|
On
October 19, 2007 the Company issued a short term Promissory Note to Centurion
Credit Resources, LLC (the “Lender”) in exchange for $500,000. The term of this
Note is for three calendar months from the issuance with provisions to pay
interest at 12% per annum in cash monthly from the date of issuance until the
note is paid. The Company also granted to Centurion a security interest in
all
of its assets. As
a
condition precedent to the note holder’s obligations under this Note, the
Company delivered to Lender (a) an origination fee and reimbursement of Lender’s
out of pocket costs and expenses in the amount of $19,600, and (b) 404,000
shares
of the Company’s $.001 par value common stock.
This
Note has been guaranteed personally by Robert McNulty, Chairman of
BOOMj.com.
On January 18, 2008 this Promissory Note was modified to extend the term of
this
Note to the earlier of three months from the modification date or the receipt
by
the Borrower of the first $2,000,000 in connection with Borrower’s anticipated
private placement of its common stock. As a condition precedent to modification
the
Company delivered to Lender (a) an origination fee in the amount of $20,000,
and
(b) 300,000 shares
of the Company’s $.001 par value common stock (see Note 9).
On
April 18, 2008 the Company entered into a Second Modification Agreement to
extend the term of $350,000 of this Note to August 1, 2008 with $150,000
maturing on April 30, 2008. In addition the Company agreed to a payment of
$100,000 by April 30, 2008 in consideration for Lender’s acceptance of this
extension option. As a condition precedent to modification
the
Company delivered to Lender (a) an origination fee in the amount of $25,000,
and
(b) 100,000 shares
of the Company’s $.001 par value common stock.
During
May, the Company enter into an extension until May 16th
through
two modification agreements and the payment of two $5,000 payments and prorated
interest on the note. Centurion also has piggyback registration rights
associated with the common stock they received.
On
December 24, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a
related party) in
exchange for $25,000. The term of this Note was for thirty days from the
issuance with provisions to pay interest at 12%, in cash from the date of
issuance until the Note is paid. This Note was paid in full (including the
$304
interest) in January 2008.
On
March 21, 2008 the Company issued a 365-day 12% Convertible Note to Carole
Harder, an accredited investor in exchange for $140,000. In connection with
the
note, the Company issued to the investor a five-year
warrant
to purchase 200,000 shares of our common stock exercisable at $0.93 per share.
This warrant was valued using the Black-Scholes method at
$0.136 per share, resulting in a total value of $27,288 assuming a market price
per share of $0.30, risk-free interest rate of 2.50% and 83% volatility index.
In addition there is a conversion
option to exchange the amount outstanding into the shares of the Company’s
$0.001 common stock. We
allocated the proceeds from the issuance of this note and the warrants based
on
the proportional fair value for each item. Consequently we recorded a discount
of $22,837 on the note, which is being amortized over the term of the note.
-8-
On
December 28, 2007, RES raised $500,000
in a private offering to accredited investors of its 12% convertible one
year
promissory notes. These securities have a voluntary conversion feature to
convert into a unit from a contemplated offering, each unit comprising of (i)
one share of stock at $0.70 per unit and (ii) one warrant to purchase one share
of common stock at an exercise price of $0.93 per share. In addition, on
December 28, 2007, the Company issued warrants to the placement agent to
purchase 71,429 shares of its common stock at an exercise price of $0.93 per
share. The warrant vested immediately and expires in five years. It was valued
by the Company at $12,853.
Additional promissory notes in conjunction with this same offering were sold
on
January 25, 2008 and February 8, 2008 for $1,230,000 and $550,000, respectively.
Along with these latest offering’s the Company issued warrants to all note
holders to purchase 3,257,143 shares of our common stock exercisable at $0.93
per share expiring in 2013, which was valued using the Black-Scholes method
at
$0.177 per share. This resulted in a total value of $577,769 assuming a market
price per share of $0.30, risk-free interest rate range of 3.25% to 5.25% based
on the note issuance and 100% volatility index. Consequently we recorded a
discount of $460,952 on the notes, which is being amortized over the term of
these notes. In
addition, on January
25, 2008 and February 8, 2008,
the
Company issued warrants to the placement agent to purchase 175,714 and 78,571
respectively, shares of its common stock at an exercise price of $0.93 per
share. The warrant vested immediately and expires in five years. These warrants
were valued by the Company at $44,882.
The Company has also granted, to these investors, a security interest in all
its
assets.
In
addition to the above terms of
its 12% convertible one year
promissory notes, the Company in January and February 2008, granted to the
note-holders “piggyback” registration rights with respect to the shares of
Common Stock issued or issuable under those notes and warrants). The Company
also agreed with the note-holders who invested in January and February 2008
that
in the event that all of the shares underlying their warrants have not otherwise
been included on a registration statement by the Company on or prior to May
1,
2008 filed with the SEC, then the Company shall file a registration statement
covering all such warrant shares on or prior to May 1, 2008. If (i) a
registration statement covering all of the note and warrant shares is (a) not
filed on or before the applicable deadline other than due to the determination
by the underwriter not to file in its sole discretion based on adverse market
conditions (“Filing Failure”), or (b) not declared effective by the SEC on or
before the date that is ninety days following the initial filing of such
registration statement for any reason other than due to the determination by
the
underwriter not to make the registration statement effective in its sole
discretion based on adverse market conditions (an "Effectiveness Failure")
then,
as partial relief for the damages to the Prior Investors (which remedy shall
not
be exclusive of any other remedies available at law or in equity), the Company
shall pay to the note-holders an amount in cash equal to one percent (1.0%)
of
the original cash consideration invested by the note-holders for each 30 day
period during which the registration statement is not effective.
The
Company recorded $482,051 and $493 as interest expense for the three-month
periods ended March 31, 2008 and 2007, respectively. Also included in interest
expense is the amortization of $428,767 of loan origination fees associated
with
these notes for the three-month period ended March 31, 2008. There was no loan
origination fees incurred during the
three
month period ended March 31, 2007.
NOTE 8 COMMITMENTS
and CONTINGENCIES
Operating
Lease
The
Company leases certain office space, under operating leases which generally
require the Company to pay taxes, insurance and maintenance expenses related
to
the leased property. The leases for office space have lease extension renewal
options for an added two to three years at fair market rent values. The Company
believes that in the normal course of business, leases will be renewed or
replaced by other leases. The Company entered into a lease for its technical
staff in California in December 2006 for occupancy, beginning January 1, 2007.
In December 2007 the Company entered into a four year lease for 4,560 square
feet in Henderson, Nevada which houses its corporate office. Total rent expense
incurred by the Company, which includes the leases above and sundry month to
month rental expenditures was $58,683 and $12,816 for the three month period
ended March 31, 2008 and 2007 respectively. The Company has future minimum
lease
obligations as follows:
|
Twelve
months ending March
31,
|
|
|||
|
2008
|
$
|
$124,595
|
||
|
2009
|
128,333
|
|||
|
2010
|
132,183
|
|||
|
2011
|
101,351
|
|||
|
Total
|
$
|
486,462
|
||
-9-
NOTE 9 COMMON
& WARRANTS AND PAID IN CAPITAL
On
January 18, 2008, the Promissory Note with Centurion Credit Resources, LLC
was
modified to extend the term of this Note for an additional ninety (90) days.
As
a condition precedent to modification the
Company delivered to Lender (a) an origination fee in the amount of $20,000,
and
(b) 300,000 shares
of the Company’s $.001 par value common stock.
These
shares were valued at $0.30 per share for a total of $90,000. $22,500 of this
cost was amortized during the three month period ended March 31, 2007 as debt
financing fees.
On
January 19, 2008, the Company issued a four-year warrant to purchase up to
12,500 shares of common stock at an exercise price of $0.70 per share to an
accredited investor for services rendered in connection with obtaining short
term financing for the Company. The
warrants were valued using the Black-Scholes method at
$0.001 per share. This resulted in a total value of $10 assuming a risk-free
interest rate range of 4.00%, based on the note issuance and 16% volatility
index.
On
January 25 and February 1, 2008, the Company issued an aggregate of 105,000
shares of the Company’s common stock to three entities for services rendered in
connection with extending certain financing for the Company. These shares were
valued by an independent valuation firm at $0.30 per share for a total of
$31,500. The total amount was
amortized during the three month period ended March 31, 2008 as debt financing
fees.
On
February 13, 2008, the Company issued 350,000 shares of the Company’s common
stock to three entities for services rendered in connection with the private
placement offering of the Convertible 12% Secured Promissory Notes offering
as
described above. These shares were valued by an independent valuation firm
at
$0.30 per share for a total of $105,000. $23,750 of this cost was amortized
during the three-month period ended March 31, 2008 as debt financing
fees.
On
February 7, 2008, the Company issued a common stock purchase warrant to a media
entity for services rendered in connection with producing video promotional
material for the Company. Included
in this transaction were the issuances of 20,000 warrants exercisable at $0.93
per share, expiring in 2011. The warrants were valued using the Black-Scholes
method at
$0.092 per share. This resulted in a total value of $1,843 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 73% volatility
index. This amount was expensed in selling, administrative, and general expense
during the three month period ended March 31, 2008
On
February 20, 2008, Carole Harder, an accredited investor, acquired 71,429 shares
of the Company’s common stock at $0.70 per share for $50,000 in cash.
Also,
included in this transaction was the issuance of a warrant to purchase 71,429
shares of our common stock exercisable at $0.93 per share expiring in 2011.
We
allocated the proceeds from the issuance of this stock and the warrants based
on
the proportional fair value for each item. The
warrants were valued using the Black-Scholes method at
$0.087 per share. This resulted in a total value of $6,203 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 71% volatility
index.
On
February 28, 2008, the Company issued 40,000 shares of its common stock upon
the
exercise of warrants to purchase the Company’s stock at $0.01 per share by two
entities.
On
March 12, 2008, Nan Parks, an accredited investor, acquired 40,000 shares of
the
Company’s common stock at $0.70 per share or $28,000 in cash. Also,
included in this transaction was the issuance of a warrant to Ms. Parks to
purchase 40,000 shares of our common stock exercisable at $0.93 per share
expiring in 2013. We
allocated the proceeds from the issuance of this note and the warrants based
on
the proportional fair value for each item. The
warrants were valued using the Black-Scholes method at
$0.139 per share. This resulted in a total value of $5,559 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 83% volatility
index.
-10-
Warrants
The
following is a summary of the Company’s outstanding common stock purchase
warrants as of March 31, 2008:
|
Outstanding
|
Outstanding
|
|||
|
Exercise
Price
|
December
31,2007
|
Issued
|
Exercised
|
March
31, 2008
|
|
$0.01
|
193,920
|
0
|
(40,000)
|
153,920
|
|
$0.30
|
30,300
|
0
|
--
|
30,300
|
|
$0.50
|
101,000
|
0
|
--
|
101,000
|
|
$0.70
|
0
|
12,500
|
--
|
12,500
|
|
$0.93
|
896,429
|
3,628,571
|
--
|
4,525,000
|
|
$1.00
|
58,247
|
0
|
--
|
58,247
|
|
$2.40
|
132,310
|
0
|
--
|
132,310
|
|
1,412,206
|
3,641,071
|
(40,000)
|
5,013,277
|
The
chart above includes in the outstanding December 31, 2007 balance, management’s
intention to convert warrants previously issued by Boomj.com, Inc. prior to
the
merger at the same 2.02 rate the Company exchanged for its common stock. The
Company has reserved a sufficient number of shares of authorized common stock
for issuance upon exercise of the outstanding warrants.
NOTE 10 SUPPLEMENTAL
DISCLOSURES OF CASH FLOWS (not described elsewhere)
The
Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95. The Company paid $20,517
for interest and $0 for income tax during the three months ended March 31,
2008.
As of March 31, 2008, prepaid loan included $282,777 of debt related fees which
were paid by issuing common stock and warrants. The Company also issued warrants
in connection with debt which reduced the outstanding debt at March 31, 2008
by
$483,789. No amounts were paid for taxes or interest during the three month
period ending March 31, 2007.
NOTE 11 GOING
CONCERN
The
Company's financial statements are prepared using generally accepted accounting
principles, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company has an
accumulated deficit of $7,587,059 on March 31, 2008 and will need to raise
additional capital, or obtain financing to continue operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue
as
a going concern.
Management
is taking steps to raise additional funds to address its operating and financial
cash requirements to continue operations in the next twelve months. Management
has devoted a significant amount of time in the raising of capital from
additional debt and equity financing. However, the Company’s ability to continue
as a going concern is dependent upon raising additional funds through debt
and
equity financing and generating revenue. There are no assurances the Company
will receive the necessary funding or generate revenue necessary to fund
operations.
NOTE 12 SUBSEQUENT
EVENTS
On
April
4, 2008 the Company issued a zero coupon convertible promissory note to Ryan
Relations Group LLC in the amount of $110,000 in exchange for receipt of $95,000
in cash. The convertible promissory note has a maturity date of July 5, 2008
and
a conversion price of $1.50 per share.
On
April
16, 2008, the Company and Coventry Windsor, Inc. entered into an agreement
for
Coventry Windsor, Inc. to provide services related to finding contacts for
future funding and other services. The term of the agreement is for one year
and
Coventry Windsor, Inc. will be compensated by a 4% commission on all monies
raised through their introductions.
-11-
On
April 18, 2008 the Company issued a 12% Convertible Note to Amee Michael Black
in exchange for $250,000. The term of this Note was for ninety days from the
issuance with provisions to accrue interest at 12% per annum, due in conjunction
with the principal. Also,
included in this note is the issuance of a warrant to purchase 125,000 shares
of
our common stock exercisable at $0.70 per share expiring in April 2013, In
addition there is a conversion option to convert the amount outstanding into
shares of the Company’s $0.001 common stock at a price of $1.00.
On
April 24, 2008 the Company issued 12% Convertible Notes to three private
investors in exchange for $250,000. The term of these notes was for ninety
days
from the issuance with provisions to accrue interest at 12% per annum, due
in
conjunction with the principal. Also,
included in these notes is the issuance of a warrant to purchase 125,000 shares
of our common stock exercisable at $0.70 per share expiring in April 2013,
In
addition there is a conversion
option, at the option of the note holders, to convert the amount outstanding
into the shares of the Company’s $0.001 common stock at a price of $1.00 per
share.
During
the first week of May, 2008 the Company issued 12% Convertible Notes to six
private investors in exchange for $307,232. The term of these Notes was for
ninety days from the issuance with provisions to accrue interest at 12% per
annum, due in conjunction with the principal. Also,
included in these notes is the issuance warrants to purchase 137,500 shares
of
our common stock exercisable at $0.70 per share expiring in April 2013.
In
addition there is a conversion
option, at the option of the note holders, to convert the amount outstanding
into the shares of the Company’s $0.001 common stock at a price of $1.00 per
share.
Throughout
this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and “our
company” refer to Boomj, Inc., a Nevada corporation formerly known as Reel
Estate Services, Inc. and, unless otherwise specified, Boomj.com, Inc., a Nevada
corporation and our wholly-owned subsidiary.
Cautionary
Statement Regarding Forward-Looking Statements
This
Quarterly Report contains forward-looking statements, which reflect the views
of
our management with respect to future events and financial performance. These
forward-looking statements are subject to a number of uncertainties and other
factors that could cause actual results to differ materially from such
statements. Forward-looking statements are identified by words such as
“anticipates,” “believes,” “estimates,” “expects,” “plans,” “projects,”
“targets” and similar expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which are based on the information
available to management at this time and which speak only as of this date.
We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. For a
discussion of some of the factors that may cause actual results to differ
materially from those suggested by the forward-looking statements, please read
carefully the information in the “Risk Factors” section in our Form 10-KSB for
the year ended December 31, 2007 and the “Risk Factors” section set forth in
Item 1A of Part II of this Report. The identification in this Quarterly Report
of factors that may affect future performance and the accuracy of
forward-looking statements is meant to be illustrative and by no means
exhaustive. All forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
Description
of Business
BOOMj,
Inc. operates a website that targets Baby Boomers and Generation Jones. On
the
Company’s Web site, BOOMj.com, users/members can create their very own personal
profile for use on the Company’s state-of-the-art social network platform. These
users/members can upload, watch and share their videos and other interesting
information with like-minded Boomers and Generation Jones. BOOMj.com provides
entertainment news ranging from the latest movie reviews, fashions and diets
to
show times and ticket sales. BOOMj.com offers a variety of travel services,
including fare finder, hotel and car rental information, reservations,
destination information and last minute travel deals. Baby Boomers and
Generation Jones are able to shop online through Boomj.com’s online store.
BOOMj.com user/members can buy leading brand name merchandise. Additionally,
through BOOMj.com health network Boomers and Generation Jones have access to
a
collection of BOOMj.com owned and operated Web sites and multi-media affiliates
providing timely and in-depth health, fitness nutrition information,
personalized tools and resources to make the right health choices. BOOMj.com
health network connects to a vast community of leading experts and people
seeking to manage and improve their health and wellness.
-12-
CORPORATE
HISTORY AND PLAN OF OPERATIONS
Plan
of Operations
This
company, formerly known as Reel Estate Services Inc. was incorporated in Nevada
as a development stage company on January 12, 2006 to create a web-based service
that lists properties across the globe that are available for rental and/or
use
by film and television companies as filming locations. We
never earned any revenue from our former Reel Estate Services internet
site,
and in
September 2007 prior management terminated those operations.
On
December 28, 2007 Reel Estate Services, Inc. acquired BoomJ.com, Inc. through
a
recapitalization (the “Reorganization”) in which it issued 34,458,067 shares of
common stock to the former shareholders of BoomJ.com, Inc. which represented
a
majority ownership in Reel Estate Services, Inc.
BoomJ.com,
Inc. is now our wholly-owned subsidiary, although from an historical perspective
it was deemed to have been the accounting acquirer in the transaction and the
survivor of the Reorganization. Accordingly, prior to December 28, 2007 the
historical financial statements of BoomJ.com, Inc. have become our historical
financial statements. Subsequent to December 28, 2007 the consolidated
operations of both entities are included in our financial statements. BoomJ.com,
Inc. itself was incorporated on November 14, 2006.
Results
of Operations
We
reported a net loss of $2,558,668 and $ 771,482 for the three months ended
March
31, 2008 and 2007 respectively. The loss in 2008 was principally attributable
to
increase in operating costs, as more fully explained in "Operating Expenses"
below.
Revenues
Our
goal is to generate revenues from the sale of various products to our website
users and from advertising fees. Revenue for the three-month period ended March
31, 2008 was $760,949 compared to none during the three month period ended
March
31, 2007. This increase in sales is mainly attributed to revenue derived from
our e-commerce business as new product lines were added to our product
offerings.
During
the first quarter ended March 31, 2008, the cost of products sold was $820,818.
Since we did not generate any revenues during the same fiscal quarter last
year,
we did not incur any cost of products sold in the 2007 period. Cost of products
sold exceeded our revenues as part of our initial roll-out strategy for our
new
website and our e-commerce platform. In order to introduce our new e-commerce
business to users of our website, we lowered our gross margins to approximately
2% (significantly lower than the margin we expect to receive in the future)
and
offered free shipping as an inducement to new users.
Operating
Expenses
Selling,
general and administrative expenses (SG&A) for the three month period ended
March 31, 2008 were $1,705,439. The increase of $1,289,434 in SG&A expenses
from the $416,005 reported for the three month period ended March 31, 2007
is
attributable to advertising costs incurred in launching our website, increases
in administrative, technical and marketing personnel and related payroll costs,
an increase in travel related costs. Our SG&A expenses are expected to
continue to increase, however, not as rapidly as what we incurred during the
first three months of the year.
Professional
fees for the three month period ended March 31, 2008 were $269,423. The largest
component of professional fees consists of services rendered for legal and
accounting fees associated with obtaining debt financing. This reflects a
decrease of $62,315 in professional fees from the $331,738 reported for the
three-month period ended March 31, 2007. The largest component last year of
professional fees was due to the establishment of an advisory board and due
to
other consulting services to enhance our website marketing and contractual
services infrastructure and the costs associated with outsourcing some of our
marketing and promotional activities.
Depreciation
expense for the three month period ended March 31, 2008 was $41,908. This
reflects an increase of $18,220 in depreciation expense from the $23,688
reported for the three month period ended March 31, 2007. This increase in
expense is attributable to the amortization of the asset additions during the
full three month period versus only two months of website amortization incurred
in the 2007 period as the website became operational in February
2007.
-13-
Interest
expense for the three month period ended March 31, 2008 was $482,051 compared
to
$493 reported for the three month period ended March 31, 2007. Our increase
in
interest expense is due to the loan amortization expense of the loan discount
of
$428,767 and cash interest paid and accrued of $53,284 for the three month
period ended March 31, 2008. The loan discount relates to the sundry loans
procured by us during late 2007 and early 2008 in order to fund our working
capital requirements.
Liquidity
and Capital Resources
Cash
and cash equivalents at March 31, 2008 were $21,105. Since we have had only
limited operations thus far, the majority of our capital resources have been
derived through the sale of debt and equity securities. No assurance can be
made
that we will have access to capital markets in the future, or that financing
will be available on acceptable terms to satisfy our future and on-going cash
requirements that we need to implement its business strategies. Our inability
to
access the capital markets or obtain acceptable financing could have a material
adverse affect on our results of operations and financial condition, and could
severely threaten our ability to continue as a going concern.
As
shown in the accompanying consolidated financial statements, we incurred a
loss
of $2,558,668, for the three month period ended March 31, 2008. Our current
liabilities less debt exceeded our current assets by $879,910 at March 31,
2008
and negative cash flow from operating activities for the three months ended
March 31, 2008 was $1,991,887. These factors, and our inability to meet our
obligations from current operations, and the need to raise additional capital
to
accomplish our objectives, create a substantial doubt about our ability to
continue as a going concern.
We
currently do not have sufficient funds on hand to fund our anticipated on-going
operating expenses. We do not have any bank credit lines. Accordingly, we will
have to obtain additional funding in the near future in order to continue our
operations. Although the amount of revenues that we are now generating from
our
operations is increasing on a monthly basis, we do not anticipate that we will
generate sufficient cash from operations to fund our working capital needs
for
at least another six months. Accordingly, we intend to continue to seek
additional financing from various sources, including from the sale of debt
or
equity securities. We have not yet identified, and cannot be sure that we will
be able to obtain any additional funding from either of these sources, or that
the terms under which we may be able to obtain such funding will be beneficial
to us. If we do not obtain sufficient additional funds in the near future,
we
will have to suspend some of our operations, scale down our current and proposed
future operations or, if those actions are not sufficient, terminate our
operations.
All
of the convertible notes that we have issued recently in order to fund our
working capital needs mature within the next 12 months. Accordingly, in addition
to having to raise funds to continue to operate, we also will have to raise
funds to repay these convertible notes (to the extent that such notes are not
converted by the holders). As of March 31, 2008, the total amount of our
short-term borrowings was $2,535,899. Most of the convertible notes that we
issued are secured by a lien on certain of our assets and/or the assets of
our
subsidiary. Therefore, in the event that we fail to repay these notes as they
mature, we will be at risk of losing our assets through foreclosure of our
assets. Accordingly, a default under the secured convertible notes could result
in the loss of our assets and the termination of our operations.
As
of March 31, 2008 we had no long-term debt obligations, no capital lease
obligations, no material purchase obligations or other similar long-term
liabilities. In addition, we have no financial guarantees, debt or lease
agreements or other arrangements that could trigger a requirement for an early
payment or that could change the value of our assets, and we do not engage
in
trading activities involving non-exchange traded contracts.
Operating
Activities
Net
cash used in operating activities for the three month period ended March 31,
2008 was $1,991,887. This was mainly attributable from the use of cash in
operations as we establish business and operations.
Investing
Activities
Net
cash used in investing activities for the three month period ended March 31,
2008 was $71,655. The company expended cash for purchase of computer and office
equipment and expenditures related to its Website development.
Financing
Activities
Net
cash provided by financing activities for the three month period ended March
31,
2008 was $1,973,400 due primarily to net cash received from the sale of debt
securities of $1,920,000. We also received proceeds from the issuance of common
stock amounting to $78,400. We also paid $25,000 to repay a short term bridge
loan in January 2008.
-14-
As
a result of the above activities, we experienced a net decrease in cash of
$90,142 for the three month period ended March 31, 2008. Our ability to continue
as a going concern is dependent on our success in obtaining additional financing
from investors through the sale of its securities.
Other
We
are not a party to any off-balance sheet arrangements, and we do not engage
in
trading activities involving non-exchange traded contracts. In addition, we
have
no financial guarantees, debt or lease agreements or other arrangements that
could trigger a requirement for an early payment or that could change the value
of our assets
Inflation
and changing prices have had no effect on our net sales and revenues or on
our
income from continuing operations
Not
applicable.
Item
4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Our
Chief
Executive Officer and Chief Financial Officer have carried out an evaluation
of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of March 31, 2008.
Based
upon their evaluation our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act)) are not effective in providing reasonable assurance that
information required to be disclosed by us in our Exchange Act filings is
recorded, processed, summarized and reported within the time periods specified
in the Commission’s rules and forms and that the information is accumulated and
communicated to our Chief Executive Office and chief Financial Officer to allow
timely decisions regarding required disclosure.
Internal
Control over Financial Reporting
During
the three months ended March 31, 2008, there were no changes in our
internal control over financial reporting (under the Exchange Act) or in other
factors that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
A
control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances
of
fraud, if any, within our company have been detected. The design of any system
of controls also is based in part upon assurance that any design will succeed
in
achieving its stated goals under all potential future conditions. However,
controls may become inadequate because of changes in conditions or the degree
of
compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due
to
error or fraud may occur and not be detected.
-15-
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
No
legal
proceedings have been initiated against us. However, in the matter titled
Boomj.com,
a Nevada corporation, and Linlithgow, a Nevada Limited Liability Company vs.
George Pursglove
that we
filed in Las Vegas, Nevada, our largest shareholder, Linlithgow Holdings, LLC
and this company have initiated a lawsuit against Mr. George Pursglove, the
former President of Boomj.com , Inc. Among other claims, we are alleging that
Mr. Pursglove breached his confidentiality and non-competition agreement with
us
and that he is improperly claiming to be the beneficial owner of 6,666,000
shares of our common stock.
There
has
been no material change in the Risk Factors set forth in the “Risk Factors”
section of the Company’s Form 10-KSB for the year ended December 31, 2007,
except that the following risk factor has been updated:
We
currently have outstanding a $500,000 promissory note that is secured by a
lien
on all of the assets of our Subsidiary, which note matures on May 15, 2008.
Accordingly, unless we repay or renegotiate the terms of this promissory note,
the holder could foreclose on all of our assets, which would result in the
termination of our business.
In
2007
we issued $500,000 of promissory note to Centurion
Credit Resources, LLC, which note currently is due and payable on May 15,
2008.
The
foregoing promissory note is secured by a first priority security interest
on
all of the assets of our Subsidiary. Failure to repay this note as required
could result in the acceleration of the promissory notes and the foreclosure
of
the assets of our Subsidiary. We currently do not have the funds available
to
repay the note. Centurion has, to date, granted us several extensions on the
maturity date of this loan. No assurance can, however, be given that Centurion
will again extend the repayment date of this note, or otherwise forebear from
accelerating and foreclosing on the pledged assets. If we are unable to repay
the note in full or obtain an extension or forbearance, Centurion will have
the
right to foreclose on the assets of our Subsidiary. Since all of our operations
are conducted through this Subsidiary, a foreclosure would effectively cause
us
to terminate our operations. No assurance can be given that we will be able
to
avoid the foreclosure under this note.
On
January 18, 2008, the Promissory Note with Centurion Credit Resources, LLC
was
modified to extend the term of this Note for an additional ninety (90) days.
As
a condition precedent to modification the
Company delivered to Lender (a) an origination fee in the amount of $20,000,
and
(b) 300,000 shares
of the Company’s $.001 par value common stock.
These
shares were valued by an independent valuation firm at $0.30 per share for
a
total of $90,000. The issuance of securities is exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Act”),under Section
4(2) of the Act as transactions by an issuer not involving any public offering,
or under Rule 506 of Regulation D promulgated under the Securities
Act.
On
January 19, 2008, the Company issued a common stock purchase warrant to an
individual for services rendered in connection with obtaining short term
financing for the Company. Included
in this transaction were the issuances of 12,500 warrants exercisable at $0.70
per share expiring in 2011. The warrants were valued using the Black-Scholes
method at
$0.001 per share. This resulted in a total value of $10 assuming a risk-free
interest rate range of 4.00% based on the note issuance and 16% volatility
index. The issuance of securities is exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Act”),under Section 4(2) of the
Act as transactions by an issuer not involving any public offering, or under
Rule 506 of Regulation D promulgated under the Securities Act.
On
January 25 and February 1, 2008, the Company issued 105,000 shares of the
Company’s common stock to three entities for services rendered in connection
with extending certain financing for the Company. These shares were valued
at
$0.30 per share for a total of $31,500. The issuance of securities is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the “Act”),under Section 4(2) of the Act as transactions by an issuer not
involving any public offering, or under Rule 506 of Regulation D promulgated
under the Securities Act.
-16-
On
February 13, 2008, the Company issued 350,000 shares of the Company’s common
stock to three entities for services rendered in connection with obtain
financing for the Company in regards to the Convertible 12% Secured Promissory
Notes offering as referred above. These shares were valued at $0.30 per share
for a total of $105,000. The issuance of securities is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
“Act”),under Section 4(2) of the Act as transactions by an issuer not involving
any public offering, or under Rule 506 of Regulation D promulgated under the
Securities Act.
On
February 7, 2008, the Company issued a common stock purchase warrant to a media
entity for services rendered in connection with producing video promotional
material for the Company. Included
in this transaction were the issuances of 20,000 warrants exercisable at $0.93
per share expiring in 2011. The warrants were valued using the Black-Scholes
method at
$0.092 per share. This resulted in a total value of $1,843 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 73% volatility
index. The issuance of securities is exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Act”),under Section 4(2) of the
Act as transactions by an issuer not involving any public offering, or under
Rule 506 of Regulation D promulgated under the Securities Act.
On
February 20, 2008, Carole Harder, an accredited investor, acquired 71,429 shares
of the Company’s common stock at $0.70 per share or $50,000 in cash.
Also,
included in this transaction was the issuance of a warrant to purchase 71,429
shares of our common stock exercisable at $0.93 per share expiring in 2011.
We
allocated the proceeds from the issuance of this stock and the warrants based
on
the proportional fair value for each item. The
warrants were valued using the Black-Scholes method at
$0.087 per share. This resulted in a total value of $6,203 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 71% volatility
index. The issuance of securities is exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Act”),under Section 4(2) of the
Act as transactions by an issuer not involving any public offering, or under
Rule 506 of Regulation D promulgated under the Securities Act.
On
February 28, 2008, the Company issued 40,000 shares of its common stock upon
the
exercise of warrants to purchase the Company’s stock at $0.01 per share by two
entities. The issuance of securities is exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Act”),under Section
4(2) of the Act as transactions by an issuer not involving any public offering,
or under Rule 506 of Regulation D promulgated under the Securities
Act.
On
March 12, 2008, Nan Parks, an accredited investor, acquired 40,000 shares of
the
Company’s common stock at $0.70 per share or $28,000 in cash. Also,
included in this transaction was the issuance of a warrant to Mr. Parks to
purchase 40,000 shares of our common stock exercisable at $0.93 per share
expiring in 2013. We
allocated the proceeds from the issuance of this note and the warrants based
on
the proportional fair value for each item. The
warrants were valued using the Black-Scholes method at
$0.139 per share. This resulted in a total value of $5,559 assuming a risk-free
interest rate range of 3.50% based on the note issuance and 83% volatility
index. The issuance of securities is exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Act”),under Section 4(2) of the
Act as transactions by an issuer not involving any public offering, or under
Rule 506 of Regulation D promulgated under the Securities Act.
On
March 21, 2008 the Company issued a 12% Convertible Note to Carole Harder in
exchange for $140,000. The term of this Note was for three hundred sixty-five
days (365) days from the issuance with provisions to pay interest at 12%, in
cash. Also,
included in this note is the issuance of a warrant to purchase 200,000 shares
of
our common stock exercisable at $0.93 per share expiring in 2013, which was
valued using the Black-Scholes method at
$0.136 per share. This resulted in a total value of $27,288 assuming a risk-free
interest rate of 2.50% and 83% volatility index. In addition there is a
conversion
option to exchange the amount outstanding into the shares of the Company’s
$0.001 common stock. We
allocated the proceeds from the issuance of this note and the warrants based
on
the proportional fair value for each item. The issuance of securities is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the “Act”),under Section 4(2) of the Act as transactions by an issuer not
involving any public offering, or under Rule 506 of Regulation D promulgated
under the Securities Act.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Securities Holders
None.
-17-
Item
5. Other Information
Item
6. Exhibits and Reports on Form 8-K
|
Exhibit
No.
|
|
Description
of Document
|
|
3.2
|
Amendment
to Articles of Incorporation (name change)(1)
|
|
|
10.1
|
Agreement
and Plan of Reorganization (2)
|
|
|
10.2
|
Employment
Agreement Wendy Borow-Johnson (3)
|
|
|
10.3
|
Property
Lease - Santa Ana, California (2)
|
|
|
10.4
|
Property
Lease - Henderson, Nevada (2)
|
|
|
31.1
|
|
Certification
of Chief Executive Officer
|
|
31.2
|
|
Certification
of Chief Financial Officer (Principal Accounting
Officer)
|
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer (Principal
Accounting Officer) pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002, 18 U.S.C. Section 1350
|
________________________________
(1) Previously
filed as an exhibit to the Company’s Annual Report Form 10-KSB filed, February
7, 2008), which exhibit is hereby incorporated herein by reference.
(2) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on January 4,
2008, which exhibit is hereby incorporated herein by reference.
(3) Previously
filed as an exhibit to the Company’s Current Report on Form 10-KSB on April 4,
2008, which exhibit is hereby incorporated herein by reference.
-18-
SIGNATURES
Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
of
1934, Registrant has duly caused this report to be signed on its behalf by
the
undersigned, thereunto duly authorized on the 15th
day of May, 2008.
|
By:
|
/s/
Robert J. McNulty
|
||
|
|
Robert
J. McNulty, Chief Executive Officer
|
||
In
accordance with the Securities and Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and the dates indicated.
|
SIGNATURES
|
|
TITLE
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Robert J. McNulty
|
|
Chief
Executive Officer and
|
May
15, 2008
|
|
Robert
J. McNulty
|
|
Chairman
of the Board and Chief
|
|
|
(Principal
Executive Officer)
|
|||
|
/s/
Mark V. Noffke
|
|
Chief
Financial Officer
|
May
15, 2008
|
|
Mark
V Noffke
|
|
(Principal
Accounting Officer and
|
|
|
Principal
Financial Officer)
|
|||
|
|
|
|
|
|
/s/
Murray Williams
|
|
Director
|
May
15, 2008
|
|
Murray
Williams
|
|
|
|
|
|
|
|
|
|
|
|
|
-19-