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EX-5.1 - EXHIBIT 5.1 - Beyond Commerce, Inc. | ex51.htm |
EX-23.1 - EXHIBIT 23.1 - Beyond Commerce, Inc. | ex231.htm |
As filed with the Securities and
Exchange Commission on February 11, 2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 4
TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
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Beyond
Commerce, Inc.
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(Exact
name of registrant as specified in its charter)
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Nevada
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5961/8600
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98-0512515
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(State
or jurisdiction of incorporation or organization)
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(Primary
Standard Industrial Classification Code Number)
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(I.R.S.
Employer Identification No.)
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9029
South Pecos
Suite
2800
Henderson,
Nevada 89074
(702)
463-7000
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(Address
and telephone number of registrant’s principal executive
offices)
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Mark
V. Noffke
Chief
Financial Officer
9029
South Pecos
Suite
2800
Henderson,
Nevada 89074
(702)
463-7000
(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
It
is respectfully requested that the Securities and Exchange Commission send
copies of all notices, orders and communications to:
Darrin
M. Ocasio, Esq.
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32nd Floor
New
York, NY 10006
(212)
930-9700
(212)
930-9725 (fax)
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Approximate
date of proposed sale to the public: As soon as practicable after this
Registration Statement becomes effective.
If any of
the securities registered on this Form are to be offered on a continuous or
delayed basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. [ x ]
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]
_______________________________________
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. [ ] ______________________________
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. [ ] ______________________________
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filed or a smaller reporting
company.
Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ]
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Smaller
reporting company [X]
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(Do
not check if smaller reporting company)
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CALCULATION
OF REGISTRATION FEE
Proposed
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Maximum
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Title
of Each Class
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Aggregate
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Amount
of
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of
Securities to be
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Offering
Price
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Registration
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||||||
Registered
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($)
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Fee($)(1)
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Shares
of Common
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Stock,
par value $0.001
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$ | 2,000,000 | $ | 142.60 | ||||
Total
Fee Due
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$ | 2,000,000 | $ | 142.60* |
1.
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Calculated
pursuant to Rule 457(o) under the Securities
Act.
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* Previously Paid
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of the prospectus. Any representation to the contrary is a criminal
offense.
2
The
information in this prospectus is not complete and may be changed. Beyond
Commerce, Inc. may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
Subject
to Completion
Dated February
11, 2010
Prospectus
Beyond
Commerce, Inc.
20,000,000
Shares of Common Stock
$0.10
per share
This is a
direct public offering by Beyond Commerce, Inc. of a maximum of 20,000,000
shares of our common stock at a price of $0.10 per share. The shares
offered by the Company will be offered at a fixed price of $0.10 per share for a
period not to exceed 180 days from the date of this prospectus. There is no
minimum number of shares that must be sold in the offering, we will retain the
proceeds from the sale of any of the offered shares, and funds will not be
returned to investors. It is possible that no proceeds will be received by the
Company or that if any proceeds are received, that such proceeds will not be
sufficient to cover the costs of the offering. The shares are offered directly
through our officers and directors. No commission or other
compensation related to the sale of the shares will be paid to our officers and
directors. Our officers and directors will not register as a broker-dealer with
the Securities and Exchange Commission in reliance on Rule 3a4-1 of the
Securities Exchange Act. The intended methods of communication
include, without limitation, telephone and personal contact. Our common stock is
included for quotation on the Over-the-Counter Bulletin Board under the symbol
“BYOC”. On February 9, 2010 , the last reported price of our common stock was $
0.03 per share. For more information, see the section titled “Plan of
Distribution” herein.
The
offering will terminate on the earlier of (i) the date when the sale of all
20,000,000 shares is completed or (ii) 180 days from the date of this
prospectus. In addition, if we abandon the offering for any reason prior to
180 days from the date of this prospectus, we will terminate the
offering.
Beyond
Commerce, Inc. has had limited operations. Any investment in the
shares offered herein involves a high degree of risk. You should only
purchase shares if you can afford a complete loss of your
investment.
This
investment involves a high degree of risk. You should purchase shares only if
you can afford a complete loss of your investment. See the section titled “Risk
Factors”, beginning on page 6.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
Beyond
Commerce, Inc. does not plan to use this offering prospectus before the
effective date.
3
TABLE
OF CONTENTS
Page
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SUMMARY
OF PROSPECTUS
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5
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RISK
FACTORS
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6
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USE
OF PROCEEDS
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13
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DETERMINATION
OF OFFERING PRICE
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13
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DILUTION
OF THE PRICE YOU PAY FOR YOUR SHARES
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13
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PLAN
OF DISTRIBUTION
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15
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DESCRIPTION
OF SECURITIES
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16
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INTEREST
OF NAMED EXPERTS AND COUNSEL
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16
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DESCRIPTION
OF OUR BUSINESS
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16
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DESCRIPTION
OF PROPERTY
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21
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LEGAL
PROCEEDINGS
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21
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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22
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
28
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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29
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DIRECTOR,
EXECUTIVE OFFICER, PROMOTER AND CONTROL PERSON
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29
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EXECUTIVE
COMPENSATION
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31
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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32
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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33
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INDEMNIFICATION
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34
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AVAILABLE
INFORMATION
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34
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FINANCIAL STATEMENTS |
F-1-F-53
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4
You
should read the following summary together with the more detailed business
information, financial statements and related notes that appear elsewhere in
this prospectus. In this prospectus, unless the context otherwise
denotes, references to “we,” “us,” “our,” the “Company,” and “Beyond Commerce”
are to Beyond Commerce, Inc.
General
Information
Beyond
Commerce, Inc., formerly known as BOOMj.com, Inc. is an Internet company that
has two interrelated divisions, i-SUPPLY and BOOMj, aimed at generating
revenues primarily from Web site advertising and E-commerce
transactions. Our initial Web site was BOOMj, www.BOOMj.com, a niche
portal and social networking site for Baby Boomers and Generation
Jones. Our BOOMj.com Web site provides social, political, financial,
and lifestyle content to the Baby Boomer/Generation Jones target audience as a
platform for our advertising and E-commerce businesses. Our second division is
i-SUPPLY, ( www.i-Supply.com
), a web based retail
storefront that offers easy to use, fully customizable E-commerce services, and
revenue solutions for any third party Web site large or small, and hosts local
ads, providing extensive reach for our proprietary advertising partner network
platform. The aforementioned Web Sites are not part of this
prospectus.
We have
incurred losses since our inception. As of September 30, 2009, we have an
accumulated deficit of $35,738,591 and a total stockholders’ deficit of
$14,321,016. We reported net losses of $12,857,990 and $4,785,000 for the fiscal
years ended December 31, 2008 and 2007, respectively. We also had a
net loss of $8,535,345 and $17,114,906 for the three and nine months
ended September 30, 2009, respectively.
In our
auditors' report on our 2007 and 2008 financial statements, dated April 2, 2009,
they have expressed substantial doubt about our ability to continue as a going
concern.
As of the
date of this prospectus, 58,793,311 shares of our common stock, $.001 per share,
are issued and outstanding.
Our
principal executive offices are located at 9029 South Pecos Suite 2800,
Henderson, Nevada 89074. Our phone number is (702) 463-7000.
Our
fiscal year end is December 31st.
Recent
Developments
On
October 9, 2009, the Company and its wholly-owned, LocalAdLink, Inc. (the “Sub”)
entered into an asset purchase agreement (the “LocalAdLink Purchase Agreement”)
with OmniReliant Holdings, Inc. (“Omni”), pursuant to which, on October 9, 2009,
the Company and the Sub sold the assets relating to the LocalAdLink software, a
third division of the Company, which operates a Web site, www.LocalAdLink.com, and a
local search directory and advertising network that brings local advertising to
geo-targeted consumers. The assets sold under the LocalAdLink Purchase
Agreement include the assets relating to the LocalAdLink source codes, as
updated, name rights, the LocalAdLink trademark, any additional third party
codes that have been modified or integrated into the source codes to enable the
business process operations of LocalAdLink, including but not limited to the
domain URL assets, and all creative materials, advertising and promotional
materials, marketing materials, conference materials, database materials,
supplier lists, equipment repair, maintenance or service records, and all other
printed or written materials whether written or electronically stored or
otherwise recorded, as they relate to the foregoing assets.
The
Company will continue to sell advertising as it had prior to inception of Local
Ad Link, Inc., however on a different scale with a greater emphasis on business
to business sales. In particular, the Company will make sales directly through
experienced professional sales representatives rather than through a multi-level
marketing system, and such advertising will continue to be presented on the
Company’s BoomJ social network and I-Supply store network. In addition, through
such professional sales representatives, we will seek to continue to expand
sales of our preparatory widget technology, which allows any Web site that is
operated by a third party to use our online storefront tool to monetize
visitors of their Web site by simply cutting and pasting a few lines of code to
instantly create a online storefront on their site.
Pursuant
to the LocalAdLink Purchase Agreement, Omni forgave $4,000,000 worth of debt in
the form of surrendered original issue discount convertible debentures and
surrendered for cancellation, warrants to purchase 18,321,037shares of the
Company’s common stock. Additionally, as further consideration for the asset
purchase, Omni agreed to extend the maturity date on all remaining original
issue discount convertible debentures it holds that were issued by the Company
until October 9, 2010 with an interest rate of 10%.
In
connection with the LocalAdLink Purchase Agreement, on October 9, 2009, the
Company entered into a securities purchase agreement with Zurvita Holdings, Inc.
(“Zurvita”) (a subsidiary of Omni), pursuant to which, in four tranches, the
last of which closed on October 30, 2009, the Company sold to Zurvita, 8,000,000
shares of common stock for an aggregate purchase price of
$800,000.
5
THE
OFFERING
Following
is a brief summary of this offering. Please see the Plan of
Distribution section for a more detailed description of the terms of the
offering.
Securities
Being Offered:
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20,000,000
shares of common stock, par value $0.001, at a price of $0.10 per
share.
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Offering
Price per Share:
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$0.10
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Offering
Period:
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The
shares are being offered for a period not to exceed 180
days.
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Proceeds
to Our Company
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$0 if no shares are sold, $200,000 if 10% of the maximum
number of shares are sold, $500,000 if 25% of the maximum number of shares
are sold, $1,000,000 if 50% of the maximum number of shares are sold,
$1,500,000 if 75% of the maximum number of shares are sold, $2,000,000 if
the maximum number of shares are
sold.
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Use
of Proceeds*:
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General
working capital purposes
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Number
of Shares Outstanding Before the Offering:
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58,793,311
as of December 10, 2009
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Stock
Symbol
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BYOC
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Number
of Shares Outstanding After the Offering*:
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58,793,311
if no shares are sold, 60,793,311 if 10% of the maximum number of shares
are sold, 63,793,311 if 25% of the maximum number of shares are sold,
68,793,311 if 50% of the maximum number of shares are sold, 73,793,311 if
75% of the maximum number of shares are sold, 78,793,311 if 100% of the
maximum number of shares are sold.
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Risk
Factors
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Please
read the section entitled “Risk Factors” beginning on page ___ of
this prospectus for a discussion of factors you should carefully consider
before deciding to invest in shares of our common
stock.
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* There
is no minimum number of shares that must be sold in the offering, we will retain
the proceeds from the sale of any of the offered shares, and funds will not be
returned to investors. It is possible that no proceeds will be received by the
Company or that if any proceeds are received, that such proceeds will not be
sufficient to cover the costs of the offering.
An
investment in these securities involves an exceptionally high degree of risk and
is extremely speculative in nature. Following are what we believe are
all of the material risks involved if you decide to purchase shares in this
offering.
An
investment in our securities involves a high degree of risk. You
should carefully consider the risks described below before deciding to invest in
or maintain your investment in our Company. The risks described below
are not intended to be an all-inclusive list of all of the potential risks
relating to an investment in our securities. If any of the following
or other risks actually occur, our business, financial condition or operating
results and the trading price or value of our securities could be materially and
adversely affected.
6
Risks
Related to the Offering
Because
this is a direct public offering, with no minimum number of shares that must be
sold, we may receive some or no proceeds.
This is a
direct public offering by the Company of up to 20,000,000 shares of our common
stock. There is no minimum number of shares that must be sold in the offering,
we will retain the proceeds from the sale of any of the offered shares, and
funds will not be returned to investors. As a result, we may receive some or no
proceeds from the offering. If any proceeds are received, it is possible that
such proceeds may not be sufficient to cover the costs of the
offering.
Risks
Related to Our Business and Industry
We
have a limited operating history upon which an evaluation of our prospects can
be made. For that reason, it is difficult to judge our prospects.
We have a
limited operating history, and as a result investors do not have access to the
same type of information in assessing their proposed investment as would be
available to investors in a company with a more extensive history of prior
operations. Although we have operated our BOOMj.com Web site for
the past two years, because of our lack of funding we have not been able to
maintain vendor credit lines with the suppliers of our online
products. As a result, we have not been able to maintain and generate
sales through the online store on our BOOMj.com Web site. In
addition, our LocalAdLink product was introduced late in the fourth quarter of
2008 (in October 2009, we sold the assets relating to the software, name rights,
and trademark of the LocalAdLink product), and the formal launch of the fully
functional i-SUPPLY online storefront occurred late in the second quarter of
2009. Accordingly, to date, we have operated as an early stage
company that is developing and now introducing its business. As a
developing new company, we face all the risks inherent in a new business,
including the expenses, difficulties, complications and delays frequently
encountered in connection with commencing new operations, including capital
requirements and management’s potential underestimation of initial and ongoing
costs. We also face the risk that we may not be able to effectively implement
our business plan or successfully roll out new products. If we are
not effective in addressing these risks, we may not develop a viable business or
may not operate profitably. We expect to incur operating losses for
the near future, and there can be no assurance that we will be able to generate
revenues or that any revenues generated will be sufficient for us to become
profitable or thereafter maintain profitability.
We
have had operating losses since formation and expect to incur net losses for the
near term.
We
reported net losses of $12,857,990 and $4,785,000 for the fiscal years ended
December 31, 2008 and 2007, respectively. Although we generate
revenues (we generated $1,843,231 in 2008), our revenues and gross profits
currently are not sufficient to cover our operating expenses. We also
had a net loss of $8,535,345 and $17,114,906 for the three and nine
months ended September 30, 2009, respectively. Although we currently
anticipate that our sales will significantly increase through the balance of
2009, we anticipate that we will continue to incur net losses in the near term,
and we may never be able to achieve profitability. In order to
achieve profitable operations we need to significantly increase our revenues
from advertising and product sales. We cannot be certain that
our business will ever be successful or that we will generate significant
revenues and become profitable.
We
will need significant additional capital, which we may be unable to
obtain.
We
currently do not have sufficient cash available to fund our working capital
needs. Presently we do not generate sufficient cash from operations
to fund our operating expenses, nor do we have any credit facilities available
to us from which we can fund our operating deficits. Our capital
requirements in connection with our commercial operations have been and will
continue to be significant. Also, to date, we have funded many of our
operating expenses from short-term convertible loans, of which $3,500,000
matured on January 30, 2010.These notes remain unpaid and the Company is
currently seeking an additional extension of the maturity date or to have the
principal and interest due on such loans converted into shares of our common
stock. There is no assurance the Company will obtain an additional extension of
the maturity date of the notes or that the principal and interest due on such
loans will be converted into shares of our common stock. Accordingly, we will
need to obtain a minimum of approximately $4,000,000 of funding until revenues
increase to continue to finance our operations and to repay our currently
outstanding obligations for the next 12 months. We have not
identified the sources for the additional financing that we will require, and we
do not have commitments from any third parties to provide this financing. There
is no assurance that sufficient funding through a financing will be available to
us at acceptable terms or at all. Any additional funding that we
obtain in a financing is likely to reduce the percentage ownership of the
company held by our existing security-holders. There can be no
assurance that financing will be available in amounts or on terms acceptable to
us, if at all. If we are unable to obtain the needed additional
funding, we will have to reduce or even totally discontinue our operations,
which would result in a total loss to all of our equity investors and a
significant loss to our promissory note holders.
Our
independent auditors’ report has included an emphasis of matter
paragraph in its report stating that there is a substantial
doubt about our ability to continue as a going concern.
Because
we have incurred losses of approximately $12,857,990 and $4,973,000 in 2008 and
2007, respectively and will need to raise additional capital to fund our
operations in 2009, our auditor included in its report for the years ended
December 31, 2008 and 2007, an emphasis of matter paragraph stating
that there is a substantial doubt about our ability to continue as a going
concern. If we continue to generate significant losses we may not be able to
continue as a going concern.
7
We
currently have outstanding potentially convertible promissory notes that are
secured by a lien on all of our assets. Accordingly, a default under the
convertible promissory notes could result in the foreclosure of all of our
assets and the termination of our business.
We
initially issued $4,280,000 (of which $2,210,000 is still outstanding as of the
date of this prospectus) of convertible promissory notes that are secured by a
first priority security interest on all of our assets. Of those notes,
$2,100,000 were to mature on March 31, 2009. The holders of
those notes have, however, extended the maturity date of those notes to January
31, 2010. The notes remain unpaid and the Company is currently seeking an
additional extension of the maturity date. There is no assurance the Company
will obtain an additional extension of the maturity date of the
notes. Failure to make any payment as required under the convertible
promissory notes could result in the acceleration of the convertible promissory
notes and the foreclosure of our assets. If we are unable to repay the notes in
full upon their maturity, or if we otherwise default under our obligations to
the holders of those notes, the holders of the convertible promissory notes will
have the right to foreclose on all of our assets, which would materially and
adversely affect our ability to continue our operations and could force us to
cease operations. No assurance can be given that we will be able to
make all payments as required or that we will be able to repay the convertible
promissory notes.
If
our strategy is unsuccessful, we will not be profitable and our stockholders
could lose their investment.
There is
no guarantee that our strategy for developing our two Internet platforms and Web
sites will be successful or that if successfully developed, will result in our
becoming profitable. If our strategy is unsuccessful, we may not realize
adequate revenues or profits and as a result we may have to cease operations,
which would cause stockholders to lose their investment.
We
may not be able to effectively control and manage our growth, which would
negatively impact our operations.
If our
business and markets grow and develop it will be necessary for us to finance and
manage expansion in an orderly fashion. We are launching our i-SUPPLY
business. This new business will require additional resources and
personnel. We may face challenges in managing this and other
expanding product and service offerings and in integrating this business with
our other Web site operations. Such eventualities will increase demands on our
existing management, workforce and facilities. Failure to satisfy increased
demands could interrupt or adversely affect our operations, restrain our
potential growth and cause administrative inefficiencies.
We
may be unable to successfully execute all of our identified business
opportunities, or other business opportunities that we determine to
pursue.
We
currently have limited resources with which to fully develop our two existing
business opportunities. Our ability to successfully develop our
existing, and possible future, business opportunities will depend on one or more
of the following factors:
·
|
our
ability to raise additional capital to fund the implementation of our
business plan;
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·
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our
ability to execute our business strategy;
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·
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the
ability of our services to achieve market acceptance;
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·
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our
ability to manage the expansion of our operations and any acquisitions we
may make, which could result in increased costs, high employee turnover or
damage to customer relationships;
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·
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our
ability to attract and retain qualified personnel;
|
·
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our
ability to manage our third party relationships effectively;
and
|
·
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our
ability to accurately predict and respond to the rapid technological
changes in our industry and the evolving demands of the markets we
serve.
|
Our
failure to adequately address any one or more of the above factors could have a
significant impact on our ability to implement our business plan and our ability
to pursue other opportunities that arise.
Our
businesses depends, to a large extent, on the development of strong brands, and
if we do not develop and enhance our brand, our ability to attract and retain
subscribers and customers may be impaired and our business and operating results
may be harmed.
We
believe that our brands are a critical part of our business. Developing and
enhancing our brands may require us to make substantial investments with no
assurance that these investments will be successful. If we fail to promote and
develop the “I-Supply” and “BOOMJ.com’’ brands, or if we incur
significant expenses in this effort, our business, prospects, operating results
and financial condition may be harmed. We anticipate that developing,
maintaining and enhancing our brands will become increasingly important,
difficult and expensive.
8
Our
intellectual property rights are valuable, and any inability to protect them
could reduce the value of our products, services and brand.
Our
trademarks, trade secrets, copyrights and other intellectual property rights are
important assets for us. Various events outside of our control pose a threat to
our intellectual property rights as well as to our products and services. For
example, effective intellectual property protection may not be available in
every country in which our products and services are distributed or made
available through the internet. Also, the efforts we have taken to protect our
proprietary rights may not be sufficient or effective. Any significant
impairment of our intellectual property rights could harm our business or our
ability to compete. Also, protecting our intellectual property rights is costly
and time consuming. Any increase in the unauthorized use of our intellectual
property could make it more expensive to do business and harm our operating
results.
In
providing our services we could infringe on the intellectual property rights of
others, which may cause us to engage in costly litigation and, if we do not
prevail, could also cause us to pay substantial damages and prohibit us from
selling our services.
Third
parties may assert infringement or other intellectual property claims against
us. We may have to pay substantial damages, if it is ultimately determined that
our services infringe a third party’s proprietary rights. Even if claims are
without merit, defending a lawsuit takes significant time, may be expensive and
may divert management’s attention from our other business
concerns.
Traffic
Levels on our BOOMj.com Web site and other Web sites can fluctuate, which could
materially adversely affect our business.
Traffic
levels to our Web sites can fluctuate significantly as a result of social,
political and financial news events. The demand for advertising, cross promotion
and subscriptions on the Company’s Web sites as well as on the Internet in
general can cause changes in rates paid for Internet
advertising. Fluctuating levels of visitors to our Web sites and to
Web sites for which we provide i-SUPPLY services could result in lower sales and
advertising revenues, and could raise our budgeted marketing and advertising
costs.
Our
business may be adversely affected by malicious applications that interfere
with, or exploit security flaws in, our products and services.
Our
business may be adversely affected by malicious applications that make changes
to our users’ computers and interfere with the Internet products that we
provide. These applications attempt to change our users’ Internet
experience or may interfere with the operation and functionality of our Web
products. Malicious interference often occurs without disclosure to
or consent from users, resulting in a negative experience that users and
customers may associate with our Company’s products and
services. These applications may be difficult or impossible to
uninstall or disable, may reinstall themselves and may circumvent other
applications’ efforts to block or remove them. In addition, we offer a number of
products and services that our users download to their computers or that they
rely on to store information and transmit information to others over the
Internet. These products and services are subject to attack by viruses, worms
and other malicious software programs, which could jeopardize the security of
information stored in a user’s computer or in our computer systems and networks.
The ability to reach users and provide them with a superior experience is
critical to our success. If our efforts to combat these malicious
applications are unsuccessful, or if our products and services have actual or
perceived vulnerabilities, our reputation may be harmed and our user traffic
could decline, which would damage our business.
We
rely on bandwidth providers, data centers or others in providing products and
services to our users, and any failure or interruption in the services and
products provided by these third parties could harm our ability to operate our
business and damage our reputation.
We rely
on vendors, including data center and bandwidth providers. Any disruption in the
network access or collocation services provided by these providers or any
failure of these providers to handle current or higher volumes of use could
significantly harm our business. Any financial or other difficulties our
providers face may have negative effects on our business. We exercise little
control over these vendors, which increases our vulnerability to problems with
the services they provide. We license technology and related databases to
facilitate aspects of our data center and connectivity operations including
internet traffic management services. We have experienced and expect to continue
to experience interruptions and delays in service and availability for such
elements. Any errors, failures, interruptions or delays in connection with these
technologies and information services could harm our relationship with users,
adversely affect our brand and expose us to liabilities.
Our
systems are also heavily reliant on the availability of electricity. If we were
to experience a major power outage, we would have to rely on back-up generators.
These back-up generators may not operate properly and their fuel supply could be
inadequate during a major power outage. This could result in a disruption of our
business.
Our
business depends on continued and unimpeded access to the Internet by us and our
users. Internet access providers may be able to block, degrade or charge for
access to certain of our products and services, which could lead to additional
expenses and the loss of users and advertisers.
Our
products and services depend on the ability of our users to access the Internet,
and certain of our products require significant bandwidth to work effectively.
Currently, this access is provided by companies that have significant and
increasing market power in the broadband and Internet access marketplace,
including incumbent telephone companies, cable companies and mobile
communications companies. Some of these providers have stated that they may take
measures that could degrade, disrupt or increase the cost of user access to
certain of our products by restricting or prohibiting the use of their
infrastructure to support or facilitate our offerings, or by charging increased
fees to us or our users to provide our offerings. While interference with access
to our popular products and services seems unlikely, such carrier interference
could result in a loss of existing users and advertisers, increased costs, and
impair our ability to attract new users and advertisers, thereby harming our
revenue and growth.
9
We
face intense competition from social networking sites and other Internet
businesses and may not be able to successfully compete.
We face
formidable competition in every aspect of our business, and particularly from
other companies that seek to connect people with information and entertainment
on the Web. Such competitors include seniorjournal.com, boomerwomenspeak.com,
aginghipsters.com, 50Plus.com, generationjones.com, Eons.com, AARP, YouTube,
MySpace, Craig’s List, Evite, Shutterfly, Facebook, Yellowpages.com, Local.com
and Superpages.com.
In
addition, we will be competing with other Internet companies, such as E-commerce
companies, general purpose consumer online services, such as America Online and
Microsoft Network; online services or Web sites targeting business and financial
needs, such as TheStreet.com and Motley Fool; and other Web “portal” companies,
such as Google, Yahoo, and MSN.
Many of
our competitors, particularly those in the advertising marketplace, have longer
operating histories and more established relationships with customers and end
users. They can use their experience and resources against us in a variety of
competitive ways, including by making acquisitions, investing more aggressively
in research and development and competing more aggressively for advertisers and
Web sites. They may have a greater ability to attract and retain users than we
do because they operate internet portals with a broad range of content products
and services. If our competitors are successful in providing similar or better
Web sites, more relevant advertisements or in leveraging their platforms or
products to make their Web services easier to access, we could experience a
significant decline in user traffic or in the size of our network. Any such
decline could negatively affect our revenues.
We
face competition from traditional media companies, and we may not be included in
the advertising budgets of large advertisers, which could harm our operating
results.
In
addition to Internet companies, we face competition from companies that offer
traditional media advertising opportunities, including television, radio and
print. Most large advertisers have set advertising budgets, a small portion of
which is allocated to Internet advertising. We expect that large advertisers
will continue to focus most of their advertising efforts on traditional media.
If we fail to convince these companies to spend a portion of their advertising
budgets with us, or if our existing advertisers reduce the amount they spend on
our programs, our operating results would be harmed.
If
we do not continue to innovate and provide products and services that are useful
to users, we may not remain competitive, and our revenues and operating results
could suffer.
Our
success depends on providing products and services that make using the Internet
a more useful and enjoyable experience for our users. Our competitors are
constantly developing innovations in Web based products and services. As a
result, we must continue to invest significant resources in research and
development in order to enhance our existing products and services and introduce
new products and services that people can easily and effectively use. If we are
unable to provide quality products and services, then our users may become
dissatisfied and move to a competitor’s products and services. Our operating
results would also suffer if our innovations are not responsive to the needs of
our users and members, are not appropriately timed with market opportunities or
are not effectively brought to market. As Internet broadcasting technology and
social networks continue to develop, our competitors may be able to offer
products and services that are, or that are seen to be, substantially similar to
or better than ours. This may force us to compete in different ways and expend
significant resources in order to remain competitive.
Changing
laws, rules and regulations and legal uncertainties could increase the
regulation of our business and therefore increase our operating
costs.
We are
subject to a number of foreign and domestic laws and regulations that affect
companies conducting business on the internet. In addition, laws and regulations
relating to user privacy, freedom of expression, content, advertising,
information security and intellectual property rights are being debated and
considered for adoption by many countries throughout the world. We face risks
from some of the proposed legislation that could be passed in the
future.
In the
U.S., laws relating to the liability of providers of online services for
activities of their users and other third parties are currently being tested by
a number of claims, which include actions for defamation, libel, invasion of
privacy and other data protection claims, tort, unlawful activity, copyright or
trademark infringement and other theories based on the nature and content of the
materials searched, the ads posted or the content generated by users. Certain
foreign jurisdictions are also testing the liability of providers of online
services for activities of their users and other third parties. Any court ruling
that imposes liability on providers of online services for activities of their
users and other third parties could harm our business.
Likewise,
a range of other laws and new interpretations of existing laws could have an
impact on our business. For example, in the U.S. the Digital Millennium
Copyright Act has provisions that limit, but do not necessarily eliminate, our
liability for listing, linking or hosting third-party content that includes
materials that infringe copyrights or other rights. The costs of compliance with
these laws may increase in the future as a result of changes in interpretation.
Furthermore, any failure on our part to comply with these laws may subject us to
significant liabilities. Similarly, the application of existing laws
prohibiting, regulating or requiring licenses for certain businesses of our
advertisers, including, for example, online gambling, distribution of
pharmaceuticals, adult content, financial services, alcohol or firearms, can be
unclear. Application of these laws in an unanticipated manner could expose us to
substantial liability and restrict our ability to deliver services to our users.
For example, some French courts have interpreted French trademark laws in ways
that would, if upheld, limit the ability of competitors to advertise in
connection with generic keywords.
We are
also subject to federal, state and foreign laws regarding privacy and protection
of user data. Any failure by us to comply with our posted privacy policies or
privacy-related laws and regulations could result in proceedings against us by
governmental authorities or others, which could potentially harm our business.
In addition, the interpretation of data protection laws, and their application
to the internet, in Europe and other foreign jurisdictions is unclear and in a
state of flux. There is a risk that these laws may be interpreted and applied in
conflicting ways from country to country and in a manner that is not consistent
with our current data protection practices. Complying with these varying
international requirements could cause us to incur additional costs and to have
to change our business practices. Further, any failure by us to protect our
users’ privacy and data could result in a loss of user confidence in our
services and ultimately in a loss of users, which would adversely affect our
business.
10
We
need to enter into strategic relationships with other Web sites. If we are
unable to do so, our revenues and operating results will
suffer.
We will
need to establish and maintain strategic relationships with other Web sites to
attract users, advertisers and compelling content. There is intense competition
for placements and cross promotion on these sites, and we may not be able to
enter into relationships on commercially reasonable terms or at all. In addition
we may have to pay significant fees to establish and maintain these
relationships.
Our
business model is dependent upon continued growth in the use of the Internet by
our target demographic, and acceptance of our services by our target
demographic. If such growth and acceptance do not occur, our business will
suffer.
Our
business model depends on increasing demand for our content and e-commerce
initiatives from the Baby Boomers and the Generation Jones, as well as the
advertising revenue from small businesses. This in turn depends on this
demographic continuing to increase their use of the Internet for obtaining
information pertaining to social, political, financial and lifestyle events,
research and conducting commercial transactions. There can be no assurance that
such growth will continue, or that our services will be accepted by this
demographic. If such growth and acceptance does not occur, our business will be
materially adversely affected.
We
rely on highly skilled personnel and, if we are unable to retain or motivate key
personnel or hire qualified personnel, we may not be able to grow
effectively
The
success of this company depends in large part upon the abilities and continued
service of our executive officers and other key employees, particularly Mr.
Robert J. McNulty, Chairman &, Chief Executive Officer, Mr. Mark V. Noffke,
Executive Vice President and Chief Financial Officer, and Mr. Jimmy White
Executive Vice President. There can be no assurance that we will be
able to retain the services of such officers and employees. Our failure to
retain the services of Messrs. McNulty, Noffke, and White, and other key
personnel could have a material adverse effect on our business and future
prospects. At the present time, we have no employment agreements and no key
person insurance policies in place for any of the above referenced individuals.
In order to support our business plan, we will be required to recruit
effectively, hire, train and retain additional qualified management personnel.
Our inability to attract and retain the necessary personnel could have a
material adverse effect on our business.
Risks
Related to Ownership of our Common Stock
Our
stock is thinly traded, so you may be unable to sell your shares at or near the
quoted bid prices if you need to sell a significant number of your
shares.
The
shares of our common stock are thinly-traded on the OTC Bulletin Board, meaning
that the number of persons interested in purchasing our common shares at or near
bid prices at any given time may be relatively small or
non-existent. As a consequence, there may be periods of several days
or more when trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on share price. We cannot give you any assurance that a broader or more active
public trading market for our common shares will develop or be sustained, or
that current trading levels will be sustained. Due to these conditions, we can
give you no assurance that you will be able to sell your shares at or near bid
prices or at all if you need money or otherwise desire to liquidate your
shares.
If
a more active market for our common stock develops, there is a significant risk
that our stock price may fluctuate dramatically which could negatively impact
your investment in our common stock.
There is
only a limited market for our common stock and a viable market for our common
stock may never develop further. If a more active market for our
common stock develops, there is a significant risk that our stock price may
fluctuate dramatically in the future in response to any of the following
factors, some of which are beyond our control including:
·
|
variations
in our quarterly operating results;
|
|||||
·
|
announcements
that our revenue or income are below or that costs or losses are greater
than analysts’ expectations;
|
|||||
·
|
general
economic slowdowns;
|
|||||
·
|
sales
of large blocks of our common stock;
|
|||||
·
|
announcements
by us or our competitors of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
|
|||||
·
|
fluctuations
in stock market prices and volumes;
|
|||||
·
|
concern
by potential investors that the large number of shares of common stock
which may be sold pursuant to this prospectus may have a downward effect
upon the market price of the stock; and
|
|||||
·
|
the
occurrence of any of the risks described in this report.
|
11
Dramatic
fluctuations in the price of our common stock may make it difficult to sell our
common stock.
Failure
to achieve and maintain effective internal controls in accordance with section
404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and operating results and stockholders could lose confidence in our
financial reporting.
Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. We are required to
document and test our internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased
control over financial reporting requirements, including annual management
assessments of the effectiveness of such internal controls and a report by our
independent registered public accounting firm addressing these assessments.
Failure to achieve and maintain an effective internal control environment,
regardless of whether we are required to maintain such controls, could also
cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on our stock price.
Because
we are subject to the “penny stock” rules, you may have difficulty in selling
our common stock.
Our
common stock is subject to regulations of the SEC relating to the market for
penny stocks. Penny stock, as defined by the Penny Stock Reform Act, is any
equity security not traded on a national securities exchange or quoted on any
market of the NASDAQ Stock Market that has a market price of less than $5.00 per
share. The penny stock regulations generally require that a disclosure schedule
explaining the penny stock market and the risks associated therewith be
delivered to purchasers of penny stocks and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. The broker-dealer must make a
suitability determination for each purchaser and receive the purchaser’s written
agreement prior to the sale. In addition, the broker-dealer must make certain
mandated disclosures, including the actual sale or purchase price and actual bid
offer quotations, as well as the compensation to be received by the
broker-dealer and certain associated persons. The regulations applicable to
penny stocks may severely affect the market liquidity for your common stock and
could limit your ability to sell your securities in the secondary
market.
As
an issuer of “penny stock”, the protection provided by the federal securities
laws relating to forward looking statements does not apply to us.
Although
federal securities laws provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, if we
are a penny stock, we will not have the benefit of this safe harbor protection
in the event of any legal action based upon a claim that the material provided
by us contained a material misstatement of fact or was misleading in any
material respect because of our failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial
condition.
Our management
and directors, together with their family members, may control a sufficient
number of shares of our common stock to be able to prevent a change in
control .
Mr.
Robert J. McNulty, our Chairman and Chief Executive Officer, Mr. Mark V. Noffke,
our Executive Vice President of Finance and CFO, Mr. Jimmy White Executive Vice
President and Mr. Murray Williams, one of our directors, collectively
beneficially own approximately 1.7% of the outstanding shares of our Common
Stock. However, approximately 28.9% of our issued and outstanding
stock is held by Linlithgow Holdings LLC, an entity owned and controlled by the
immediate family members of Mr. Robert J. McNulty. Mr. McNulty is not a member
or manager of Linlithgow Holdings LLC and he disclaims any beneficial interests
in these shares. Mr. McNulty does not exercise any voting rights in respect of
these shares nor does he have any right to dispose of these
shares. Nevertheless, Linlithgow Holdings LLC could resist any change
of control that would remove Mr. McNulty or any of the other officers or
directors and, together with Mr. McNulty, Mr. Noffke, Mr. White and Mr. Williams
if they act in concert, can exercise substantial influence over our business by
virtue of their voting power with respect to the election of directors and all
other matters requiring action by stockholders. Such concentration of share
ownership may have the effect of discouraging, delaying or preventing a change
in control of this company.
12
Substantial sales of our common stock
could cause our common stock price to fall .
Currently,
approximately 26,746,803 shares of our currently outstanding common stock and
another 7,597,206 shares of our common stock issuable upon conversion of
currently outstanding convertible promissory notes are eligible to be sold
pursuant to Rule 144. The sale of these shares, or even the
possibility that substantial amounts of these shares of our common stock may be
sold in the public market, may adversely affect prevailing market prices for our
common stock and could impair our ability to raise capital through the sale of
our equity securities.
There is
no minimum number of shares that must be sold in the offering, we will retain
the proceeds from the sale of any of the offered shares, and funds will not be
returned to investors. It is possible that no proceeds will be received by the
Company or that if any proceeds are received, that such proceeds will not be
sufficient to cover the costs of the offering.
The
Company intends to use the net proceeds of this offering to for general
corporate purposes and marketing, summarized as follows:
%
of Offering
|
NET
PROCEEDS
|
USES
|
|||
100%
|
$1,939,000
|
$1,000,000
|
Debt
Payment
|
||
$
200,000
|
Financing
Fee
|
||||
$
739,000
|
Working
Capital
|
||||
$1,939,000
|
$1,939,000
|
||||
75%
|
$1,439,000
|
$750,000
|
Debt
Payment
|
||
$150,000
|
Financing
Fee
|
||||
$539,000
|
Working
Capital
|
||||
$1,439,000
|
$1,439,000
|
||||
50%
|
$939,000
|
$500,000
|
Debt
Payment
|
||
$100,000
|
Financing
Fee
|
||||
$339,000
|
Working
Capital
|
||||
$939,000
|
$939,000
|
||||
25%
|
$439,000
|
$250,000
|
Debt
Payment
|
||
$ 50,000
|
Financing
Fee
|
||||
$139,000
|
Working
Capital
|
||||
$439,000
|
$439,000
|
||||
10%
|
$139,000
|
$ ---
|
Debt
Payment
|
||
$
20,000
|
Financing
Fee
|
||||
$119,000
|
Working
Capital
|
||||
$139,000
|
$139,000
|
||||
Dilution
represents the difference between the offering price and the net tangible book
value per share immediately after completion of this offering. Net
tangible book value is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises
mainly as a result of our arbitrary determination of the offering price of the
shares being offered. Dilution of the value of the shares you
purchase is also the result of the lower book value of the shares held by our
existing shareholders. Because this is a direct public offering, with no minimum
number of shares that must be sold, it is possible that none or some of the
maximum number of shares offered will be sold.
After
giving effect to the sale of 10%, 25%, 50%, 75% and 100% of the maximum shares
of Common Stock offered by the Company hereby, at an assumed initial public
offering price per share of $0.10 and the application of the estimated net
proceeds there from (after deducting underwriting discounts and other estimated
offering expenses), the net tangible book value of the Company as of
September 30, 2009, under the assumptions set forth above and after
giving effect to the sale of shares offered hereby, would increase
from a negative ($0.307) to ($0.292), ($0.269), ($0.236),
($0.209), and ($0.186) per share, respectively. This represents an immediate
increase in the net tangible book value of $0.015, $0.038, $0.071, $0.098, and
$0.121 per share to current shareholders, respectively, and an immediate
dilution of $0.392, $0.369, $0.336, $0.309, $0.286 per share to new
investors or (292%), (269%), (236%), (209%), or (186%),
respectively.
The
following table summarizes the per share dilution based on 10% of the maximum
number of shares being sold:
Public
offering price per share
|
$ | 0.100 |
__
|
|||||
Net
tangible book value per share before this offering
|
$ | (0.307 | ) | |||||
Increase
per share attributable to new investors
|
$ | 0.015 | ||||||
Adjusted
net tangible book value per share after this
offering
|
$ | (0.292 | ) |
__
|
||||
Dilution
per share to new investors
|
$ | 0.392 |
__
|
|||||
Percentage
dilution
|
(292 | ) |
%
|
The
following table summarizes the per share dilution based on 25% of the maximum
number of shares being sold:
Public
offering price per share
|
$ | 0.100 |
__
|
|||||
Net
tangible book value per share before this offering
|
$ | (0.307 | ) | |||||
Increase
per share attributable to new investors
|
$ | 0.038 | ||||||
Adjusted
net tangible book value per share after this
offering
|
$ | (0.269 | ) |
__
|
||||
Dilution
per share to new investors
|
$ | 0.369 |
__
|
|||||
Percentage
dilution
|
(269 | ) |
%
|
13
The following table summarizes the per share dilution based on 50% of the maximum number of shares being sold:
Public
offering price per share
|
$ | 0.100 |
__
|
|||||
Net
tangible book value per share before this offering
|
$ | (0.307 | ) | |||||
Increase
per share attributable to new investors
|
$ | 0.071 | ||||||
Adjusted
net tangible book value per share after this
offering
|
$ | (0.236 | ) |
__
|
||||
Dilution
per share to new investors
|
$ | 0.336 |
__
|
|||||
Percentage
dilution
|
(236 | ) |
%
|
The
following table summarizes the per share dilution based on 75% of the maximum
number of shares being sold:
Public
offering price per share
|
$ | 0.100 |
__
|
|||||
Net
tangible book value per share before this offering
|
$ | (0.307 | ) | |||||
Increase
per share attributable to new investors
|
$ | 0..098 | ||||||
Adjusted
net tangible book value per share after this
offering
|
$ | (0.209 | ) |
__
|
||||
Dilution
per share to new investors
|
$ | 0.309 |
__
|
|||||
Percentage
dilution
|
(209 | ) |
%
|
The
following table summarizes the per share dilution based on 100% of the maximum
number of shares being sold:
Public
offering price per share
|
$ | 0.100 |
__
|
|||||
Net
tangible book value per share before this offering
|
$ | (0.307 | ) | |||||
Increase
per share attributable to new investors
|
$ | 0.121 | ||||||
Adjusted
net tangible book value per share after this
offering
|
$ | (0.186 | ) |
__
|
||||
Dilution
per share to new investors
|
$ | 0.309 |
__
|
|||||
Percentage
dilution
|
(186 | ) |
%
|
The
following tables set forth for 10% of the maximum number of shares offered
hereby as of September 30, 2009, (i) the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by the current shareholders, and (ii) the number of
shares of Common Stock included in the shares to be purchased from the Company
and total consideration to be paid by new investors in this offering at an
offering price of $0.10 per share.
Shares
|
Total
|
Average
Amount
|
||||||||||||||||||
Number
|
Percent
|
Capital
|
Percent
|
Per
Share
|
||||||||||||||||
Current
shareholders
|
46,640,941
|
95.9
|
%
|
$
|
(14,321,016
|
)
|
101.0
|
%
|
$
|
(0.307
|
) | |||||||||
New
investors
|
2,000,000
|
4.1
|
%
|
139,000
|
(1.0
|
)%
|
$
|
0.070
|
||||||||||||
Total
|
48,640,941
|
100.0
|
%
|
$
|
(14,182,016
|
)
|
100
|
%
|
$
|
(0.292
|
) |
The
following tables set forth for 25% of the maximum number of shares offered
hereby as of September 30, 2009, (i) the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by the current shareholders, and (ii) the number of
shares of Common Stock included in the shares to be purchased from the Company
and total consideration to be paid by new investors in this offering at an
offering price of $0.10 per share.
Shares
|
Total
|
Average
Amount
|
||||||||||||||||||
Number
|
Percent
|
Capital
|
Percent
|
Per
Share
|
||||||||||||||||
Current
shareholders
|
46,640,941
|
90.3
|
%
|
$
|
(14,321,016
|
)
|
103.2
|
%
|
$
|
(0.307
|
) | |||||||||
New
investors
|
5,000,000
|
9.7
|
%
|
439,000
|
(3.2
|
)%
|
$
|
0.088
|
||||||||||||
Total
|
51,640,941
|
100.0
|
%
|
$
|
(13,882,016
|
)
|
100
|
%
|
$
|
(0.269
|
) |
The
following tables set forth for 50% of the maximum number of shares offered
hereby as of September 30, 2009, (i) the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by the current shareholders, and (ii) the number of
shares of Common Stock included in the shares to be purchased from the Company
and total consideration to be paid by new investors in this offering at an
offering price of $0.10 per share.
Shares
|
Total
|
Average
Amount
|
||||||||||||||||||
Number
|
Percent
|
Capital
|
Percent
|
Per
Share
|
||||||||||||||||
Current
shareholders
|
46,640,941
|
82.3
|
%
|
$
|
(14,321,016
|
)
|
107.0
|
%
|
$
|
(0.307
|
) | |||||||||
New
investors
|
10,000,000
|
17.7
|
%
|
939,000
|
(7.0
|
)%
|
$
|
0.094
|
||||||||||||
Total
|
56,640,941
|
100.0
|
%
|
$
|
(13,382,016
|
)
|
100
|
%
|
$
|
(0.236
|
) |
The
following tables set forth for 75% of the maximum number of shares offered
hereby as of September 30, 2009, (i) the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by the current shareholders, and (ii) the number of
shares of Common Stock included in the shares to be purchased from the Company
and total consideration to be paid by new investors in this offering at an
offering price of $0.10 per share.
Shares
|
Total
|
Average
Amount
|
||||||||||||||||||
Number
|
Percent
|
Capital
|
Percent
|
Per
Share
|
||||||||||||||||
Current
shareholders
|
46,640,941 | 75.7 | % | $ | (14,321,016 | ) | 111.2 | % | $ | (0.307 | ) | |||||||||
New
investors
|
15,000,000 | 24.3 | % | 1,439,000 | (11.2 | )% | $ | 0.096 | ||||||||||||
Total
|
61,640,941 | 100.0 | % | $ | (12,882,016 | ) | 100 | % | $ | (0.209 | ) |
The
following tables set forth for 100% of the maximum number of shares offered
hereby as of September 30, 2009, (i) the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by the current shareholders, and (ii) the number of
shares of Common Stock included in the shares to be purchased from the Company
and total consideration to be paid by new investors in this offering at an
offering price of $0.10 per share.
Shares
|
Total
|
Average
Amount
|
||||||||||||||||||
Number
|
Percent
|
Capital
|
Percent
|
Per
Share
|
Current
shareholders
|
46,640,941
|
70.0
|
%
|
$
|
(14,321,016
|
)
|
115.7
|
%
|
$
|
(0.307
|
) | |||||||||
New
investors
|
20,000,000
|
30.0
|
%
|
1,939,000
|
(15.7
|
)%
|
$
|
0.097
|
||||||||||||
Total
|
66,640,941
|
100.0
|
%
|
$
|
(12,382,016
|
)
|
100
|
%
|
$
|
(0.186
|
) |
14
Dividend
Policy
The
Company does not anticipate paying dividends on the Common Stock at any time in
the foreseeable future. The Company’s Board of Directors currently
plans to retain earnings for the development and expansion of the Company’s
business. See “Description of Securities”
This is a
self-underwritten offering. This prospectus is part of a registration
statement that permits our officers and directors to sell the shares directly to
the public, with no commission or other remuneration payable to him for any
shares that are sold by him. We may also engage registered
broker-dealers to offer and sell the shares. We may pay any such registered
persons who make such sales a commission of up to 10% of the sale price of
shares sold, and provide the registered persons a non-accountable expense
allowance of up to 3% of the sale price of shares sold. However, we have
not entered into any underwriting agreement, arrangement or understanding for
the sale of the shares being offered. In the event we retain a broker
who may be deemed an underwriter, we will file a post-effective amendment to
this registration statement with the Securities and Exchange Commission. This
offering is intended to be made solely by the delivery of this prospectus and
the accompanying Subscription Application to prospective investors. We may
terminate this offering prior to the expiration date. Our officers and directors
will sell the shares and intend to offer them to friends, family members and
business acquaintances. In offering the securities on our behalf, our directors
and officers will rely on the safe harbor from broker dealer registration set
out in Rule 3a4-1 under the Securities Exchange Act of 1934.
Rule
3a4-1 sets forth those conditions under which a person associated with an Issuer
may participate in the offering of the Issuer’s securities and not be deemed to
be a broker-dealer. Those conditions are as follows:
a. Our
officers and directors are not subject to a statutory disqualification, as
that term is defined in Section 3(a)(39) of the Act, at the time of their
participation; and
b. Our
officers and directors will not be compensated in connection with their
participation by the payment of commissions or other remuneration based either
directly or indirectly on transactions in securities; and
c. Our
officers and directors are not, nor will they be at the time of their
participation
in the
offering, an associated person of a broker-dealer; and
d. Our
officers and directors meet the conditions of paragraph (a)(4)(ii) of Rule 3a4-1
of the Exchange Act, in that they (A) primarily perform, or intend primarily to
perform at the end of the offering, substantial duties for or on behalf of our
Company, other than in connection with transactions in securities; and (B) are
not a broker or dealer, or been associated person of a broker or dealer, within
the preceding twelve months; and (C) have not participated in selling and
offering securities for any Issuer more than once every twelve months other than
in reliance on Paragraphs (a)(4)(i) and (a)(4)(iii).
Our
officers, directors, control persons and affiliates of same do not intend to
purchase any shares in this offering.
This is a
direct public offering by Beyond Commerce, Inc. of a maximum of 20,000,000
shares of our common stock at $0.10 per share. The shares will be
sold at the fixed price of $0.10 per share until the earlier of (i) the date
when the sale of all 20,000,000 shares is completed or (ii) 180 days from the
date of this prospectus. There is no minimum amount of aggregate
subscriptions and there is no minimum amount of subscription required per
investor. Subscriptions, once received, are irrevocable. Accordingly,
there is no minimum number of shares that must be sold in the offering, we will
retain the proceeds from the sale of any of the offered shares, and funds will
not be returned to investors. It is possible that no proceeds will be received
by the Company or that if any proceeds are received, that such proceeds will not
be sufficient to cover the costs of the offering. There is no commitment on the
part of any person to purchase and pay for any shares.
There can
be no assurance that all, or any, of the shares will be sold. In
order to comply with the applicable securities laws of certain states, the
securities may not be offered or sold unless they have been registered or
qualified for sale in such states or an exemption from such registration or
qualification requirement is available and with which we have complied. The
purchasers in this offering and in any subsequent trading market must be
residents of such states where the shares have been registered or qualified for
sale or an exemption from such registration or qualification requirement is
available. As of the date of this prospectus, we have not identified the
specific states where the offering will be sold. We will file a pre-effective
amendment indicating which state(s) the securities are to be sold pursuant to
this registration statement.
15
This is a
direct public offering and, as such, payment for the sale of the shares in this
offering will be payable to Beyond Commerce, Inc. and we will have immediate
access to these funds. Investors can purchase common stock in this
offering by completing a Subscription Agreement (attached hereto as Exhibit
99.1). All payments are to be made to Beyond Commerce, Inc. and are
required in the form of United States currency either by personal check, bank
draft, or by cashier’s check. All subscription agreements and checks
are irrevocable and should be delivered to Beyond Commerce, Inc. 9029 South
Pecos, Suite 2800, Henderson, Nevada 89074, attention Mr. Robert
McNulty. We reserve the right to either accept or reject any
subscription. Any subscription rejected by us will be returned to the
subscriber within five business days of the rejection date. Once a
subscription agreement is accepted, it will be executed without reconfirmation
to or from the subscriber. Once we accept a subscription, the
subscriber cannot withdraw it.
If you
decide to subscribe for any shares in this offering, you will be required to
execute a Subscription Agreement and tender it, together with a check or
certified funds to us. Subscriptions, once received by the company,
are irrevocable. All checks for subscriptions should be made
payable to Beyond Commerce, Inc.
After the
registration statement of which this prospectus forms a part has been declared
effective, we will provide each investor with a copy of the final prospectus
relating to this offering.
COMMON
STOCK
Our
authorized Common Stock consists of 200,000,000 shares of common stock, par
value $.001 per share. The holders of our common stock (i) have equal
rights to dividends from funds legally available, therefore, when, as and if
declared by our Board of Directors; (ii) are entitled to share in all of our
assets available for distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs; (iii) do not have preemptive,
subscription or conversion rights and there are no redemption or sinking fund
provisions or rights; and (iv) are entitled to one non-cumulative vote per share
on all matters on which stockholders may vote. We currently have issued and
outstanding 57,793,311 shares of common stock.
We
currently have outstanding $2,280,000 of convertible promissory notes which are
convertible into 3,247,143 shares of common stock at a conversion price of $0.70
and are secured by a first priority security interest on all of our assets. Of
those notes, $2,100,000 were to mature on March 31, 2009. The
holders of those notes have, however, extended the maturity date of those notes
to January 31, 2010. The notes remain unpaid and the Company is
currently seeking an additional extension of the maturity date. There is no
assurance the Company will obtain an additional extension of the maturity date
of the notes. Failure to make any payment as required under the
convertible promissory notes could result in the acceleration of the convertible
promissory notes and the foreclosure of our assets. If we are unable to repay
the notes in full upon their maturity, or if we otherwise default under our
obligations to the holders of those notes, the holders of the convertible
promissory notes will have the right to foreclose on all of our assets, which
would materially and adversely affect our ability to continue our operations and
could force us to cease operations. No assurance can be given that we
will be able to make all payments as required or that we will be able to repay
the convertible promissory notes.
We also
have outstanding an additional $8,383,137 principal amount of convertible
promissory notes, of which $1,280,000 is convertible into common stock at a
conversion price of $1.00 and $7,103,137 is convertible into common stock at a
conversion price of $0.70. Thus, the $8,383,137 of additional convertible
promissory notes are convertible into an aggregate of 11,427,338 shares of
common stock.
We
currently have outstanding warrants to purchase an aggregate of 18,782,668
shares of our common stock. The warrants have exercises prices ranging from
$0.01 to $2.40 and five-year terms from the date of issuance.
The
accounting firm of L J Soldinger Associates LLC have audited the financial
statements for the years ended December 2007 and 2008 that have been included in
this prospectus. We include the financial statements in
reliance on their report, given upon their authority as experts in accounting
and auditing.
Sichenzia
Ross Friedman Ference LLP have passed upon the validity of the shares being
offered and certain other legal matters and is representing us in connection
with this offering.
None of
the above described experts or counsel have been hired on a contingent basis and
none of them will receive a direct or indirect interest in the Company, except
that Sichenzia Ross Friedman Ference LLP or its members were issued 75,000
shares of our common stock as payment for its services in connection with this
offering.
Beyond
Commerce, Inc., formerly known as BoomJ.com, Inc. (the “Company”), is an
Internet company that has two interrelated divisions aimed at generating
revenues primarily from website advertising and E-commerce
transactions. Our initial site was BOOMj, www.BOOMj.com , a niche
portal and social networking site for Baby Boomers and Generation
Jones. Our Boomj.com website provides social, political, financial,
and lifestyle content to the Baby Boomer/Generation Jones target audience and
provides us with a platform for our advertising and E-commerce businesses. The
Company sells advertising on a business to business basis in which the BoomJ and
I-Supply platforms are utilized as targeted advertising networks. We
are currently releasing i-SUPPLY, www.i-SUPPLY.com , a retail
site that offers easy to use, fully customizable E-commerce services, and
revenue solutions for any third party Website large or small, and hosts local
ads, providing extensive reach for our proprietary advertising partner network
platform. The aforementioned websites are not part of this
prospectus.
History
of the Company
We were
formerly known as Reel Estate Services, Inc. (“RES”), and were incorporated in
Nevada on January 12, 2006. As of December 28, 2007, RES was a public
shell company, defined by the Securities and Exchange Commission as an inactive,
publicly quoted company with nominal assets and liabilities.
On
December 28, 2007, RES entered into an Agreement and Plan of Reorganization,
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, 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 (which were
held by Linda Rutter) of the 3,150,000 issued and outstanding shares of RES. The
cancellation was performed in two tranches: In exchange for $125,000 paid at the
closing of the Merger, 750,000 shares of RES Common Stock were cancelled; the
remaining 750,000 shares were cancelled upon payment to Ms. Rutter of $125,000
on January 31, 2008. All share amounts presented in the financial statements
included with this prospectus, unless otherwise noted, reflect the foregoing
recapitalization.
16
Upon the
closing of the Merger, Linda Rutter received a five-year warrant to purchase
825,000 shares of the Company’s Common Stock at an exercise price of $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. However,
pursuant to the terms of those warrants, the warrants were subsequently
exchanged for warrants to purchase the Company’s common stock. The
exchange of the warrants was completed during the fiscal quarter ended June 30,
2008.
Subsequent
to the Merger, RES changed its name to BoomJ.com, Inc.
In the
Reorganization Agreement, concurrent with the closing of the Merger, (a) all
current officers of RES resigned from their positions with RES, (b) BOOMj.com’s
officers were appointed by the then existing members of the Board of Directors
of RES to replace the former RES officers, and (c) the members of the RES board
of directors appointed the members of BOOMj.com’s current board of directors of
the Company and thereafter resigned.
RES is
the legal acquirer of BOOMj.com. 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. Although RES was the legal acquirer
in the Merger, BOOMj.com was the accounting acquirer since its shareholders
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. Unless
otherwise specified, all references to the Company prior to the Merger refer to
BOOMj.com, and all references to the Company after the Merger refer to Beyond
Commerce, Inc. (formerly BOOMj.com, Inc.) and its subsidiaries on a consolidated
basis.
In
December 2008, the Company changed its name from BoomJ.com, Inc. to Beyond
Commerce, Inc. to more accurately reflect the new structure of the Company
consisting of three operating divisions: i-SUPPLY, LocalAdLink, and BOOMj.com.
On October 9, 2009, we sold the assets relating to the software, name rights,
and trademark of the LocalAdLink division.
The
Company currently maintains its corporate office in Henderson,
Nevada.
Our
Businesses
Our two
business divisions are (i) i-SUPPLY, and (ii) BOOMj. As noted above, on October
9, 2009, we sold the assets relating to the software, name rights, and trademark
of a third division of the Company, LocalAdLink, an online advertising service
that enables local businesses to reach local customers. The Company will
continue to sell advertising as it had prior to inception of Local Ad Link,
Inc., however on a different scale with a greater emphasis on business to
business sales. In particular, the Company will make sales directly through
experienced professional sales representatives rather than through a multi-level
marketing system, and such advertising will continue to be presented on the
Company’s BoomJ social network and I-Supply store network. In addition, through
such professional sales representatives, we will seek to continue to expand
sales of our preparatory widget technology, which allows any Web site that is
operated by a third party to use our online storefront tool to monetize
visitors of their Web site by simply cutting and pasting a few lines of code to
instantly create a online storefront on their site.
During
the third quarter of 2009 the Company started another subsidiary, KaChing
KaChing, which is an E-commerce platform that provides a complete turn-key
E-commerce solution. Individual KaChing KaChing retail store owners have the
ability to create, manage and earn money from product sales generated from their
individual Web stores.
17
i-SUPPLY
Our
i-SUPPLY division specializes in providing state of the art E-commerce tools and
solutions for high traffic Web sites. The i-SUPPLY widget online
store will allow any Web site that is operated by a third party to use our
online storefront tool to monetize visitors of their Web site by
simply cutting and pasting a few lines of code to instantly create a
online storefront on their site. Using the i-SUPPLY tool,
participating Web sites will be able to offer 1.8 million brand name products on
their Web site and will be able to customize the look and feel of their
storefront. i-SUPPLY creates a value-add to these owners by handling
product selection, pricing, customer support, billing and shipping for any sales
generated by its widget. In March 2009, we launched the beta
version of the i-SUPPLY storefront tool. The advanced version of the
storefront tool with additional functionality and features was released during
the second quarter of 2009.
i-SUPPLY
offers E-commerce solutions that combine the best features of today’s hottest
online storefronts with social shopping platforms, offering users
of i-SUPPLY highly valuable technology, products and information to
monetize their traffic. For example, a third party site dedicated to
a specific interest (such as photography, gardening, electronics, etc.) can now
use the i-SUPPLY storefront to offer a store on that site that offers thousands
of products related to that interest (such as photo equipment, gardening tools,
or electronic products). Users of the tool will be able to generate
sales from their Web site without having to set up and operate an online store.
i-Supply has over 4,800 member affiliate agreements and over 2,600
stores. The Company is in the process of creating stores for the member
affiliate agreements that do not yet have corresponding stores. i-Supply is not
dependent on one or more major customers.
The core
of i-SUPPLY is our proprietary Widget store technology. This technology allows
users to instantly create a store that is hosted on their platform by simply
copying and pasting a few lines of code into a blank page on their site. This
means that third party Web sites will retain traffic and be able to record
statistics through our innovative live reporting and sales tools. This unique
service allows any Web site to integrate customizable Web stores with tailored
assortments of products from over 1.8 million brand names. i-SUPPLY’s team
completely manages all backend fulfillment issues following a sale of any of the
products, including shipping, customer service, returns, and
refunds.
To date,
only the beta version of the i-SUPPLY product has been
launched. However, users of the storefront include Web sites such as
NameMedia, operator of over 2 million unique domain names; Rackspace
Hosting, 70,000 client base; Mosso Cloud Storage, 100,000 Domains; Wpromote,
17,000 clients; and UVU Networks.
i-SUPPLY
provides us with the potential to generate revenue from product sales on third
party Web sites. In addition, the third party storefronts are built with
customized advertising space dedicated to local advertising. This ad
inventory is filled by our former LocalAdLink division, thereby providing the
Company with the ability to extend its advertising reach to the hundreds of
thousands of Web properties who use the i-SUPPLY platform.
BOOMj.com
The BOOMj
subsidiary operates BOOMj.com, the leading online community for Baby Boomers and
Generation Jones, both born during the big 20-year post-World War II boom in
births from the mid-1940's to mid-1960's. “Baby Boomer” is a term
used to describe a person who was born between 1942 and 1953, while “Generation
Jones” is a term generally used to describe people born between 1954 and
1965. Together they consist of almost 80 million people, arguably at
the prime of their lives. BOOMj.com’s membership is absolutely free and offers a
rich integrated online experience through easy to use social networking and
shopping tools for members to network, as well as share common interests with
others, including their friends, family and colleagues. BOOMj.com
members will be able to take advantage of the innovative technologies
incorporated from i-SUPPLY, offering over 1.8 Million brand name products at
affordable prices.
18
Currently,
BOOMj.com’s traditional social-networking features include that of creating a
personal and business profile, uploading and sharing images and videos.
Community features include blogs, groups and messaging between friends as well
as the ability to create posts and leave messages on individual profile pages.
The BOOMj Expert Network features over sixty experts in categories ranging from
retirement and financial planning to fitness and health. BOOMj Experts interact
with our community of members by providing advice and insight on these important
and relevant topics. Members are also able to reach out to experts for opinions
and recommendations. BOOMj.com also offers content from respected third parties,
such as Tribune Media, in the areas of current events, health and lifestyle.
This additional news and information offers incremental value to members and
often acts as the starting point for debate and interaction.
As a way
of showing our appreciation to our community and incentivizing interaction, we
award our members with reward points for all of their activity on the site.
Whether they read an article, upload new photos, take a quiz, comment on a blog,
write a product review, and invite friends to join or even respond to a survey,
our members accrue reward points. These BOOMj Reward Points are redeemable
as discounts towards purchases in the BOOMj store and are a valuable tool for
increasing our brand loyalty.
The BOOMj
store currently offers over 1.8 million brand name products at affordable
prices. The store is available to both our members and the general public and
offers best selling products across major categories including but not limited
to beauty, garden and patio, Books, kitchen, music, camera and photo, office
supplies, computers, pets, consumer electronics, wellness, DVDs and more.
BOOMj.com has registered over 85,000 members since commencing the site. BoomJ is
not dependent on one or more major customers. During the nine months ended
September 30, 2009, BoomJ had an aggregate of 271,713 visits (for an average of
30,190 visits per month) by an aggregate of 174,518 unique visitors, and an
aggregate of 1,541,337 pageviews (for an average of 171,260 pageviews per
month).
Competition
We
believe that i-SUPPLY provides unique value for third party Web sites that use
our online storefront. However other large E-commerce platforms, such
as Amazon.com and Buy.com may be able to create similar opportunities. Our
i-SUPPLY product offering competes against other E-commerce stores and against
traditional brick and mortar retailers that have the advantage of the brand
awareness inherent with their brick and mortar presence. In today’s
economic climate brick and mortar retailers are expanding their sales outreach
by investing in the E-commerce strategy.
BOOMj has
intense competition in the social network and niche community
space. Many internet users belong to more than one social network and
divide their time between those networks. We expect this competition to continue
to increase as the social networking industry expands. As a result,
we face formidable competition in every aspect of our social networking
business, and particularly from other companies that seek to connect people with
information and entertainment on the Web. Competitors include
Eons.com, TeeBeeDee.com, Facebook.com, Myspace.com, etc. In addition,
we will continue to compete with large portals like Google, Yahoo, MSN, and
professional social communities like LinkedIn and Plaxo. We also expect
competition from traditional magazine and newspaper publishers, as they begin to
integrate social networking features into their current digital
properties.
While
advertising on the Web continues to grow, so does the competition for the
national and local advertising revenues earned. BOOMj media and
advertising programs are in competition with sites like CNBC.com, CNN.com,
iVillage.com and others that are competing for the same advertising
dollars. As Google and Yahoo ally with others and control a majority
of major advertising presence, BOOMj needs to continue to foster both agency and
direct brand relationships while still offering a competitive and unique
advertising and sponsorship packages.
We
believe that BOOMj.com over time will morph itself from a pure social online
community to a social commerce community, leveraging today’s social media trends
within the industry. It will be driven by our continued integration of the
i-SUPPLY commerce platform, and the growth in our member base driven by our
independent sales representatives. Through the product reviews from i-SUPPLY,
BOOMj.com will foster the interaction between small business owners and
individual members, thus creating an online community connecting people, local
businesses and relevant information.
Marketing
Strategy
The
i-SUPPLY marketing strategy includes a commerce platform that is available for a
licensing fee to our brand builders. This allows the licensee to create an
unlimited affiliate program with other Web sites to create a store front of
brand name products. The brand builder and the affiliates will share in a
sliding scale commission structure from a minimum of 3% to a maximum of 10%.
Additionally i-SUPPLY will offer other Web partners its E-commerce solution.
This process will allow i-SUPPLY to grow virally throughout the Internet, thus
creating tens of thousands of Web sites carrying the i-SUPPLY E-commerce
solution. The Company also sells advertising on a business to business
basis in which the BoomJ and I-Supply platforms are utilized as targeted
advertising networks.
19
BOOMj has
implemented a variety of results driven and cost effective online and offline
marketing strategies in order to drive brand awareness, customer generation and
retention, and revenue for BOOMj.com. Such marketing strategies
include e-mail marketing, search engine marketing (both paid search and search
engine optimization), social media marketing, incentive/loyalty marketing,
comparison shopping engine marketing, Expert Network outreach, public relations,
participation in community, not-for-profit and industry related events. With the
transformation of BOOMj.com from a pure social community to a social commerce
community, customer, site traffic and revenue generation will mainly be driven
through the support of the viral marketing efforts of the i-SUPPLY business
property.
We are
subject to a number of foreign and domestic laws and regulations that affect
companies conducting business on the Internet, including laws and regulations
relating to user privacy, freedom of expression, content, advertising,
information security and intellectual property rights. In the U.S.,
laws relating to the liability of providers of online services for activities of
their users and other third parties are currently being tested by a number of
claims, which include actions for defamation, libel, invasion of privacy and
other data protection claims, tort, unlawful activity, copyright or trademark
infringement and other theories based on the nature and content of the materials
searched, the ads posted or the content generated by users. Certain foreign
jurisdictions are also testing the liability of providers of online services for
activities of their users and other third parties. Any court ruling that imposes
liability on providers of online services for activities of their users and
other third parties could harm our business. Likewise, a range of other laws and
new interpretations of existing laws could have an impact on our business. For
example, in the U.S. the Digital Millennium Copyright Act has provisions that
limit, but do not necessarily eliminate, our liability for listing, linking or
hosting third-party content that includes materials that infringe copyrights or
other rights. The costs of compliance with these laws may increase in the future
as a result of changes in interpretation. Furthermore, any failure on our part
to comply with these laws may subject us to significant
liabilities.
Similarly,
the application of existing laws prohibiting, regulating or requiring licenses
for certain businesses of our advertisers, including, for example, online
gambling, distribution of pharmaceuticals, adult content, financial services,
alcohol or firearms, can be unclear. Application of these laws in an
unanticipated manner could expose us to substantial liability and restrict our
ability to deliver services to our users. For example, some French courts have
interpreted French trademark laws in ways that would, if upheld, limit the
ability of competitors to advertise in connection with generic
keywords.
We are
also subject to federal, state and foreign laws regarding privacy and protection
of user data. We post on our Web site our privacy policies and practices
concerning the use and disclosure of user data. Any failure by us to comply with
our posted privacy policies or privacy-related laws and regulations could result
in proceedings against us by governmental authorities or others, which could
potentially harm our business. In addition, the interpretation of data
protection laws, and their application to the Internet, in Europe and other
foreign jurisdictions is unclear and in a state of flux. There is a risk that
these laws may be interpreted and applied in conflicting ways from country to
country and in a manner that is not consistent with our current data protection
practices. Complying with these varying international requirements could cause
us to incur additional costs and to have to change our business practices.
Further, any failure by us to protect our users’ privacy and data could result
in a loss of user confidence in our services and ultimately in a loss of users,
which could adversely affect our business.
In
addition, because our services are accessible worldwide, certain foreign
jurisdictions may claim that we are required to comply with their laws, even
where we have no local entity, employees or infrastructure.
INTELLECTUAL
PROPERTY
Our trademarks, trade secrets,
copyrights and other intellectual property rights are important assets for us.
We believe that we own the trademarks to “boomj,” “boomj.com,”
“iSUPPLY” and “i-SUPPLY.com.” We intend to register these
and possibly other trademarks. We hold the Internet domain names www.boomj.com,
www.boomj.net , www.boomj.org, www.beyondcommerce.com, and
www.i-supply.com. We also hold the Internet domain names
www.myboomj.com, myboomj.net, and myboomj.org. Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as “.org,” or with a country designation.
20
As of
February 8, 2010 we have 22 full-time employees, including our three executive
officers. None of our employees are represented by a labor union. We have not
experienced any work stoppages and consider our relations with our employees to
be fair as many of these employees have not been paid since the beginning of the
year.
Our
executive offices are located at 9029 South Pecos, Suite 2800, Henderson, Nevada
89074, and consist of 10,194 square feet, and are leased at a monthly rate of
$23,115 until December 31, 2011. We believe that our properties are adequate for
our current and immediately foreseeable operating needs.
We are
not a party to any material legal proceedings. From time to time, the
Company is a party to various legal matters in the normal course of business,
the outcome of which, in the opinion of management, will not have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.
PENNY
STOCK RULES
The
Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny
stocks. Penny stocks are generally equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system).
A
purchaser is purchasing penny stock which limits the ability to sell the
stock. The shares offered by this prospectus constitute penny stock
under the Securities and Exchange Act. The shares may remain penny
stocks for the foreseeable future. The classification of penny stock
makes it more difficult for a broker-dealer to sell the stock into a secondary
market, which makes it more difficult for a purchaser to liquidate his/her
investment. Any broker-dealer engaged by the purchaser for the
purpose of selling his or her shares in US will be subject to Rules 15g-1
through 15g-10 of the Securities and Exchange Act. Rather than
creating a need to comply with those rules, some broker-dealers will refuse to
attempt to sell penny stock.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document, which:
-
|
Contains
a description of the nature and level of risk in the market for penny
stock in both Public offerings and secondary
trading;
|
-
|
Contains
a description of the broker’s or dealer’s duties to the customer and of
the rights and remedies available to the customer with respect to a
violation of such duties or other requirements of the Securities Act of
1934, as amended;
|
-
|
Contains
a brief, clear, narrative description of a dealer market, including “bid”
and “ask” price for the penny stock and the significance of the spread
between the bid and ask price;
|
-
|
Contains
a toll-free number for inquiries on disciplinary
actions;
|
-
|
Defines
significant terms in the disclosure document or in the conduct of trading
penny stocks; and
|
-
|
Contains
such other information and is in such form (including language, type, size
and format) as the Securities and Exchange Commission shall require by
rule or regulation.
|
The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:
-
|
The
bid and offer quotations for the penny
stock;
|
-
|
The
compensation of the broker-dealer and its salesperson in the
transaction;
|
-
|
The
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
|
-
|
Monthly
account statements showing the market value of each penny stock held in
the customer’s account.
|
In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written acknowledgement of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability
statement. These disclosure requirements will have the effect of
reducing the trading activity in the secondary market for our stock because it
will be subject to these penny stock rules. Therefore, stockholders
may have difficulty selling their securities.
21
REGULATION
M
Our
officers and directors, who will offer and sell the shares are aware that they
are required to comply with the provisions of Regulation M promulgated under the
Securities Exchange Act of 1934, as amended. With certain exceptions,
Regulation M precludes the officers and directors, sales agents, any
broker-dealer or other person who participate in the distribution of shares in
this offering from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete.
REPORTS
We are
subject to certain reporting requirements and will furnish annual financial
reports to our stockholders, certified by our independent accountants, and will
furnish un-audited quarterly financial reports in our quarterly reports filed
electronically with the SEC. All reports and information filed by us
can be found at the SEC Website, www.sec.gov.
Some of
the statements contained in this prospectus that are not historical facts are
"forward-looking statements" which can be identified by the use of terminology
such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
prospectus, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
·
Our
ability to integrate and maintain technical information and management
information systems;
·
Our
ability to raise capital when needed and on acceptable terms and
conditions;
·
The
intensity of competition; and
·
General
economic conditions.
OVERVIEW
The
following information should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this
prospectus.
Overview
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
triangular merger (the “Merger”) in which it issued 34,458,067 shares of common
stock to the former shareholders of BoomJ.com, Inc.
Our goal
is to generate revenues primarily from website advertising and E-commerce
transactions. Although we did not generate significant revenues, and
we have incurred a substantial loss, in 2008, we established the three platforms
from which we expect to generate significant revenues in
2009. Throughout 2008, we operated BOOMj, www.BOOMj.com, the leading
niche portal and social networking site for Baby Boomers and Generation
Jones. Revenues from this website were derived from advertising sales
and E-commerce transactions effected through the on-line store on that
website. Our former LocalAdLink subsidiary operates a website,
www.LocalAdLink.com, and a local search directory and advertising network that
brings local advertising to geo-targeted consumers. We started to
generate revenues from sales of local advertising through LocalAdLink after that
product was released in October 2008. We sold the assets relating to
the software, name rights, and trademark of LocalAdLink in October 2009. Our
third revenues source, i-SUPPLY, www.i-SUPPLY.com, a retail storefront for any
third party Websites was not commercially released in 2008 and did not generate
any revenues (i-SUPPLY was released in March 2009). A major component
of our business strategy in 2008 was to maximize revenues from E-commerce sales
made through our BOOMj Store. In order to be able to offer and sell
products through that website, we needed to obtain credit from the vendors of
the products offered on the website. Because of our weak
financial condition in 2008, we did not receive the amount of credit from
vendors that we needed and, as a result, we were not able to effectively operate
the BOOMj Store (in fact, the BOOMj Store had limited operations during the
later part of 2008). LocalAdLink contributed to our 2008 revenues,
but since it was not available until the last two months of the year, the amount
of LocalAdLink revenues was limited. Based on our recent results and
the release of i-SUPPLY, we currently anticipate that (i) we will generate more
sales from our BOOMj Store in 2009 if our financial condition improves and our
vendor relationships improve, (ii) we will generate significantly more revenues
in 2009 from LocalAdLink (until the sale of the assets relating to the software,
name rights, and trademark of LocalAdLink in October 2009), and (iii) i-SUPPLY
will also contribute during 2009.
During
the third quarter of 2009 the Company started another subsidiary, KaChing
KaChing, which is an E-commerce platform that provides a complete turn-key
E-commerce solution. Individual KaChing KaChing retail store owners have the
ability to create, manage and earn money from product sales generated from their
individual Web stores.
22
For
financial statement purposes, our acquisition of Boomj.com, Inc. was treated as
a reverse acquisition and as though BoomJ.com, Inc. had acquired us since the
prior shareholders’ of BoomJ.com, Inc. ended up with a majority ownership in our
stock. 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 created November 14,
2006. Our financial statements for the year ended December 31, 2007 are
therefore not comparable to the previous period from November 14, 2006 through
December 31, 2006 since this was a start-up period and our operations had not
fully commenced.
During
the fourth quarter of 2008, we started a new company, LocalAdLink and
consolidated the operations of this entity as well. On October 9,
2009, we sold the assets relating to the software, name rights, and trademark of
a third division of the Company, LocalAdLink, an online advertising service that
enables local businesses to reach local customers. The Company will continue to
sell advertising as it had prior to inception of Local Ad Link, Inc., however on
a different scale with a greater emphasis on business to business sales. In
particular, the Company will make sales directly through experienced
professional sales representatives rather than through a multi-level marketing
system, and such advertising will continue to be presented on the Company’s
BoomJ social network and I-Supply store network. In addition, through such
professional sales representatives, we will seek to continue to expand sales of
our proprietary widget technology, which allows any Web site that is operated by
a third party to use our online storefront tool to monetize visitors of
their Web site by simply cutting and pasting a few lines of code to instantly
create a online storefront on their site.
In
November of 2008 we changed our name from Boomj.com, Inc. to Beyond Commerce,
Inc.
We
reported a consolidated net loss of $12,857,990 for the twelve months ended
December 31, 2008, a consolidated net loss of $4,973,477 for the twelve months
ended December 31, 2007 and a net loss of $54,914, reflecting our operations
from inception for the period November 14, 2006 through December 31, 2006
. The loss in 2008 was principally attributable to increase in
operating costs, as more fully explained in “Operating Expenses”
below.
Results
of Operations for Three and Nine Months Ended September 30, 2009
We
reported a net loss of $17,114,906 and $8,535,345 for the nine and three months
ended September 30, 2009, respectively as compared to net losses of
$8,987,304and $4,032,056 reported for the nine and three months ended September
30, 2008, respectively. During the first quarter of 2009, the LocalAdLink
division was continuing to grow, however, at the end of February with the spike
in the volume of weekly credit card revenues generated, certain credit card
processing companies, without notice to the Company, put a hold on all of the
cash being remitted to Beyond Commerce’s LocalAdLink subsidiary. This hold was
initiated under the rationale of “potential business risk.” The Company had less
than 0.25% percent in charge-backs and a total of approximately $13,000 in
claims over a six month period of time prior to this risk reassessment.
With the stoppage of the credit card processing and the processors holding back
over $900,000 of funds due to the Company, we inadvertently had 567 checks
returned totaling over $250,000 to valued employees, our commissioned sales
force and vendors.
The
reckless actions of the credit card processors negatively impacted the Company
and prevented us from achieving our projected first and second quarter revenues
and income. As a result of the hold, LocalAdLink was prevented from selling
advertising to local businesses for approximately 23 days during the month of
March. The negative impact of inadvertently returning 567 checks impacted the
Company’s credibility with its independent sales force. Due to the problems of
not being able to process credit cards, which caused 567 returned checks, during
the sixty days following the incident, the Company had to rebuild its
credibility with its independent sales representatives so they would reenergize
and once again sell ads. At the time of the incident, LocalAdLink was ramping up
revenues based on its prior month’s revenues at a rate of four and a half
million per month.
The
Company continues in evaluating any claims it may have against the
aforementioned credit card processing companies, as we believe that the damage
to the Company from the willful negligence of the processors has caused an
undetermined financial loss to Beyond Commerce. Furthermore, the credit card
processors’ holding of revenues forced us to change processors. This
change has resulted in increased processing fees, personal guarantees and a
mandate for the Company to reserve 10% of its revenues received daily to
mitigate potential risk to the new processor.
As more
fully explained in "Operating Expenses" below, the additional losses in 2009
were also attributable to increases in operating costs, interest from debt, the
issuance of warrants, and the delay in certain revenue generation
activities.
Revenues
Our goal
is to generate revenues from (i) the sale of various products to our Web site
users (our e-commerce operations), and (ii) both national and local advertising
fees. Revenue for the nine and three month periods ended September 30, 2009, was
$12,708,068 and $2,051,866, respectively as compared to $1,025,023 and $204,810
for the nine and three month periods ended September 30, 2008 respectively. The
increases are due to revenue from the LocalAdLink segment, which the Company
launched in November 2008, (and which has since been terminated as a result of
the asset sale described above). LocalAdLink constituted $12,299,017
and $1,811,788 of total revenue for the nine and three months ended September
30, 2009, respectively.
Cost
of Advertising/ Merchandise Acquired
Cost
of sales for the nine and three month periods ended September 30, 2009 were
$11,527,949 and $1,484,565, respectively compared to $1,050,113 and $165,630 for
the nine and three month periods ended September 30, 2008,
respectively. LocalAdLink constituted $11,464,512 and $1,441,623 of
the total cost of sales for the nine and three months ended September 30, 2009,
respectively. These costs consist mainly of commissions paid to independent
sales representatives of $10,054,601 and $1,256,749for the nine and three months
ended September 30, 2009 respectively. As described above, certain assets of
LocalAdLink were sold in October 2009.
Operating
Expenses
Selling,
general and administrative expenses, including related party expenses,
(SG&A) for the nine month and three month periods ended September 30, 2009
were $8,690,836 and $2,196,484. This is an increase of $3,485,583 and a decrease
of $65,152 in SG&A expenses from the $5,205,253 and $2,261,636 reported for
the nine month and three month periods ended September 30, 2008, respectively.
This increase is mainly attributable to the increase in employees, programming,
merchant fees, travel, marketing and the issuance of options. The
Company had 86 employees at the end of September 2009 as compared to 52 at the
end of September 2008. This accounts for an increase in payroll
expenses for the nine and three months ended September 30, 2009 of $1,281,245
and $173,759, respectively as compared to the expense for the nine and three
months ended September 30, 2008. Payroll expenses were $3,492,459 and
$1,075,362 for the nine and three months ended September 30, 2009 and $2,211,214
and $901,603 for the same periods ended September 30, 2008,
respectively.
23
Programming
and computer expenses increased by $513,400 and $202,981 to $833,253and $332,287
for the nine and three months ended September 30, 2009, respectively.
Programming and computer expenses were $319,853 and $129,306 for the nine
and three months ended September 30, 2008, respectively. A large part
of the increase is attributable to the maintenance of the LocalAdLink, (of which
certain assets were sold in October 2009), i-Supply and KaChing KaChing
software, and the increase in computer related expenses for new
employees. The issuance of options for stock-based compensation
created an expense of $1,718,290 and a $213,814 from the nine and three month
periods ended September 30, 2009, respectively as compared to zero for the same
periods of 2008. Merchant and bank fees of $742,268 and $127,106 for
the nine and three months ended September 30, 2009, respectively is an increase
of $708,508 and $122,265 from $33,760 and $4,841 for the nine and three months
ended September 30, 2008, respectively. This increase in merchant and
bank fees is due to the volume of credit card sales through LocalAdLink,
i-Supply and KaChing KaChing. Travel expense increased $407,192 and
$116,017 for the nine and three months ended 2009, respectively to $516,153 and
$148,652 respectively, as compared to total travel expense of $108,961 and
$32,635 for the nine and three months ended September 30, 2008,
respectively. Marketing and selling expense for the nine and three
months ended September 30, 2009 was $1,593,349 and $143,894,
respectively. This is a decrease of $190,503 and $569,577 from the
$1,783,852 and $713,471 for the nine and three months ended September 30, 2008,
respectively. This decrease was due to the marketing enhancements of
LocalAdLink as it launched during the quarter ended September 30,
2008.
Professional
fees, including related party professional fees, for the nine and three month
periods ended September 30, 2009 were $2,803,618 and $734,799, respectively.
This is an increase of $1,559,091 and $239,580 in professional fees from
the $1,244,527 and $495,219 for the nine month and three month periods ended
September 30, 2008, respectively. The largest component of the increase in
professional fees consisted of consulting and support services due to the rapid
growth of activity in the LocalAdLink division. The increase in LocalAdLink
consulting fees was $447,524 and a decrease of $400,200 for the nine month and
three month periods ended September 30, 2009, respectively as compared to the
same periods for September 30, 2008. The decrease for the three month period
ended September 30, 2009 was created by a reversal of over-billing by a former
consulting team. There was also an increase in accounting fees of
$242,806 and $18,004 for the nine month and three month periods ended September
30, 2009, respectively as compared to the same periods for September 30, 2008.
This increase is due to an increase in our audit and compliance expenses as a
result of ramping up operations, and the filing of registration
statements. Legal fees increased $148,277 and $116,196 for the nine
and three months ended September 30, 2009 as compared to the same periods for
September 30, 2008, respectively. This is due to an increase in fees
paid for SEC filings and pending litigation against credit card processors (see
results of operations). Professional fees for marketing decreased in
2009 due to the hiring of internal marketing professionals.
Depreciation
expense for the nine month and three month periods ended September 30, 2009 was
$195,533 and $88,759, respectively. This reflects an increase of $61,190 and
$40,997 from $134,343 and $47,762 reported for the nine month and three month
periods ended September 30, 2008, respectively. This increase in expense is
attributable to the amortization of the asset additions, which consist mostly of
hardware purchased for new employees and the development costs of
software.
Other
income (expense)
Income
related to the change in derivative liability value for the nine month period
ended September 30, 2009 was $1,055,747 and expense for the three month period
ended September 30, 2009 was $2,942,287. These derivatives related to
notes issued in the third and fourth quarters of 2008 and notes and warrants
issued during the second and third quarter of 2009.
Interest
expense net, including related party interest, for the nine month and three
month periods ended September 30, 2009 was $7,660,785, and $3,140,317,
respectively, compared to $2,378,091and $1,266,619 for the nine and three month
periods ended September 30, 2008, respectively. Interest expense includes
non-cash expenses related to the value of warrants issued to investors who
invested in our convertible notes and discounts from beneficial conversion
features. Loan fees and loan discount amortization expenses of $6,682,337 and
$2,878,804 related to our promissory notes for the nine and three month periods
ended September 30, 2009, respectively. Interest expense on the note
balances accrued for the nine and three months ended September 30, 2009 was
$522,163 and $226,441, respectively.
Liquidity
and Capital Resources
Cash and
cash equivalents at September 30, 2009 was $0 and $100,086 at December 31, 2008.
Since our business model is in the early stages of maturing, the majority of our
capital resources have been derived through the sale of debt and equity
securities. No assurance can be made that these operations will continue to
improve or 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 our business strategies.
Our inability to fulfill our business plan, 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.
24
As shown
in the accompanying consolidated financial statements, we incurred a loss of
$17,114,906 and $8,535,345 for the nine and three month periods ended September
30, 2009, respectively, as compared to $8,987,304 and $4,032,056 for the same
periods ended September 30, 2008, respectively. Our current liabilities exceeded
our current assets by $15,273,221 at September 30, 2009 and negative cash flow
from operating activities for the nine months ended September 30, 2009 was
$6,200,151. Included in current liabilities is derivative liability
of $3,451,215 and notes payable of $8,239,384. These factors, and our inability
to meet our obligations from current operations, and the need to raise
additional capital to accomplish our objectives, create considerable doubt about
our ability to continue as a going concern.
We
currently do not have sufficient funds on hand to fund our current obligations
until we reach our projected break-even level of operations. 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 until our revenues are
sufficient to fund our operating expenses. Although we have again re-commenced
our on-line e-commerce business and now are generating revenues from our
e-commerce business, we do not anticipate that we will generate sufficient cash
from operations to fund our working capital needs for at least another three
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, further 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 in order to fund our working capital
needs mature within the next twelve 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 in
shares of our common stock by the holders). As of September 30, 2009, the total
principal amount of our short-term borrowings was $10,656,655. Some of the
convertible notes that we issued are secured by a lien on certain of our assets
and/or the assets of our subsidiaries. During the first nine months of 2009,
$2,100,000 of the secured promissory notes were converted into Company common
stock. In the event that we fail to repay these remaining secured promissory
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. On October 9, 2009, we sold from our wholly owned
subsidiary, LocalAdLink the assets relating to the software, name rights, and
trademark, LocalAdLink, which operates a Web site, www.LocalAdLink.com , and a
local search directory and advertising network that brings local advertising to
geo-targeted consumers. In consideration for the sale of
LocalAdLink, the Company had their secured promissory note balance reduced by
$4,000,000. Additionally, the Company issued 8,000,000 shares of
common stock in exchange for $800,000.
Because
this is a direct public offering, with no minimum amount of shares that must be
sold, it is possible that we will receive some or no proceeds. If any proceeds
are received, it is possible that such proceeds will not be sufficient to cover
the costs of the offering. If we sell less than the maximum amount of securities
under this offering, management will seek to raise additional funds through
private placements of equity or debt securities to address its operating and
financial cash requirements to continue operations in the next twelve
months. There is no assurance such financing will be available to the Company on
acceptable terms, or at all. If we are unable to raise sufficient funding, we
will have to suspend some of our operations, further scale down our current and
proposed future operations or, if those actions are not sufficient, terminate
our operations.
Management
has devoted a significant amount of time to raising capital from additional debt
and equity financing. As noted above, in October 2009, the Company sold
8,000,000 shares of common stock for a purchase price of $800,000. During July
2009, the Company entered into an amendment to extend the maturity date of its
Secured Convertible Promissory notes in the principal amount of $2,280,000
originally due July 31, 2009 to January 31, 2010. Also during July 2009, 10
holders of the Company’s bridge loan notes having an aggregate balance of
$590,000 agreed to extend the maturity date of these notes from July 6 to
January 31, 2010. The notes remain unpaid and the Company is currently seeking
an additional extension of the maturity date. There is no assurance the Company
will obtain an additional extension of the maturity date of the
notes.
In
addition, we have recently reduced our staff by 50% to reduce over
head. We are seeking to increase revenues through a new product
offering called Search Boost, which seeks to increase market awareness of our
customers by ensuring that they appear within the first 3 pages of Google
searches.
Operating
Activities
Net cash
used in operating activities for the nine month period ended September 30, 2009
was $6,200,151 compared to a use of cash of $5,590,315 for the nine month
period ended September 30, 2008. This change was mainly attributable to the
increase in Local Ad Link and I-Supply operations and related overhead demands
compared to the start up of operations incurred in 2008.
Investing
Activities
Net cash
used in investing activities for the nine month period ended September 30, 2009
and 2008 was $521,268 and $121,882, respectively, representing cash expended for
the purchase of computers and office furniture and
equipment.
Financing
Activities
Net cash
provided by financing activities for the nine month period ended September 30,
2009 and 2008 was $6,621,333 and $5,629,159, respectively, due primarily to net
cash received from the sale of debt securities of $9,158,000 and 5,733,232,
respectively. During the nine month period ended September 30, 2009 we received
$20,000 from the issuance of common stock, repaid $1,730,167 of a short term
loans, received short term unsecured borrowings of $228,000 and paid cash for
debt placement fees of $826,500.
As a
result of the above activities, we experienced a net decrease in cash of
$100,086 for the nine month period ended September 30, 2009 as compared to a net
decrease for the nine month period September 30, 2008 of $83,038. In October
2009, we sold 8,000,000 shares of common stock for a purchase price $800,000.
Our ability to continue as a going concern is dependent on our success in
obtaining additional financing from investors through the sale of our securities
and continuing our stream of revenue through ads and our e-commerce stores.
There is no assurance that we will be able to raise any additional
funds.
25
Other
As of
September 30, 2009, we had no long-term debt obligations, no
capital lease obligations, no material long-term purchase
obligations or other similar long-term liabilities. We are not a party to any
off-balance sheet arrangements, and we do not engage in trading activities
involving non-exchange traded contracts.
Inflation
and changing prices have had no effect on our net sales and revenues or on our
income from continuing operations.
Results
of Operations for Year Ended December 31, 2008
Results
of Operations – Revenues
Our goal
is to generate revenues from the sale of various products to our website users
and from advertising fees. We operated our Boomj.com website throughout 2008 and
commenced our LocalAdLink.com site in October 2008. Through the end of 2008, we
had $1,843,230 in revenues, of which just over half was derived from
LocalAdLink revenues, with the remainder generated from the Boomj.com
web site from product sales and national advertising. Our revenues from the
Boomj.com website for 2007 were $94,485
, consisting mostly of product sales
revenues.
Operating
Expenses
Selling,
general and administrative expenses (SG&A), including related party
expenditures, for the twelve month period ended December 31, 2008 (“fiscal 2008)
were $6,920,360. This reflects an increase of $3,736,900 in SG&A expenses
from the $3,183,460 reported for the twelve month period ended December 31, 2007
(“fiscal 2007). The change in SG&A expenses is attributable to
increased advertising, marketing and promotional costs, which were $2,236,170 in
fiscal 2008 as compared to $517,424 in fiscal 2007. These costs
in 2008 were largely incurred launching our LocalAdLink website and promoting
LocalAdLink. There were also increases in administrative, technical
and marketing personnel, related payroll costs, and an increase in travel
related costs. The increase is also attributable to the granting of
options to our employees and independent sales representatives valued at
approximately $630,000. Our SG&A expenses are expected to
continue to increase during the current fiscal year ending December 31, 2009 as
we increase our operations, increase advertising, and hire more
employees.
Professional
fees for the twelve month period ended December 31, 2008 were $1,345,091. The
largest component of professional fees consists of services rendered in
connection with the design and establishment of our websites and Internet
related activities, as well as legal and accounting fees. This reflects an
increase of $180,821 in professional fees from the $1,164,270 reported for the
period ended December 31, 2007.
Included
in the professional fees and SG&A are non-cash items of $1,703,459 for
fiscal 2008 and $817,417 for fiscal 2007 in stock issued in exchange for a
variety of consulting services and employee options. Depreciation and
amortization expense for the twelve month period ended December 31, 2008 was
$182,802. This reflects an increase of $45,547 in depreciation and amortization
expense from the $137,255 reported for the period ended December 31,
2007. The increase in expense is attributable to the amortization of
the asset additions during the period ended December 31, 2008.
Interest
expense, of $3,325,662 for the twelve month period ended December 31, 2008
reflects an increase of $3,027,378 from the interest expense of $298,284 of
which $125,413 was to a related party in fiscal 2007. The loan discount relates
to the sundry loans procured by us during fiscal 2007 and fiscal
2008. Interest expense also includes non-cash expenses related to the
value of warrants issued to investors who invested in our convertible notes and
discounts from beneficial conversion features. Our increase in
interest expense is due to loan fees and loan discount amortization expenses of
$2,446,939. The loan discount relates to the sundry loans procured by us during
2007 and 2008.
Operating
Activities
Net cash
used in operating activities for the twelve months period ended December 31,
2008 was $5,740,549. This was mainly attributable from the use of cash in
operations as we establish business and operations. Accounts Receivable
increased $199,696 to $226,091 on December 31, 2008 from $26,395 on December 31,
2007. Most of this increase is due to sales made generated through
LocalAdLink. The credit card payments for these sales were
subsequently captured during the first week of January 2009. Accounts
Payable on December 31, 2008 was $1,510,142, an increase of $784,415 from the
balance on December 31, 2007 of $725,727. The increase is attributed
mainly to commissions due sales reps of LocalAdLink of $630,000 and increases in
advertising of Boomj.com, with an increase to Google of approximately
$300,000.
Investing
Activities
Net cash
used in investing activities for the twelve month period ended December 31, 2008
was $122,310. 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 twelve month period ended December 31,
2008 was $5,851,698 due primarily to net cash received from the sale of debt
securities of $6,213,232. We also received $721,966 from the issuance of common
stock net of $102,357 in offering costs, and paid $25,000 to repay a short term
bridge loan in January 2008, a $500,000 Secured Note in July 2008 and a
promissory note of $110,000 in August 2008 for a total debt payment of $661,500
(including the fourth quarter repayment listed below). During August
2008, the company paid off a zero coupon note to one of its investors of
$110,000. In September 2008 the Company received a $50,000 short-term
loan from an accredited investor, of which $26,500 was repaid in the fourth
quarter of fiscal 2008. In October 2008, the Company received a
$25,000 loan from an accredited investor as a 90-day zero coupon-note with a $
30,000 repayment.
26
As a
result of the above activities, we experienced a net decrease in cash of $11,161
for the twelve month period ended December 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 and through a continued
increase in revenues.
Other
We do not
believe that inflation has had a material impact on our business or
operations.
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.
Going
Concern
Our
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 $17,886,381 on December 31, 2008 and will need to raise
additional capital, or obtain financing to continue operations. The accompanying
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 this company be
unable to continue as a going concern.
Management
is taking steps to address its operating and financial cash requirements, which
it believes will be sufficient to provide the company with the ability to
continue operations in next twelve months. Management has devoted a significant
amount of time in the raising of capital and improving the operating
profitability of the Company through initially its former LocalAdLink division
(the assets relating to the software, name rights and trademark of which were
sold in October 2009). However, the company’s ability to continue as a going
concern is dependent upon raising funds through debt and equity financing and
generating revenue. There are no assurances we will receive the necessary
funding or generate revenue necessary to fund operations. This raises
substantial doubt about our ability to continue as a going concern.
Significant
Accounting Policies
We
prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America. As such, we are required to
make certain estimates, judgments, and assumptions that we believe are
reasonable based upon the information available.
Consolidation
The
accompanying financial statements include the accounts of the Company and its
wholly-owned subsidiaries, LocalAdLink, Inc. and Boomj.com, Inc. All
inter-company accounts and transactions between the entities have been
eliminated in consolidation.
Revenue
Recognition
The
Company generates its revenue from products and services sold on its internet
websites. The BOOMj.com store’s database has available close to two million name
brand products. These items include books, digital cameras, kitchen and bath
items and office supplies. Revenue is also generated from content, advertising,
and discount travel.
Advertising
products consist of web-banner advertising, which are continuous or rotating.
Delivery of these profiles is based on the number of impressions of an
advertisement that a customer purchases. An impression is a single instance of
an Internet user viewing the page that contains a customer’s name and/or logo.
Revenue is recognized on such advertising programs based on the proportionate
units of advertising delivered over the period of a media campaign. The Company
also sells a marketing kit through their Local Ad Link division. The kit is
comprised of ten one month duration ads. The sales reps have the option to sell
the ten ads as a commissionable sale or to give them away as a free promotional
tool.
The
Company recognizes its revenue in accordance with the Securities and Exchange
Commission’s (“SEC”) Staff Accounting Bulletin No. 104, “Revenue Recognition in
Financial Statements” (“SAB 104”). Revenue is recognized when merchandise is
shipped to a customer.
Stock-Based
Compensation
The
Company follows the guidance of Financial Accounting Standard No 123(R) “Share
Based Payment” for all share-based payments to employees, including grants of
employee stock options or warrants, are recognized in the financial statements
based on their fair values. This guidance requires the Company to measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. That cost will be
recognized over the period during which an employee is required to provide
service in exchange for the award—the requisite service period (usually the
vesting period). The Company follows the guidance of Emerging Issues
Task Force No. 96-18: “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services” for transactions in which equity instruments are issued in exchange
for the receipt of goods or services to non employees.
27
MARKET
PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On
January 15, 2008, our common stock began trading on the OTC Bulletin Board under
the symbol “RLET”. On January 31, 2008 our trading symbol changed to
“BOMJ.” Subsequently on February 23, 2009 our stock symbol changed in
conjunction with our name change to “BYOC.”
As of
December 31, 2008 there were 246 record holders of our common stock, not
including any persons who hold their stock in “street name.”
As of
February 5, 2010, we had 58,793,311 outstanding shares of common
stock.
The
following table sets forth the high and low bid prices for our common stock for
the periods indicated as reported by the OTC Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-ups, mark-downs, or
commissions and may not necessarily represent actual transactions. There was no
active trading market in our common stock until after our acquisition of
Boomj.com, Inc. in the Merger, and virtually no trades were recorded during the
fiscal year ended December 31, 2007.
High
|
Low
|
|||||||
Year
ended December 31, 2008
|
||||||||
First
Quarter
|
$
|
2.47
|
$
|
0.75
|
||||
Second
Quarter
|
$
|
3.30
|
$
|
1.86
|
||||
Third
Quarter
|
$
|
3.30
|
$
|
2.30
|
||||
Fourth
Quarter
|
$
|
2.55
|
$
|
0.55
|
||||
Year
ended December 31, 2009
|
||||||||
First
Quarter
|
$
|
1.80
|
$
|
0.33
|
||||
Second
Quarter
|
$
|
1.88
|
0.45
|
|||||
Third
Quarter
|
$
|
0.50
|
$
|
0.055
|
||||
Fourth
Quarter*
|
$
|
0.30
|
$
|
0.017
|
||||
Year
ended December 31, 2010
|
||||||||
First
Quarter*
|
$ | 0.036 | $ | 0.02 |
* As of
February 9, 2010
The last
reported sales price of our common stock on the OTC Bulletin Board
on February 9, 2010, was $0.03 per share.
Dividends
and Dividend Policy
We have
not previously paid any cash dividends on our common stock and do not anticipate
or contemplate paying dividends on our common stock in the foreseeable future.
We currently intend to use all available funds to develop our business. We can
give no assurances that we will ever have excess funds available to pay
dividends.
Equity
Compensation Plans
The
following table sets forth certain information as of December 31, 2008,
regarding securities authorized for issuance under our equity compensation
plans:
Plan Category
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
Number of Securities
Remaining Available
for Issuance Under
Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a))
|
|||||||||
Equity
compensation plans approved by our security holders:
|
—
|
—
|
—
|
|||||||||
|
||||||||||||
Equity
compensation plans not approved by our security holders: 2008
Equity Incentive Plan(1) |
1,114,320
|
$
|
0.89
|
2,385,680
|
||||||||
Total
|
1,114,320
|
$
|
0.89
|
2,385,680
|
(1)
|
Our
board of directors adopted this plan in September 2008. On June
12, 2009, the Company’s Board of Directors approved an amendment
increasing the shares issuable under the plan from 3,500,000 to 7,000,000.
This amendment was approved by the Company’s shareholders at the Company’s
annual shareholder meeting held on July 24,
2009.
|
28
None
The
following describes the backgrounds of current directors and the key members of
the management team. The persons who acted as officers and directors of
Boomj.com, Inc. prior to the Merger resigned effective upon the Merger. All of
our officers and directors also currently hold the same offices with Boomj.com,
Inc our wholly-owned subsidiary. Except as otherwise indicated, all
of our officers and directors assumed their current offices with Beyond
Commerce, Inc. upon the closing of the Merger on December 27, 2007. Our
directors are elected at the annual meeting of shareholders to hold office until
the annual meeting of shareholders for the ensuing year or until their
successors have been duly elected and qualified.
Name
|
Age
|
Position
|
||
Robert
McNulty
|
63
|
Chief
Executive Officer and a Director
|
||
Mark
V. Noffke
|
54
|
Executive
V.P., Finance and CFO
|
||
Jimmy
“Bo” White
|
36
|
Executive
V. P. of Operations
|
||
Murray
Williams
|
39
|
Director
|
||
Michael
Warsinske
|
46
|
Director
|
||
Barry
Falk
|
46
|
Director
|
||
Ron
Loveless
|
65
|
Director
|
Robert J. McNulty,
Chairman / CEO. Mr. McNulty has been Chief Executive Officer and a
director of the Company since December 2007 and Chief Executive Officer and a
director of Boomj.com, Inc. since its formation in January 2007. From January
1999 to January 2007 Mr. McNulty was self-employed as a consultant. Mr. McNulty
is an accomplished entrepreneur with over 25 years of significant experience in
specialty retail, E-commerce, branded consumer products, retail start-ups and
developing new concepts and technology platforms for utilization in the retail
industry. Mr. McNulty founded Shopping.com in November 1996 and served as its
President and CEO from 1996 until its merger with Compaq Computer Corporation in
January of 1999. Shopping.com was the first on-line retailer selling a broad
range of consumer brand name products on the Internet, which was purchased for
$220 million in an all cash transaction by Compaq Computers. Mr. McNulty also
founded Home Club (also known as Home Base), in 1983 and served as its Chairman
and CEO from 1983 until its merger with Zayre Corp. in 1986. Home
Club was a chain of home improvement warehouse stores for contractor trade and
do-it-yourself customers, servicing U.S. western states with 38 stores and 7,000
employees. He was the first to institute and implement the “everyday low price
strategy” in the U.S. Home Improvement industry. Mr. McNulty was a founding
board member of the Home Center Industry Council for the City of Hope Cancer
Research Center. Currently, he serves as Chairman of Global Leadership
Connection, a charitable organization that provides leadership programs for high
school students and supports the education of today’s youth leaders across
America.
Mark V. Noffke,
Executive Vice President and CFO. Mr. Noffke has been the Company’s
CFO since January 2007. From August 2006 to December 2006, Mr. Noffke was the
CFO of Financial Media Group, Inc. From May 2004 to August 2006, Mr. Noffke was
CFO of National Storm Management, Inc. where he was responsible for taking the
company public. From August 2003 to May 2004, Mr. Noffke was a Managing Director
of Striker Pacific Corporation, an investment bank, where he conducted due
diligence, and acquisition analysis in various industries, including waste
recycling, forest products and automotive. From September 1996 to August 2003,
Mr. Noffke served as the CFO and a Director of U.S. Forest Industries, Inc., a
timber manufacturing company, where he was responsible for developing the
company's accounting infrastructure. From January 2002 to May 2004, Mr. Noffke
served as CFO of Brands Shopping Network, a publicly traded company currently
known as United Fuel and Energy Corporation. In this position, Mr. Noffke was
responsible for raising capital and developing the accounting infrastructure.
Mr. Noffke is a Certified Public Accountant and has a B.S. in Accounting from
Valparaiso University in Northwestern Indiana.
Jimmy’ Bo’ White, Executive
Vice President/ Operations, Technology. Mr. White has 17 years of experience in
both retail management and online technology and has served as an owner and
managing partner of Click Here Publishing, LLC, an Internet design and
development company, since its formation in 1994. Mr. White is a
successful entrepreneur owning and operating several technology-based companies
specializing in website development, application development, and Internet
marketing. Mr. White is a specialist in implementing and developing online
technologies. He joined Beyond Commerce in late 2008 as a technology consultant
helping to drive the direction of online products. Mr. White
also brings years of experience in managing IT and creating Web-based software
to maximize efficiencies. Mr. White attended Louisiana State
University, majoring in information technology.
Ron Loveless ,
Director. Mr. Loveless has been a director of the Company since
April 2009. Mr. Loveless is a retired executive of the world’s largest retailer,
Wal-Mart Stores, Inc. (NYSE:WMT). Ron served four years in the US Air
Force Intelligence Service and began his career with Wal-Mart in 1964. He
accelerated through the operations ranks, serving as assist. Mgr, Store Manager,
District Manager and Regional Vice-President. In 1980, he was named
General Merchandise Manager of Wal-Mart’s Hardlines Merchandising
Division. In 1983, he was named as the first CEO of the new Sam’s
Wholesale Club Division and achieved over $1.5 billion in sales with 30 units in
just three years of operation. Since leaving Wal-Mart, Mr. Loveless
has consulted in retailing and consumer products with numerous projects in
Canada, the U.S. and the Middle East He has also been recognized in Sam
Walton’s book as a key executive in the growth of Wal-Mart.
29
Barry Falk , Director. Mr.
Falk has been a director of the Company since December 2008. Mr. Falk has broad
experience in structuring complex financing transactions in diversified
industries, including the telecommunications, specialty finance, software and
hardware technologies, distribution and retail sectors. Mr. Falk is an
attorney and specializes in corporate and securities law, with an emphasis on
business planning, venture capital and mergers and acquisitions. Prior to
joining the firm Irvine Venture Law Firm, Mr. Falk worked for the U.S.
Securities and Exchange Commission’s Division of Corporation Finance from 1990
through 1993 where he was the senior disclosure attorney for the SEC’s Pacific
Region and in the SEC’s Division of Enforcement from 1988 through1990.
Prior to completing his law degree, Mr. Falk worked as an accountant for a
national public accounting firm. Mr. Falk is an investor in several
venture capital and angel funds and is active on the board of directors of
several private companies. Mr. Falk received his J.D. degree from Loyola
Law School, Los Angeles and his B.S. degree in Accounting from Kean College of
New Jersey.
Michael Warsinske , Director.
Mr. Warsinkse has been a director of the Company since September 2008. Mr.
Warsinske is an online media sales executive and since January 2007 Mr.
Warsinske has been CEO of OverAd Media, a digital media sales firm. He is
a founder and CEO of Cybereps, an early online advertising sales company which
launched advertising sales for IMDB.com, Advertising.com, Andover.net,
Reuters.com and eMarketer.com. Cybereps grew to 100 employees in 7 offices and
was sold to Interep (Nasdaq: IREP) in 2001. Mr. Warsinske also co-founded
Wordcents, an early contextual advertising network sold to YBrant Digital. He
currently advises digital media startups, including Information Strategies,
Inc., CMBS.com, FlatFeeConferencing.com, Newsforce.comand
Friend2Friend.com. Mr. Warsinske has 25 years of experience in online and
traditional media sales.
Murray Williams , Director.
Mr. Williams has been a director of the Company since June 2007. Mr. Williams is
a CPA with 5 years experience in public accounting and 11 years experience as
CFO of various public and private companies. Mr. Williams began his career
in public accounting with KPMG where he was a manager in their assurance
practice managing a team of over 20 professionals specializing in financial
services, with an emphasis on public offerings, private financings, and mergers
and acquisitions. Mr. Williams resigned from KPMG in 1997 to become one of
the founding members of Buy.com, Inc., which grew to be the second largest
e-commerce company in the world during his tenure. He developed the
finance, legal, business development, and human resource departments of Buy.com,
securing over $225 million in private financing, and was the primary driver in
the initial public offering process that generated proceeds of an additional
$192 million. Mr. Williams also obtained vast international business
experience managing Buy.com’s international expansion into Europe, Canada,
and Australia. In addition, he successfully completed three acquisitions
for Buy.com and was responsible for their expansion into eleven core product
categories. After leaving Buy.com in August of 2001, Mr. Williams became
an active entrepreneur creating and investing in numerous companies, and worked
for an investment banking firm as interim CFO on various private companies to
convert them into publicly traded entities. Mr. Williams has helped take
seven companies public and helped raise over $500 million for the various
companies. From June 2005 to February 2007, Mr. Williams was Chief Financial
Officer at Interactive Television Networks, Inc., a public company and a leading
provider of Internet Protocol Television hardware, programming software and
interactive networks. Since March 14, 2008, Mr. Williams has been
the Chief Financial Officer, Treasurer and Secretary of GTX Corp., a public
company engaged in the commercialization of miniaturized assisted GPS tracking
and cellular location-transmitting technologies. Mr. Williams
received degrees in both Accounting and Real Estate from the University of
Wisconsin-Madison.
30
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The table
set forth below summarizes the annual and long-term compensation for services in
all capacities paid to our executive officers during the years ending December
31,2009, 2008 and 2007. On December 27, 2007, Beyond Commerce, Inc.
acquired Boomj.com, Inc., our primary operating subsidiary during 2007 and
2008. Beyond Commerce did not pay any compensation to any of its
officers or directors during 2007. The table below sets forth all
compensation paid (i) by Boomj.com, Inc. in 2007 and (ii) by either Beyond
Commerce, Inc. or Boomj.com, Inc. in 2009 and 2008, to Robert McNulty and Mark
Noffke, the only individuals who served as our principal executive and financial
officers during the year ended December 31, 2009, and to our three other most
highly compensated executive officers who were serving as executive officers as
of December 31, 2009.
Name and Principle Position
(in dollars)
|
Fiscal
Year
|
Salary
(1)
|
Bonus
(2)
|
Restricted
Stock
Awards
(3)
|
All Other
Compensation
(4)
|
Total
|
|||||||||||||||
Robert
J. McNulty
|
2009
|
$
|
191,192
|
-
|
-
|
-
|
$
|
191,192
|
|||||||||||||
President
and CEO
|
2008
|
$
|
171,692
|
-
|
-
|
$
|
171,692
|
||||||||||||||
2007
|
-
|
-
|
$
|
150,000
|
$
|
150,000
|
|||||||||||||||
Wendy
Borow-Johnson
|
2009
|
$
|
18,000
|
-
|
$
|
-
|
-
|
18,000
|
|||||||||||||
President—Media
(6)
|
2008
|
$
|
185,538
|
$
|
118,125
|
-
|
$
|
303,663
|
|||||||||||||
2007
|
$
|
64,615
|
-
|
$
|
75,000
|
$
|
139,615
|
||||||||||||||
Mark
V. Noffke
|
2009
|
$
|
169,157
|
-
|
-
|
-
|
169,157
|
||||||||||||||
Chief
Financial Officer
|
2008
|
$
|
164,927
|
-
|
-
|
$
|
164,927
|
||||||||||||||
2007
|
$
|
162,502
|
-
|
$
|
1,000
|
-
|
$
|
163,502
|
|||||||||||||
Mark
Doumani Sr.
|
2009
|
$
|
13,333
|
-
|
-
|
-
|
$
|
13,333
|
|||||||||||||
VP
Business Development (5)
|
2008
|
$
|
164,927
|
-
|
$
|
164,927
|
|||||||||||||||
2007
|
$
|
118,540
|
-
|
$
|
90,000
|
$
|
208,540
|
||||||||||||||
Jimmy
“Bo” White (7)
|
2009
|
|
$ |
100,500
|
-
|
-
|
-
|
$
|
100,500
|
||||||||||||
Executive
Vice President/
Operations,
Technology
|
(1)
|
The
dollar value of base salary (cash and non-cash) earned.
|
(2)
|
The
dollar value of bonus (cash and non-cash) earned. There
are no anticipated bonus awards for
2009.
|
(3)
|
During
the periods covered by the table, the value of the shares of restricted
stock issued as compensation for services to the persons listed in the
table.
|
(4)
|
All
other compensation received that we could not properly report in any other
column of the table.
|
(5)
|
Mr.
Doumani resigned as VP Business Development effective January 31,
2009.
|
(6)
|
Ms.
Johnson resigned as President—Media in October 2009.
|
(7) |
Mr.
White joined the Company as Executive Vice President/ Operations,
Technology in January 2009.
|
Outstanding
Equity Awards at Fiscal Year-End
None of
the executive officers named in the above Summary Compensation Table (i)
received any options during fiscal 2008, (ii) owned any vested or unvested stock
options on December 31, 2008, or (iii) received any stock awards or equity
incentive plan awards during fiscal 2008 that had not vested.
Director
Compensation
We
reimburse our directors for expenses incurred in connection with attending board
meetings.
We
currently have no other formal plan for compensating our directors for their
service in their capacity as directors, although our Board of Directors has
recently granted options to purchase common shares to new directors upon joining
the Board of Directors. Our Board of Directors has, however, from
time to time paid non-employee directors cash compensation for serving on the
Board. Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of our
Board of Directors. Our Board of Directors may award special
remuneration to any director undertaking any special services on behalf of our
company other than services ordinarily required of a director.
The
following table summarizes the compensation of each of our directors who is not
also a named executive officer for their service as a director for the fiscal
year ended December 31, 2009.
31
DIRECTOR
COMPENSATION
Name
|
Fees
Earned
or Paid
in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
Non-Equity
Incentive Plan
Compensation
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||
Michael
Warsinske
|
-0-
|
-0-
|
$
|
-0-
|
N/A
|
N/A
|
$
|
-0-
|
||||||||||||||||
Barry
Falk
|
-0-
|
-0-
|
$
|
-0-
|
N/A
|
N/A
|
$
|
-0-
|
||||||||||||||||
Murray
Williams
|
$
|
38,346
|
(2)
|
-0-
|
-0-
|
N/A
|
N/A
|
$
|
38,346
|
|||||||||||||||
Ron
Loveless (3)
|
-0-
|
-0-
|
$
|
86,100
|
N/A
|
N/A
|
$
|
86,100
|
||||||||||||||||
Paul
Morrison (4)
|
$
|
-0-
|
-0-
|
-0-
|
N/A
|
N/A
|
-0-
|
(1)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2009 fiscal year for the fair value
of stock options granted to the named director in fiscal year 2009, in
accordance with SFAS 123R. Pursuant to SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. These amounts reflect our accounting
expense for these awards, and do not correspond to the actual value that
will be recognized from these awards by the named
director.
|
(2)
|
At
the request of the Board, during 2009, Mr. Williams provided additional
services to the Company by monitoring and supervising certain of the
Company’s activities. These fees were paid to Mr. William’s
company, FA Corp.
|
(3)
|
We
agreed to grant Mr. Loveless a ten-year non-qualified option to purchase
100,000 shares of the Company’s common stock at an exercise price of $0.70
per share at the time that he joined our Board of Directors in April of
2009. One half of the foregoing options will vest upon the first
anniversary of the appointment of Mr. Loveless to the Board, and the
second half of the options will vest upon the second anniversary of the
appointment.
|
(4)
|
Mr.
Morrison joined the Board in July 2009 pursuant to an agreement with
OmniReliant Holdings, Inc. under which OmniReliant Holdings, Inc. invested
in the Company. Mr. Morrison resigned as a Board member on January 21,
2010. Mr. Morrison did not receive any compensation for his services as a
Board member of Beyond Commerce,
Inc.
|
Employment
Contracts
None.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based
solely upon information made available to us, the following table sets forth
information with respect to the beneficial ownership of our common stock as of
February 5, 2010 by (1) each person who is known by us to beneficially own more
than five percent of our common stock; (2) each of our directors; (3) the named
executive officers listed in the Summary Compensation Table under Item 11; and
(4) all of our executive officers and directors as a group.
Shares of
common stock subject to any warrants or options that are presently exercisable,
or exercisable within 60 days of December 10, 2009 (which are indicated by
footnote) are deemed outstanding for the purpose of computing the percentage
ownership of the person holding the warrants or options, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. The percentage ownership reflected in the table is based on 58,793,311
shares of our common stock outstanding as of February 5, 2010. Except as
otherwise indicated, the holders listed below have sole voting and investment
power with respect to all shares of common stock shown, subject to applicable
community property laws. An asterisk represents beneficial ownership of less
than 1% .
Name
and Address
|
Number
of Shares
Beneficially
Owned
|
Percentage
of
Class
|
|||
Mark
V. Noffke
|
31,408
|
*
|
|||
Jimmy
‘Bo’ White (1)
|
30,714
|
*
|
|||
Murray
Williams
|
202,000
|
*
|
|||
Michael
Warsinske(2)
|
--
|
*
|
|||
Barry
Falk(2)
|
202,000
|
*
|
|||
Robert
J. McNulty
|
505,000
|
*
|
|||
Ron
Loveless (4)
|
0
|
*
|
|||
All
executive officers and directors as a group (8
persons)
|
971,122
|
1.7
|
%
|
||
Linlithgow
Holdings, LLC (3)
|
|||||
9029
S. Pecos Henderson, NV 89074
|
16,982,000
|
28.9
|
%
|
* Less
than 1%
(1)
|
Mr.
White joined the Company during the second quarter of
2009.
|
(2)
|
All
of the shares shown are issuable upon the exercise of options to purchase
our common stock.
|
(3)
|
Represent
shares owned by Linlithgow Holdings, LLC. Mr. Rhett McNulty is the
managing member of Linlithgow Holdings LLC and has voting and investment
power with respect to the shares held by Linlithgow Holdings LLC. Mr.
Rhett McNulty is the son of Mr. Robert McNulty. Mr. Robert McNulty is not
a member or manager of Linlithgow Holdings LLC and he disclaims any
beneficial interests in these shares. Mr. Robert McNulty does not exercise
any voting rights in respect of these shares nor does he have any right to
dispose of these shares.
|
(4)
|
Does
not include shares underlying 100,000 options which are not exercisable
within 60 days of February 5,
2010.
|
Unless
otherwise indicated, the address of each of the foregoing persons is 9029 South
Pecos, Suite 2800, and Henderson, Nevada 89074.
32
Our full
board of directors is responsible for reviewing and approving or ratifying all
related party transactions. Although there is no written policy in
this regard, it is the practice of our board to review all material facts of
interested transactions and take into account, among other factors it determines
appropriate, whether the interested transaction is on terms no less favorable
than terms generally available to any similarly situated, unrelated third
parties under the same or similar circumstances and the extent of the person’s
interest in the transaction. Additionally, board approval of any
interested party transaction must include the affirmative vote of at least a
majority of our non-employee directors. We have, since January 1,
2008 been involved in the following related party transactions, each of which
was reviewed and approved by our full board of directors:
·
|
The
Company permits TAC Financial, Inc. to use some of its facilities at its
Nevada headquarters. TAC Financial has not paid the Company for
the use of the facilities. In 2009, the Company commenced
paying the commissions it owed to its LocalAdLink independent consultants
through the use TAC Financial’s VISA debit card. The Company
does not pay TAC Financial for loading payments onto the debit cards,
although the card holders are charged fees for the use of the debit
cards. Linlithgow Holdings, LLC currently owns over 85% of the
issued and outstanding shares of TAC Financial. Linlithgow
Holdings, LLC is the largest shareholder of this Company and is a family
trust of the McNulty family. Mr. McNulty, our Chief Executive
Officer has no voting control over the holdings of Linlithgow Holdings and
disclaims beneficial ownership of the shares owned by Linlithgow
Holdings. Two members of TAC Financial’s Board of Directors are
the sons of Robert McNulty (our Chief Executive
Officer).
|
·
|
On
December 24, 2007 the Company borrowed $25,000 from Linlithgow Holdings,
LLC. The loan matured in 30 days and bore interest at a rate of
12% per annum. This loan was repaid in full (including $304 of
interest) in January 2008.
|
·
|
During
2007, BoomJ.com borrowed $218,000 from Linlithgow Holdings in a series of
transactions. All of the loans bore interest at 12% per
year. Most of the loan was repaid in 2007, although the final
$25,000 balance was not repaid until 2008. In connection with
these loans BoomJ.com issued Linlithgow Holdings warrants to purchase
34,835 shares of its common stock. The warrants are exercisable at a price
ranges from $0.01 to $1.00 per share and expire on December 31,
2011.
|
·
|
During
2008, we paid Linlithgow Holdings a total of $53,450 for consulting
services rendered to us.
|
·
|
In
2008, we paid FA Corp. a total of $102,673 for various services provided
to us by Mr. Murray Williams. Mr. Williams is a member of our
Board of Directors and the principal stockholder of FA
Corp.
|
On
May 20, 2009, the Company executed a convertible promissory note (the
“Note”) in the principal amount of $1,600,000 payable to Linlithgow
Holdings. Pursuant to the Note, the Company promises to pay to
Linlithgow Holdings $1,600,000 in cash on November 20, 2009. The Note is
convertible at any time at a conversion price of $1.00 per share which was
reset to $0.70 due to a subsequent offering. The Note bears an
initial interest rate of 1.5% for the first month and increases by 1.5%
per month until maturity. After the maturity date, the default rate of
interest becomes 18% per month or the highest rate allowed by law,
whichever is lower, until the date the Note amount is actually paid.
Further, as part of the consideration provided to the holder for the Note,
the Holder also received a warrant for the purchase of up to 1,782,000
shares of the Company’s common stock at an exercise price of $0.90 per
share. The warrants are exercisable, in whole or in part, any time from
and after the date of issuance of the warrant. Due to a subsequent ratchet
adjustment based on the issuance of warrants at a lower per share price,
the exercise price of these warrants has been adjusted to
$0.70.
|
Director
Independence
Our
independent directors, as defined in Rule (a)(15) of the Market place Rules of
the NASDAQ Stock Market, are Barry Falk and Michael Warsinske. We paid $336
in 2008 for legal services provided to the Company by Mr. Falk’s
firm. However, our board determined that the small amount of fees we
paid to Mr. Falk’s law firm during 2008 did not prevent it from reaching a
determination that Mr. Falk is independent.
33
Pursuant
to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a lawsuit, because of his position, if he acted in good faith and in a
manner he reasonably believed to be in our best interest. In certain
cases, we may advance expenses incurred in defending any such
proceeding. To the extent that the officer or director is successful
on the merits in any such proceeding as to which such person is to be
indemnified, we must indemnify him against all expenses incurred, including
attorney’s fees. With respect to a derivative action, indemnity may
be made only for expenses actually and reasonably incurred in defending the
proceeding, and if the officer or director is judged liable, only by a court
order. The indemnification is intended to be to the fullest extent
permitted by the laws of the State of Nevada.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable.
In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
Federal
securities laws require us to file information with the Commission concerning
our business and operations. Accordingly, we file annual, quarterly, and special
reports, and other information with the Commission. You can inspect and copy
this information at the public reference facility maintained by the Commission
at Judiciary Plaza, 450 Fifth Street, N.W, Room 1024, Washington, D.C.
20549.
You can
get additional information about the operation of the Commission's public
reference facilities by calling the Commission at 1-800-SEC-0330. The Commission
also maintains a web site (http://www.sec.gov) at which you can read or download
our reports and other information.
We have
filed with the Commission a registration statement on Form S-1 under the
Securities Act of 1933 with respect to the common stock being offered hereby. As
permitted by the rules and regulations of the Commission, this prospectus does
not contain all the information set forth in the registration statement and the
exhibits and schedules thereto. For further information with respect to Beyond
Commerce, Inc. and the common stock offered hereby, reference is made to the
registration statement, and such exhibits and schedules. A copy of the
registration statement, and the exhibits and schedules thereto, may be inspected
without charge at the public reference facilities maintained by the Commission
at the addresses set forth above, and copies of all or any part of the
registration statement may be obtained from such offices upon payment of the
fees prescribed by the Commission. In addition, the registration statement may
be accessed at the Commission’s web site.
34
BEYOND
COMMERCE, INC.
TABLE OF
CONTENTS
Annual Financial Statements
Page
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2008 & 2007
|
F-3
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 &
2007
|
F-4
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 &
2007
|
F-5
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED
DECEMBER 31,2008, 2007 &2006
|
F-6
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-9
|
Interim
Financial Statements
Condensed
Consolidated Balance Sheet at September 30, 2009 and December 31, 2008 -
(Unaudited)
|
F-32
|
Condensed
Consolidated Statements of Operations for the Three and Nine month period
ended September 30, 2009 & 2008 -
(Unaudited)
|
F-33
|
Condensed
Consolidated Statements of Cash Flows for the Nine month period ended
September 30, 2009 & 2008 - (Unaudited)
|
F-34
|
Notes
to the Condensed Consolidated Financial Statements -
(Unaudited)
|
F-35
|
Pro Forma Financial Information
Pro Forma Financial Information | P-1 |
Pro
Forma Condensed Consolidated Balance Sheet at September 30, 2009 -
(Unaudited)
|
P-2
|
Pro
Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 2008 - (Unaudited)
|
P-3
|
Pro
Forma Condensed Consolidated Statements of Operations for the nine
months ended September 30, 2009-
(Unaudited)
|
P-4
|
F -
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Beyond Commerce, Inc.
We have
audited the accompanying consolidated balance sheets of Beyond Commerce, Inc. as
of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the
company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Beyond Commerce, Inc. as of
December 31, 2008 and 2007, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company reflected a loss of approximately $12,857,990 and
$4,973,000 in 2008 and 2007, respectively and will need to raise additional
capital to fund operations in 2009. These conditions raise substantial doubt
about its ability to continue as a going concern. Management’s plans regarding
those matters also are described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ L J
Soldinger Associates, LLC
Deer
Park, Illinois
April 2,
2009
F -
2
CONSOLIDATED
BALANCE SHEETS
As
of December 31,
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets :
|
||||||||
Cash
|
$
|
100,086
|
$
|
111,247
|
||||
Accounts
receivable
|
226,091
|
26,395
|
||||||
Prepaid
loan cost
|
562,665
|
116,854
|
||||||
Other
current assets
|
306,285
|
35,896
|
||||||
Total
current assets
|
$
|
1,195,127
|
$
|
290,392
|
||||
Property,
website and computer equipment
|
871,180
|
749,298
|
||||||
Less:
Accumulated depreciation and amortization
|
(320,366
|
)
|
(137,564
|
)
|
||||
Property,
website and computer equipment – net
|
$
|
550,814
|
$
|
611,734
|
||||
Other
Assets
|
60,067
|
22,930
|
||||||
Total
assets
|
$
|
1,806,008
|
$
|
925,
056
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Short
term borrowings
|
$
|
2,400,555
|
$
|
979,220
|
||||
Short
term borrowings - related party
|
-
|
25,000
|
||||||
Accounts
payable
|
1,490,590
|
680,727
|
||||||
Accounts
payable - related party
|
19,552
|
45,000
|
||||||
Note
derivative liability
|
1,523,651
|
-
|
||||||
Other
current liabilities
|
1,374,534
|
273,237
|
||||||
Deferred
Revenue
|
609,987
|
-
|
||||||
Total
current liabilities
|
$
|
7,418,869
|
$
|
2,003,184
|
||||
Commitments
and contingencies
|
||||||||
Temporary
Equity
|
$
|
1,135,980
|
-
|
|||||
Stockholders’
Deficit :
|
||||||||
Common
stock, $0.001 par value, 200,000,000 and 75,000,000 shares authorized as
of December 31, 2008 and 2007,
respectively,
and 40,936,143 and 36,108,067
issued and outstanding at December 31, 2008 and 2007,
respectively
|
$
|
40,936
|
$
|
36,108
|
||||
Preferred
stock,$.001 par value of 50,000,000 shares authorized and no shares
issued
|
-
|
-
|
||||||
Additional
paid in capital
|
11,096,604
|
3,914,155
|
||||||
Accumulated
deficit
|
(17,886,381
|
)
|
(5,028,391
|
)
|
||||
Total
stockholders' deficit
|
$
|
(6,748,841
|
)
|
$
|
(1,078,128
|
)
|
||
Total
Liabilities and Stockholders' Deficit
|
$
|
1,806,008
|
$
|
925,056
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F -
3
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Year
ended
December 31,
|
For the Year
ended
December 31,
|
|||||||
2008
|
2007
|
|||||||
Revenues
|
||||||||
Advertising,
net
|
$
|
782,959
|
$
|
-
|
||||
Merchandise
sales, net
|
1,060,272
|
94,485
|
||||||
Total
Revenue
|
$
|
1,843,231
|
$
|
94,485
|
||||
Operating
expenses
|
||||||||
Cost
of products sold, net
|
2,175,099
|
97,879
|
||||||
Selling
general & administrative
|
6,764,238
|
2,892,141
|
||||||
Selling
general & administrative – related party
|
156,123
|
291,319
|
||||||
Professional
fees
|
1,345,091
|
1,164,270
|
||||||
Depreciation
and amortization
|
182,802
|
137,255
|
||||||
Total
costs and operating expenses
|
10,623,353
|
4,582,864
|
||||||
Loss
from operations
|
(8,780,122
|
)
|
(4,488,379
|
)
|
||||
Non-operating
income (expense)
|
||||||||
Interest
expense
|
(3,325,662
|
)
|
(172,871
|
)
|
||||
Interest
expense – Related Party
|
-
|
(125,413
|
)
|
|||||
Expense
related to derivative
|
(752,748
|
)
|
-
|
|||||
Interest
income
|
542
|
2,150
|
||||||
Total
non-operating expense
|
(4,077,868
|
)
|
(296,134
|
)
|
||||
Loss
from operations before income taxes
|
(12,857,990
|
)
|
(4,784,513
|
)
|
||||
Provision
for income tax
|
-
|
-
|
||||||
Net
loss
|
(12,857,990
|
)
|
(4,784,513
|
)
|
||||
Less:
Preferred Dividends
|
-
|
188,964
|
||||||
Net
loss available to common stockholders
|
$
|
(12,857,990
|
)
|
(4,973,477
|
)
|
|||
Basic
and diluted net loss per common share
|
$
|
(0.33
|
)
|
(0.20
|
)
|
|||
Weighted
average number of common shares outstanding
|
38,580,296
|
24,533,552
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F -
4
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Audited
For
the Years ended
December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(12,857,990
|
)
|
$
|
(4,784,513
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Interest
expense from conversion of note
|
39,018
|
3,715
|
||||||
Amortization
of debt fees
|
2,446,939
|
279,903
|
||||||
Depreciation
and amortization
|
182,802
|
137,255
|
||||||
Stock
issued for professional services
|
1,703,459
|
817,417
|
||||||
Change
in derivative liability
|
752,748
|
-
|
||||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
decrease in accounts receivable
|
(199,697
|
)
|
(26,395
|
)
|
||||
(Increase)
decrease in prepaid loan cost and other assets
|
(303,527
|
)
|
(107,942
|
)
|
||||
Increase
(decrease) in accounts payable
|
809,863
|
663,198
|
||||||
Increase
(decrease) in accounts payable - related party
|
(25,448
|
)
|
(5,000
|
)
|
||||
Increase
(decrease) in other current liabilities
|
1,101,297
|
114,528
|
||||||
Deferred
Revenue
|
609,987
|
-
|
||||||
Net
cash used in operating activities
|
$
|
(5,740,549
|
)
|
$
|
(2,907,834
|
)
|
||
Cash
flows from investing activities:
|
||||||||
Cash
paid to purchase property, website and computer
equipment
|
$
|
(122,310
|
)
|
$
|
(149,698
|
)
|
||
Net
cash used in investing activities
|
$
|
(122,310
|
)
|
$
|
(149,698
|
)
|
||
Cash
flows from financing activities:
|
||||||||
Proceeds
from common stock issuance – net of offering costs of
$102,357
|
$
|
721,966
|
$
|
-
|
||||
Issuance
of preferred stock - net of offering costs
|
-
|
2,014,470
|
||||||
Cash
received from short term borrowings
|
6,213,232
|
1,200,000
|
||||||
Cash
received from short term borrowings - related party
|
-
|
218,000
|
||||||
Cash
paid on short term borrowings - related party
|
(25,000
|
)
|
(193,000
|
)
|
||||
Cash
paid on short term borrowings
|
(636,500
|
)
|
-
|
|||||
Cash
paid for cancellation of stock at merger
|
-
|
(125,000
|
)
|
|||||
Cash
paid for debt placement fees
|
(422,000
|
)
|
-
|
|||||
Net
cash provided by financing activities
|
$
|
5,851,698
|
$
|
3,114,470
|
||||
Net
increase(decrease) in cash & cash equivalents
|
(11,161
|
)
|
56,938
|
|||||
Cash
& cash equivalents, beginning balance
|
111,247
|
54,309
|
||||||
Cash
& cash equivalents, ending balance
|
$
|
100,086
|
$
|
111,247
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F -
5
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
Common Stock
|
Preferred Stock
|
Additional
|
||||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
Paid-In
Capital
|
Accumulated
Deficit
|
Stockholders’
Equity
|
||||||||||||||||||||||
Series
A Convertible 10% Cumulative Preferred Stock issued private offering at
$0.248 per share
|
—
|
$
|
—
|
383,800
|
$
|
384
|
$
|
94,616
|
—
|
$
|
95,000
|
|||||||||||||||||
Series
A Convertible 10% Cumulative Preferred Stock issued in exchange for
website technology valued at $0.248 per share
|
—
|
—
|
1,616,000
|
1,616
|
398,384
|
—
|
400,000
|
|||||||||||||||||||||
Common
stock issued to founders at $.0005
|
20,604,000
|
20,604
|
—
|
—
|
(10,404
|
)
|
—
|
10,200
|
||||||||||||||||||||
Offering
costs on private offering for issuance of preferred stock
|
—
|
—
|
—
|
—
|
(17,685
|
)
|
—
|
(17,685
|
)
|
|||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(54,914
|
)
|
(54,914
|
)
|
|||||||||||||||||||
Balance, December 31,
2006
|
20,604,000
|
20,604
|
1,999,800
|
2,000
|
464,911
|
$
|
(54,914
|
)
|
432,601
|
|||||||||||||||||||
Issuance of Series
A Convertible 10% Cumulative Preferred Stock
for cash at $0.248 per share in January 2007 in continuance of the 2006
private offering
|
—
|
—
|
1,838,200
|
1,838
|
453,162
|
—
|
455,000
|
|||||||||||||||||||||
Offering
costs on the January 2007 issuance of Series A Convertible 10% Cumulative
Preferred Stock
|
—
|
—
|
—
|
—
|
(45,000
|
)
|
—
|
(45,000
|
)
|
|||||||||||||||||||
Issuance
of common stock in January and February 2007 in compensation for services
provided valued at $0.149 per share
|
1,979,600
|
1,980
|
—
|
—
|
292,020
|
—
|
294,000
|
|||||||||||||||||||||
Issuance
of Series B 10% Cumulative Preferred Stock for cash at $0.99 per share in
private offering commencing February 2007 through November
2007
|
—
|
—
|
1,849,310
|
1,849
|
1,829,151
|
—
|
1,831,000
|
|||||||||||||||||||||
Offering
costs on the issuance of Series B 10% Cumulative Preferred
Stock
|
—
|
—
|
—
|
—
|
(226,530
|
)
|
—
|
(226,530
|
)
|
|||||||||||||||||||
Issuance
of common stock in March 2007 upon conversion of a note
|
205,656
|
206
|
—
|
—
|
101,602
|
—
|
101,808
|
|||||||||||||||||||||
Issuance
of Series A Convertible 10% Cumulative Preferred Stock in exchange for
website technology valued at $0.248 per share
|
—
|
—
|
202,000
|
202
|
49,798
|
—
|
50,000
|
|||||||||||||||||||||
Issuance
of common stock in April 2007 in compensation for services provided valued
at $0.149 per share
|
808,000
|
808
|
—
|
—
|
119,192
|
—
|
120,000
|
F -
6
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
Common Stock
|
Preferred Stock
|
Additional
|
||||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
Paid-In
Capital
|
Accumulated
Deficit
|
Stockholders’
Equity
|
||||||||||||||||||||||
Issuance
of warrants to Linlithgow Holdings, LLC (“Linlithgow”) to purchase 34,835
shares of common stock in 2007 in connection with various promissory notes
issued to Linlithgow in the total amount of $193,000
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
13,414
|
$
|
—
|
$
|
13,414
|
||||||||||||||||
Issuance
of common stock in August 2007 in compensation for consulting services
provided valued at $0.149 per share
|
2,424,000
|
2,424
|
—
|
—
|
357,576
|
—
|
360,000
|
|||||||||||||||||||||
Issuance
of common stock in September 2007 in compensation for consulting services
provided valued at $0.297 per share
|
80,800
|
81
|
—
|
—
|
23,919
|
—
|
24,000
|
|||||||||||||||||||||
Issuance
of warrant to a noteholder to purchase 25,000 shares of common stock in
October 2007 in connection with a $100,000 promissory note
|
—
|
—
|
—
|
—
|
9,494
|
—
|
9,494
|
|||||||||||||||||||||
Issuance
of Series B 10% Cumulative Preferred Stock in December 2007 upon
conversion of the $100,000 promissory note
|
—
|
—
|
102,925
|
103
|
101,804
|
—
|
101,907
|
|||||||||||||||||||||
Cancellation
of shares of common stock upon termination of employment in October
2007
|
(174,645
|
)
|
(175
|
)
|
—
|
—
|
(25,762
|
)
|
—
|
(25,937
|
)
|
|||||||||||||||||
Issuance
of common stock in October 2007 to Centurion Credit Resources, LLC
(“Centurion”) in connection with a $500,000 promissory note issued to
Centurion valued at $0.24 per share
|
404,000
|
404
|
—
|
—
|
96,371
|
—
|
96,775
|
|||||||||||||||||||||
Issuance
of common stock to Robert McNulty in October 2007 in compensation for
guarantee services provided on the $500,000 Centurion loan valued at
$0.297 per share
|
505,000
|
505
|
—
|
—
|
149,495
|
—
|
150,000
|
F -
7
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
Common Stock
|
Preferred Stock
|
Additional
|
||||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
Paid-In
Capital
|
Accumulated
Deficit
|
Stockholders’
Equity
|
||||||||||||||||||||||
Issuance
of common stock in November 2007 in compensation for employment services
vesting over a one year period valued at $0.297 per share
|
606,000
|
$
|
606
|
—
|
$
|
—
|
74,394
|
$
|
—
|
$
|
75,000
|
|||||||||||||||||
Issuance
of common stock in October and November 2007 to various parties in
compensation for consulting and legal services provided valued at $0.297
per share
|
424,200
|
424
|
—
|
—
|
125,576
|
—
|
126,000
|
|||||||||||||||||||||
Issuance
of common stock upon conversion of all Series A and B 10% Cumulative
Preferred Stock in December 2007
|
5,992,235
|
5,992
|
(5,992,235
|
)
|
(5,992
|
)
|
—
|
—
|
—
|
|||||||||||||||||||
Dividends
issued on conversion of Preferred Stock
|
599,221
|
599
|
—
|
—
|
188,365
|
—
|
188,964
|
|||||||||||||||||||||
Recapitalization
of Reel Estate Services, Inc. (“RES”) on December 28, 2007 and
cancellation of 1,500,000 shares of common stock
|
1,650,000
|
1,650
|
—
|
—
|
(251,650
|
)
|
—
|
(250,000
|
)
|
|||||||||||||||||||
Warrants
issued for financing fees in December 2007
|
—
|
—
|
—
|
—
|
12,853
|
—
|
12,853
|
|||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(4,973,477
|
)
|
(4,973,477
|
)
|
|||||||||||||||||||
Balance,
December 31, 2007
|
36,108,067
|
36,108
|
—
|
—
|
3,914,155
|
(5,028,391
|
)
|
$
|
(1,078,128
|
)
|
||||||||||||||||||
Common
stock sold - net of costs
|
793,986
|
794
|
—
|
—
|
719,245
|
—
|
720,039
|
|||||||||||||||||||||
Common
stock issued in relation to debt
|
855,000
|
855
|
—
|
—
|
255,645
|
—
|
256,500
|
|||||||||||||||||||||
Common
stock issued in relation to debt conversion
|
1,686,530
|
1,687
|
—
|
—
|
1,659,842
|
—
|
1,661,529
|
|||||||||||||||||||||
Common
stock issued for services
|
918,240
|
918
|
—
|
—
|
1,686,872
|
—
|
1,687,790
|
|||||||||||||||||||||
Cashless
stock warrant exercises
|
574,320
|
574
|
—
|
—
|
(574
|
)
|
—
|
—
|
||||||||||||||||||||
Stock
and options issued for compensation
|
—
|
—
|
—
|
—
|
748,956
|
—
|
748,956
|
|||||||||||||||||||||
Warrants
issued in connection with debt
|
—
|
—
|
—
|
—
|
2,883,366
|
—
|
2,883,366
|
|||||||||||||||||||||
Derivative
on note discounts
|
(770,903
|
)
|
(770,903
|
)
|
||||||||||||||||||||||||
Net
loss
|
(12,857,990
|
)
|
(12,857,990
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2008
|
40,936,143
|
$
|
40,936
|
0
|
$
|
-
|
$
|
11,096,604
|
$
|
(17,886,381
|
)
|
$
|
(6,748,841
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F -
8
BEYOND
COMMERCE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
NOTE
1
|
DESCRIPTION
OF BUSINESS AND BASIS OF
PRESENTATION
|
Beyond
Commerce, Inc., formerly known as BoomJ, Inc. (the “Company”), is an Internet
company that has three interrelated business models aimed at generating revenues
primarily from website advertising and E-commerce transactions. Our
initial business was
BOOMj, www.BOOMj.com,
the leading niche portal and social networking site for Baby Boomers and
Generation Jones. Our Boomj.com website provides social, political,
financial, and lifestyle content to the Baby Boomer/Generation Jones target
audience as a platform for our advertising and E-commerce businesses. Our LocalAdLink subsidiary
operates a website, www.LocalAdLink.com,
and a local search directory and advertising network that brings local
advertising to geo-targeted consumers. We are currently releasing
i-SUPPLY, www.i-SUPPLY.com,
a retail storefront that offers easy to use, fully customizable E-commerce
services, and revenue solutions for any third party website large or small, and
hosts local ads, providing extensive reach for our proprietary advertising
partner network platform.
History
of the Company
The
Company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated
in Nevada on January 12, 2006. As of December 28, 2007, RES was a
public shell company, defined by the Securities and Exchange Commission 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, 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 (which were
held by Linda Rutter) of the 3,150,000 issued and outstanding shares of RES. The
cancellation was performed in two tranches: In exchange for $125,000 paid at the
closing of the Merger, 750,000 shares of RES Common Stock were cancelled; the
remaining 750,000 shares were cancelled upon payment to Ms. Rutter of $125,000
on January 31, 2008. All share amounts presented in these financial statements,
unless otherwise noted, reflect the foregoing recapitalization.
Upon the
closing of the Merger, Linda Rutter received a five-year warrant to purchase
825,000 shares of the Company’s common stock at an exercise price of $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. However,
pursuant to the terms of those warrants, the warrants were subsequently
exchanged for warrants to purchase the Company’s common stock. The
exchange of the warrants was completed during 2008.
In the
Reorganization Agreement, concurrent with the closing of the Merger, (a) all
current officers of RES resigned from their positions with RES and (b)
BOOMj.com’s officers were appointed by the then existing members of the Board of
Directors of RES to replace the former RES officers, and (c) the members of the
RES board of directors appointed the members of BOOMj.com’s current board of
directors of the Company and thereafter resigned.
Subsequent
to the Merger, RES changed its name to BoomJ, Inc.
F -
9
RES is
the legal acquirer of BOOMj.com. 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. Although RES was the legal acquirer
in the Merger, BOOMj.com was the accounting acquirer since its shareholders
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. Unless
otherwise specified, all references to the Company prior to the Merger refer to
BOOMj.com, and all references to the Company after the Merger refer to Beyond
Commerce, Inc. (formerly BOOMj, Inc.) and its subsidiaries on a consolidated
basis.
In
December 2008, the Company changed its name from Boomj, Inc. to Beyond Commerce,
Inc. to more accurately reflect the new structure of the Company consisting of
two operating divisions: BOOMj.com dba i-SUPPLY and
LocalAdLink, .
The
Company currently maintains its corporate office in Henderson, Nevada, and has
its LocalAdLink customer service department located in Irvine,
California.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of Presentation
Management
is responsible for the fair presentation of the Company’s financial statements,
prepared in accordance with U.S. generally accepted accounting principles (GAAP)
and principles of consolidations.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary: Local Ad Link, Inc. All significant intercompany
transactions and accounts have been eliminated upon consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Estimates are used in the
determination of depreciation and amortization and the valuation for non-cash
issuances of equity instruments, and the website, income taxes and
contingencies, among others.
Cash
and Cash Equivalents
The
Company classifies as cash and cash equivalents amounts on deposit in banks and
cash temporarily in various instruments with original maturities of three months
or less at the time of purchase. The Company’s cash management system is
integrated within three separate banking institutions.
Accounts
Receivable
Accounts
receivable consists primarily of credit card charges which are collected within
one to five days.
Fair
Value of Financial Instruments
The
carrying value of the current assets and liabilities approximate fair value due
to their relatively short maturities except for certain of the short-term
borrowings which are net of a $2,527,945 debt discount in 2008 and $20,780 in
2007.
Reclassifications
Certain
comparative amounts from prior periods have been reclassified to conform to the
current year's presentation. These changes did not affect previously reported
net loss.
F -
10
Segment
Information
The
Company’s Operations Are Classified Into two Principal Reportable Segments:
Internet retail store, its e-commerce operations (BOOMj.com
dba i-SUPPLY) and internet advertising (Local Ad Link) and as defined
by SFA No. 131, “Disclosures about Segments of an Enterprise and Related
Information”.
Property,
Website and Computer Equipment
Property,
website and computer equipment are stated at cost less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
income as incurred. Additions, improvements and major replacements
that extend the life of the asset are capitalized. The initial cost of the
Boomj.com website has been capitalized. Once the site began operating, costs to
maintain the site are expensed as incurred. The cost and accumulated
depreciation and amortization related to assets sold or retired are removed from
the accounts and any gain or loss is credited or charged to income in the period
of disposal.
The
Company accounts for web site costs in accordance with SOP 98-1 “Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use” and EITF
00-2 “Accounting for Web Site Development Costs”. Costs associated
with the web site application and infrastructure development stage are
capitalized. Amortization of costs commences once the web site is
ready for its intended use which occurred when the website was launched in
2007.
For
financial reporting purposes, depreciation and amortization is provided on the
straight-line method over the estimated useful lives of depreciable
assets. Financial reporting provisions for depreciation and
amortization are generally based on the following annual rates and estimated
useful lives:
Type
of Asset
|
Rates
|
Years
|
|||
Computer
equipment and property
|
20%
- 50%
|
2 -
5 years
|
|||
Website
Development Costs
|
20%
|
5
years
|
|||
Leasehold
improvements
(or
life of lease where shorter)
|
20%
- 50%
|
2 -
5 years
|
Income
Taxes
The
Company has not generated any taxable income, and, therefore, no provision for
income taxes has been made other than for State franchise taxes.
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with SFAS Number 109, "Accounting for Income Taxes",
which requires the use of the asset/liability method of accounting for income
taxes. Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and for tax loss and credit carry-forwards. Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated future tax
effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
A
valuation allowance is recorded to fully offset the deferred tax asset if it is
more likely than not that the assets will be utilized.
The
Company’s effective tax rate differs from the statutory rates associated with
taxing jurisdictions because of permanent timing differences as well as a
valuation allowance.
F -
11
On
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”,
which seeks to reduce the diversity in practice associated with the accounting
and reporting for uncertainty in income tax positions. This
Interpretation prescribes comprehensive model for financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns.
Revenue
Recognition
The
Company generates its revenue from products and advertising sold on its internet
websites. The BOOMj.com store’s database has available close to two million name
brand products. These items include books, digital cameras, kitchen and bath
items and office supplies. Revenue is also generated from content, advertising,
and discount travel.
Advertising
products consist of web-banner advertising, which are continuous or rotating.
Delivery of these profiles is based on the number of impressions of an advertisement that
a customer purchases. An impression is a single instance of an Internet user
viewing the page that contains a customer's name and/or logo. Revenue is
recognized on such advertising programs based on the proportionate units of
advertising delivered over the period of a media campaign. The Company also
sells a marketing kit through their Local Ad Link division. The kit is
comprised of ten one month duration ads. The sales reps have the option to sell
the ten ads as a commissionable sale or to give them away as a free promotional
tool.
All
sources of revenue are recorded pursuant to Staff Accounting Bulletin (SAB) 104
“Revenue Recognition” and EITF 00-21 “Revenue Arrangements with Multiple
Deliverables”, when persuasive evidence of an arrangement exists, delivery of
services has occurred, the fee is fixed or determinable and collectability is
reasonably assured. Revenue is presented in the statement of operations in
accordance with EITF 99-19 “Reporting Revenue Gross as a Principal versus Net as
an Agent” and EITF 00-10 “Accounting for Shipping and Handling Fees and
Cost.”
In
connection with advertising revenue, the Company receives certain up front fees
a portion of which they defer recognition in accordance with EITF 00-21 and SEC
Staff Accounting Bulletin 104.
Corresponding
revenue origination costs are accounted for under the guidance provided in SAB
104.
Revenue
is recorded net of discounts, allowances, and estimated returns.
Stock
Based Compensation
The
Company accounts for stock based compensation in accordance with Statement of
Financial Accounting Standard (“SFAS”) 123 (revised 2004), “Share Based Payment”
(“SFAS 123(R)”). Share-based payments are required to be reflected as
an expense based on the grant-date fair value of those awards. The Company
follows the guidance of Emerging Issues Task Force No. 96-18: “Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” for transactions in which equity
instruments are issued in exchange for the receipt of goods or services to non
employees.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consists principally of cash deposits at financial
institutions. At various times during the year, the Company may
exceed the federally insured limits. To mitigate this risk, the Company places
its cash deposits only with high credit quality
institutions. Management believes the risk of loss is
minimal. At December 31, 2008, the Company had $40,729 in uninsured
cash deposits.
Impairment
of Long-lived Assets
The
Company accounts for long-lived assets in accordance with the provisions of
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment of Long-Lived Assets. This statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Fair values are determined based on quoted market value,
discounted cash flows or internal and external appraisals, as applicable. During
2008 and 2007, the Company did not recognize any impairment
charges.
F -
12
Employee
Benefits
The
Company currently offers employees vacation benefits and recently began offering
a healthcare plan. During 2008, the Company implemented the 2008 Equity
Incentive Plan.
Inventories
The
Company does not carry any inventory and has its vendors or distributors ship
directly to the consumer based on confirmed orders provided electronically by
the Company.
Recent
Accounting Pronouncements
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. SFAS 157 defines
fair value, establishes a framework for measuring fair value under GAAP, and
expands disclosures about fair value measurements. The Company does not believe
that the partial adoption of SFAS 157 has had or will have a material impact on
the Company’s financial statements. In February 2008, the FASB issued a FASB
Staff Position (“FSP”), FSP SFAS 157-2, Effective Date of FASB
Statement No. 157 , to defer the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. The FSP defers the effective date of SFAS 157 to fiscal years beginning
after November 15, 2008. The Company does not expect the adoption of FSP SFAS
157-2 to have a significant impact on the financial statements
On
January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115 (“SFAS 159”). This Statement provides
companies with an option to measure, at specified election dates, many financial
instruments and certain other items at fair value that are not currently
measured at fair value. A company that adopts SFAS 159 will report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. This Statement also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. The adoption of SFAS 159 has not had a material
impact on the Company’s financial statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, Interests in Consolidated
Financial Statements — an amendment of ARB No.
51 (“SFAS 160”), which impacts the accounting for minority
interest in the consolidated financial statements of filers. The statement
requires the reclassification of minority interest to the equity section of the
balance sheet and the results from operations attributed to minority interest to
be included in net income. The related minority interest impact on earnings
would then be disclosed in the summary of other comprehensive income. The
statement is applicable for all fiscal years beginning on or after December 15,
2008 and earlier adoption is prohibited. The adoption of this standard will
require prospective treatment. The Company is currently evaluating the effect
that the adoption of SFAS 160 will have on its results of operations and
financial position. However, the adoption of SFAS 160 is not expected to have a
material impact on the Company’s financial statements.
In
December 2007, FASB issued SFAS No. 141R, Business Combinations (“SFAS
141R”), which impacts the accounting for business combinations. The statement
requires changes in the measurement of assets and liabilities required in favor
of a fair value method consistent with the guidance provided in SFAS 157 (see
above). Additionally, the statement requires a change in accounting for certain
acquisition related expenses and business adjustments which no longer are
considered part of the purchase price. Adoption of this standard is required for
fiscal years beginning after December 15, 2008. Early adoption of this standard
is not permitted. The statement requires prospective application for all
acquisitions after the date of adoption. The Company is currently evaluating the
effect that the adoption of SFAS 141R will have on its results of operations and
financial position. However, the adoption of SFAS 141R is not expected to have a
material impact on the Company’s financial statements.
F -
13
In March
2008, FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities an amendment to FASB Statement No.
133 (“SFAS 161”). SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The Company does not expect
the adoption of this statement to have a material effect on its financial
statements.
In April
2008, the FASB issued Staff Position No. FAS 142-3, Determination of the Useful Life of
Intangible Assets, or FSP FAS 142-3. FSP FAS 142-3 amends
the factors that should
be considered in developing renewal
or extension assumptions used to determine the useful life
of a recognized intangible asset under Statement 142. We
are required to adopt FSP FAS 142-3 prospectively for intangible assets acquired
on or after January 1, 2009. Intangible assets acquired prior to
January 1, 2009 are not affected by the adoption of FSP FAS 142-3. We
are currently evaluating the impact of adopting FSP FASB 142-3 on our results of
operations and financial condition.
In May
2008, the FASB issued Staff Position No. APB 14-1, Accounting for
Convertible Debt Instruments That May
Be Settled in Cash upon Conversion
(Including Partial Cash Settlement), or
FSP APB 14-1. FSP APB 14-1 specifies that issuers of convertible debt
instruments that may be settled in cash upon conversion should separately
account for the liability and equity components in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. We are required to adopt FSP APB 14-1 at the beginning of
2009 and apply FSP APB 14-1 retrospectively to all periods
presented. We are currently evaluating the impact of adopting FSP APB
14-1 on our results of operations and financial condition.
NOTE
3
|
-
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 limited
sales, reflected a loss of approximately $12,857,990 for the year ended December
31, 2008 and will need to raise additional capital and/or obtain financing to
continue operations in 2009. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. 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
4
|
PROPERTY,
WEBSITE AND COMPUTER
EQUIPMENT
|
Property
and equipment at December 31, 2008 and 2007 consisted of the
following:
2008
|
2007
|
|||||||
Office
and computer equipment
|
$
|
186,614
|
$
|
64,732
|
||||
Website
|
684,566
|
684,566
|
||||||
Total
property, website and computer equipment
|
871,180
|
749,298
|
||||||
Less:
accumulated depreciation
|
(320,366
|
)
|
(137,564
|
)
|
||||
$
|
550,814
|
$
|
611,734
|
Depreciation
and amortization expense for the year ended December 31, 2008 was $182,802,
compared to $137,255 for the same period in 2007.
F -
14
NOTE
5
|
OTHER
ASSETS
|
2008
|
2007
|
|||||||
Rent
Deposits
|
$
|
20,828
|
$
|
22,930
|
||||
Credit
Card Reserve
|
33,387
|
-
|
||||||
Vendor
Deposit
|
5,852
|
-
|
||||||
TOTAL
|
$
|
$60,067
|
$
|
22,930
|
Other
assets primarily consisted of rent and utility deposits of $17,753 and $3,075
for the Company's Nevada and Irvine offices respectively, at December 31, 2008
and $18,659 and $4,271 at December 31, 2007. Also included in this line item for
December 31, 2008 is $33,387 for credit card reserves and $5,852 in vendor
deposits.
NOTE
6
|
ACCRUED
EXPENSES
|
Accrued
expenses consist of the following at December 31, 2008:
2008
|
2007
|
|||||||
Accrued
website costs
|
$
|
-
|
$
|
50,000
|
||||
Accrued
interest
|
388,783
|
-
|
||||||
Accrued
commission
|
220,869
|
-
|
||||||
Accrued
payroll and related expenses
|
625,997
|
180,544
|
||||||
Other
|
138,885
|
42,693
|
||||||
$
|
1,374,534
|
$
|
273,237
|
NOTE
7
|
SHORT
TERM BORROWINGS
|
2008
|
2007
|
|||||||
Note
payable ($190,000 face amount) to Carole Harder bearing an annual interest
rate of 12%, unsecured, due 6/20/09
|
$
|
190,000
|
$
|
-
|
||||
Convertible
Promissory Notes ($4,280,000 face amount), bearing an annual interest rate
of 12%, secured, due 7/31/09
|
4,280,000
|
500,000
|
||||||
Bridge
Notes ($458,500 face amount), bearing an annual interest rate 12%,
unsecured, due 6/30/09
|
458,500
|
-
|
||||||
Note
Payable to Linlithgow Holdings, LLC (related Party) 12% per
annum, Unsecured
|
-
|
25,000
|
||||||
Note
Payable to Centurion Credit, LLC 12% per annum
|
-
|
500,000
|
||||||
Total
principal
|
$
|
4,928,500
|
$
|
1,025,000
|
||||
Less
debt discount
|
2,527,945
|
20,780
|
||||||
Net
balance
|
$
|
2,400,555
|
$
|
1,004,220
|
On March
16, 2007 the Company issued a 12% Convertible Note to Mountain Capital Natural
Resource Fund, L.P. in exchange for $100,000. The term of this Note is one year
from the issuances with provisions to pay interest at 12%, in cash, on a
quarterly basis. The principal and accrued interest on this Note may be
converted into shares of the Company’s common stock at the option of the holder
at any time, at a price of one dollar ($1.00) per share. On May 10, 2007,
Mountain Capital Natural Resource Fund, L.P. initiated the optional conversion
provision included in this Note, and the Company subsequently issued 205,656
shares of common stock for the cancellation of the 12% Convertible Note. This
included $1,808 of interest with the principal conversion of
$100,000.
F -
15
On April
30, 2007 the Company issued a short term Promissory Note to Linlithgow Holdings,
LLC (a related party) in exchange for $50,000. The term of this Note was for
thirty (30) days from the issuance with provision to pay interest at 12%, in
cash from the date of issuance until the Note is paid. On May 9th this
Note was paid in full along with the respective interest earned of
$247. On May 14, 2007 the Company issued a short term Promissory Note
to Linlithgow Holdings, LLC (a related party) in exchange for $30,000. The term
of this Note was for thirty (30) days from the issuance with provisions to pay
interest at 12%, in cash from the date of issuance until the Note is paid. On
May 24th this
Note was paid in full along with the respective interest of $108. In
connection with the issuance of these two notes to Linlithgow Holdings, LLC (a
related party), the Company granted a warrant to Linlithgow Holdings, LLC (a
related party) in June 2007 to purchase 16,000 shares of its common
stock. The warrant has an exercise price of $0.01 per share, vested
immediately, and expires in four years. The warrant was valued by the
Company at $4,685 using the Black-Sholes model and recorded as expense on the
notes.
On
September 10, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $90,000. The term of
this Note is for thirty (30) days from the issuance with provisions to pay
interest at 12%, in cash from the date of issuance until the Note is paid. Also,
issued with this note were 15,000 warrants exercisable at $0.30 per share
expiring in 2011. These warrants were valued at $0.49 per share using the
Black-Scholes method. This resulted in a total value of $7,273 assuming a
risk-free interest rate of 5.25% and 100% volatility index. 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
$7,273 on the note, which was amortized over the term of the note. For the
twelve months ended December 31, 2007, amortization of the discount amounted to
$7,273, which was recorded as interest expense. On October 10th this
Note was extended another thirty-two days with the same terms and conditions. On
October 22, 2007 this Note was paid in full along with the respective
interest of $1,243.
On
October 14, 2007 the Company issued a 12% Convertible Note to Carole Harder in
exchange for $100,000. The term of this Note was for thirty (30) days from the
issuance with provisions to pay interest at 12% per annum, in cash. Also,
included with this Note were the issuance of warrants to purchase 25,000 shares
of our common stock exercisable at $1.00 per share expiring in 2011, which was
valued using the Black-Scholes method at $0.59 per share. This resulted in a
total value of $9,494 assuming a risk-free interest rate of 5.25% and 100%
volatility index. 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 $9,494 on the note, which was being amortized over the
term of the note. For the twelve months ended December 31, 2007, amortization of
the discount amounted to $9,494, which was recorded as interest
expense. The principal and accrued interest on this Note was converted into
shares of the Company’s Preferred Stock Series “B” at the request of the holder
at a price of two dollar ($2.00) per share on December 12, 2007. The Company
subsequently issued 102,925 shares of its Preferred Stock Series “B” for the
cancellation of the 12% Note. This included $1,907 of interest with the
principal conversion of $100,000.
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 Promissory
Note bore interest at 12% per annum payable in cash monthly from the date of
issuance until the note is paid. The loan was secured by a lien on all of the
assets of BOOMj.com. As consideration for making the loan, 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 (as adjusted by the Merger) of the Company’s common stock. This Note was
guaranteed personally by Robert McNulty, Chairman of both the Company and
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 Company of the first $2,000,000 in connection with Company’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 additional shares of the Company’s common
stock (see Note 8). On April 18, 2008 the Company entered into a Second
Modification Agreement and received an option to extend the term for $350,000 of
this Note to August 1, 2008 and $150,000 to April 30, 2008 for an additional fee
of $100,000. The Company did not exercise this option, thus did not
pay the $100,000 option fee. As a condition precedent to the April
18, 2008 modification the Company delivered to Lender (a) an origination fee in
the amount of $25,000, and (b) 100,000 additional shares of the Company’s common
stock. During May 2008, the Company asked the Lender for an additional extension
until May 16, 2008 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 June 23,
2008 Centurion Credit Resources entered a judgment against the Company and Mr.
McNulty for the entire principal amount, plus interest. On July 9, 2008, the
Company satisfied the entire judgment by paying in full the $500,000 note
balance plus accrued interest of $7,553.
F -
16
On
December 4, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $23,000. The term of this Note
is for thirty (30) days from the issuance with provisions to pay interest at
12%, in cash from the date of issuance until the Note is paid. Also, included in
this note were the issuance of 3,835 warrants exercisable at $1.00 per share
expiring in 2011, which were valued using the Black-Scholes method at $1,456
assuming a discount rate of 5.25% and 100% volatility index. The note was paid
in December 2007.
On
December 24, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party-see note 13) in exchange for $25,000. The term of
this Note was for thirty days from issuance with interest at 12%. This Note was
paid in full (including the $304 interest) in January 2008.
On March
21, 2008 the Company issued a 12% Convertible Note to Carole Harder, an
accredited investor in exchange for $140,000 originally due March 20, 2009. 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 fair value 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 common stock at a conversion price of $1.00 per share. We allocated
the proceeds from the issuance of this note and the warrants based on the
relative 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 using
the effective interest method resulting in an effective interest rate of
approximately 25%. This note was extended on March 21 for another 90
days.
On
December 28, 2007, RES raised $500,000 in a private offering to accredited
investors of its 12% Secured Convertible one-year promissory notes. These notes
have a voluntary conversion feature to convert into a unit from a contemplated
offering, each unit comprised 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 as financing fees 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 by
the Company on January 25, 2008 and February 8, 2008 for $1,230,000 and
$550,000, respectively. The promissory notes were scheduled to mature on March
31, 2009. However, the maturity date of the promissory notes has been
extended to July 31, 2009 (see Note 16, “Subsequent
Events”). The purchasers of the December 28, 2007, January and
February 2008 promissory notes also received warrants 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 fair value 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 using the
effective interest method with an effective interest rate between 26% and 27%.
In addition, on January 25, 2008 and February 8, 2008, the Company issued
warrants to the placement agent as financing fees 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 the 12% secured convertible promissory notes, the
Company granted to the January and February 2008 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 that in the event all of the shares underlying their warrants
have not otherwise been included in a registration statement filed by the
Company with the SEC on or prior to May 1, 2008, other than for certain
specified reasons, then, as partial relief for the damages to the investors, the
Company shall pay to the noteholders an amount in cash equal to one percent
(1.0%) of the original cash consideration invested by the noteholders for each
30 day period during which the registration statement is not effective. Since a
registration statement was not filed by June 30, 2008, the Company accrued
$45,000 as a penalty charge. During the fiscal quarter ended September 30, 2008,
this registration obligation and the requirement to pay penalties was waived by
the majority of noteholders and the accrual was reversed.
F -
17
In
addition, during 2008, the Company raised $2,025,000, in a private offering from
accredited investors. The securities sold by the Company consisted of
its 12% secured convertible promissory notes and warrants to purchase 2,892,858
shares of the Company’s common stock at an exercise price of $0.93 per
share. The notes are convertible at a price of $0.70 per share, are
secured by a lien on the Company’s assets and on the assets of Boomj.com, Inc.,
and mature on July 31, 2009. The warrants were valued using the
Black–Scholes method at $0.767per share. This resulted in a total value of
$2,218,822 assuming a fair value per share of $1.00, risk-free interest rate of
3.32% and 100% volatility index. Under EITF 00-27 and APB No. 14, we
allocated the proceeds from issuance of these notes and warrants based on the
relative fair value for each item. Consequently, we recorded a
discount of $1,135,980 on the notes, which is being amortized over the term of
these notes using the effective interest rate method. A discount was
also recorded on these convertible notes based on the requirement to bifurcate
the conversion feature as noted below. As a result, those convertible
notes were recorded with additional discounts in the total amount of $770,903.
The combined value of the note discount and discount related to the conversion
feature on the convertible notes is being amortized over the term of the
respective convertible note using the effective interest method. The
amortization of the discounts was recorded as interest expense. Since
the discounts represent near 100% of the loan proceeds from these notes, the
effective periodic interest rate for these notes ranges from between 77% and
86%. As a result, the majority of amortization expense will be
incurred at the end of the term of the note. See the table below for
the timing and approximate amounts of the amortization expense. For
the twelve months ended December 31, 2008, we recorded interest expense of
$316,127 related to amortization of the discounts. We also recorded an
additional interest expense of $108,208, which was for the stated interest rate
and accrued as of December 31, 2008.
Note Amounts
|
9/30/2008
|
12/31/2008
|
3/31/2009
|
6/30/2009
|
9/30/09
|
TOTAL
|
||||||||||||||||||
$2,025,000
|
$
|
-
|
$
|
316,127
|
$
|
270,974
|
$
|
503,258
|
$
|
934,641
|
$
|
2,025,000
|
||||||||||||
Total
|
$
|
-
|
$
|
316,127
|
$
|
270,974
|
$
|
503,258
|
$
|
934,641
|
$
|
2,025,000
|
In
addition the Notes contained several provisions which if triggered would reset
the conversion price of the Notes including; (1) in the event the Company failed
to timely convert or deliver the conversion shares, the Notes went into default
as defined under the agreement or a change of control event, as defined in the
Note agreement, occurred, the holders of the Note could demand immediate cash
payment of the greater of 120% of the outstanding principal plus accrued
interest or the dollar amount equivalent of the number of shares convertible
into at the time of the triggering event multiplied by the closing stock price
of the Company’s common shares; (2) a reset provision such that should the
Company issue in the future any common stock or instruments convertible or
exchangeable into common stock of the Company at a per share price lower than
the then in effect conversion price, would automatically reset the conversion
price of the Notes to that lower price and (3) the Company agreed to reset the
conversion price of the notes based on a formula of meeting certain sales and
income targets in the twelve month period ending June 30, 2009, such that the
conversion price would reset lower by 1% for every 1% of either the revenue or
income targets missed by the Company, with a cap such that the reduction in
price per share could not exceed 50%.
Because
of these provisions, the Company determined that the conversion feature was not
clearly and closely related to the Note host contract and under the guidance of
Emerging Issues Task Force (“EITF”) 05-2 “The Meaning of Conventional
Convertible Debt Instrument Under EITF 00-19” and SFAS 133 “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”) it has bifurcated
the conversion feature. Because the conversion feature is not
considered to be conventional convertible and note holders have the ability to
demand cash settlement of the conversion feature, the amount recorded has been
shown as a liability at December 31, 2008 of $1,523,651. Under the
requirements of SFAS 133, the Company has remeasured the fair value of the
conversion feature at each reporting period after inception, with those changes
in fair value being recorded in the statement of operations.
The
warrants issued under this Note and Warrant Purchase Agreement also contained
several provisions which if triggered would reset the strike price of the
warrants and also possibly the number of warrant shares to be issued, including
(1) a reset provision such that should the Company issue in the future any
common stock or instruments convertible or exchangeable into common stock of the
Company at a per share price lower than the then in effect conversion price,
would automatically reset the conversion price of the Notes to that lower price
and would also increase the number of shares exercisable and (2) the Company
agreed to reset the conversion price of the notes based on a formula of meeting
certain sales and income targets in the twelve month period ending June 30,
2009, such that the conversion price would reset lower by 1% for every 1% of
either the revenue or income targets missed by the Company, with a cap such that
the reduction in price per share could not exceed 50%.
F -
18
Because
of these provisions, the Company has determined that the provisions within the
warrants that could result in the issuance of a variable number of shares
preclude amounts ascribed to the warrants from being included in permanent
equity so long as those provisions are outstanding. Under the
guidance of Accounting Series Release (“ASR”) 268 and Topic D-98 the Company has
recorded the amounts for the warrants under Temporary Equity. The
Company believes as of the issuance date and the date of these financial
statements that the provisions which would trigger the reset to be remote and
thus has not remeasured the warrants after the date of
issuance. Should the trigger events become probable, the Company will
remeasure the warrants and any changes will be reported in expense at that time.
Both the Notes and Warrants also contained standard anti-dilution
provisions.
The
Company in August 2008 issued warrants to the placement agent to purchase
289,286 shares of its common stock at an exercise price of $0.93 per
share. The warrants vested immediately and expire in five years.
These warrants were valued by the Company using the Black-Scholes method at
$831,872 using a fair value per share of $1.00, risk-free interest rate of 3.32%
based on the note issuance and 100% volatility.
In
October 2008 the Company issued detachable warrants along with a note agreement
with an exercise price of $0.70 per share. This issuance triggered
the reset provision contained within the warrants above such that the warrant
exercise price reset to $0.70 from $0.93 and the number of shares exercisable
increased to 3,843,364 from 2,892,858. The Company recorded an
additional discount of $118,000 in 2008 which will be amortized.
On May
29, 2008, one of the note-holders from the January 2008 investment converted a
$25,000 note including accrued interest of $1,028 into 37,182 shares of the
Company’s common stock.
During
August 2008, the Company paid off a zero coupon note to one of its investors of
$110,000 which $95,000 represented cash received from the prior
quarter.
On
September 23, 2008 the Company received $50,000 from an accredited investor as a
90 day Zero Coupon note in which $55,000 was due in December 2008. The
Company made payments of $26,500 in December 2008, and paid the balance in
incremental payments during the first quarter of 2009.
During
2008, the Company entered into several short term (ninety-day) unsecured, 12%
promissory notes with certain accredited investors for a total of $1,508,232.
Along with these notes, the Company issued warrants to purchase 754,116 shares
of common stock at an exercise price of $0.70 expiring in 2013, which was valued
using the Black–Scholes method at $0.192 per share. This resulted in a value
of approximately $144,000 assuming a fair value per share of $0.30,
risk-free interest rate of 3.32% and a 100% volatility index. Consequently, the
Company recorded a discount of $131,865 on the notes, based on the relative fair
value of the warrants, which is being amortized over the term of these notes.
During 2008, all notes plus interest accrued of $36,598 were converted into
1,542,457 shares of common stock. On August 22, 2008 the Company
issued 327,126 shares of the Company’s common stock to another one of our
placement agents as part of their commission in connection with this convertible
note private placement. In accordance with an agreement with
the placement agent, the number of shares were determined by converting the cost
of services to common stock at $.70 per share. However, at the time
of settlement, in accordance with generally accepted accounting principles, the
company used the trading price of the stock, which ranged between $2.24 and
$3.27 per share, to convert the liability. Since the Company
initially recorded an expense of approximately $325,000 for these services, this
settlement resulted in additional expense
of $583,893.
F -
19
During
the third quarter ended September 30, 2008, the Company issued short term
(ninety-day) unsecured, 12% promissory notes to four (4) accredited investors
for a total of $170,000. Along with these notes, the Company issued
warrants to note holders to purchase 57,500 shares of common stock exercisable
at $0.70 per share expiring in 2013, which was valued using the Black–Scholes
method at $0.39 per share. This resulted in a Black–Scholes value of $32,000
using a market price per share of $1.00, risk-free interest rate of 3.32% and a
100% volatility index. Consequently, the Company recorded a discount of $64,857
on the notes, based on the relative fair value of the warrants, which is being
amortized over the term of these notes. These notes also contain a conversion
feature in which the holder may convert their respective principal and accrued
interest into shares of the Company’s common stock at $1.00 per share. During
the fiscal quarter ended September 30, 2008; $90,000 of principal from the notes
were converted into 90,000 shares of common stock and accrued interest of $770
was converted into 770 shares of common stock.
On
October 30, 2008, November 17, 2008, December 4, 2008 and December 17, 2008, the
company raised $130,000, $100,000, $180,000 and $40,000 respectively in a
private offering from accredited investors. The securities sold by the Company
consisted of its 12% secured convertible promissory notes and warrants to
purchase 130,000, 100,000 180,000 and 40,000 shares of the Company’s common
stock , respectively at an exercise price of $0.70 and $1.00
respectively. The warrants were valued using the Black–Scholes
method. This resulted in a total value of $203,966 assuming a fair value per
share of $1.00, risk-free interest rates ranging from 2.06% to 2.75% based on
the note issuance and 100% volatility index. Under EITF 00-27 and APB
No. 14, we allocated the proceeds from issuance of these notes and warrants
based on the proportional fair value for each item. Consequently, we
recorded a discount of $209,966 which is being amortized over the term of these
notes using the effective interest rate ranging from 3.815% to
5.329%. A beneficial conversion discount was also recorded on these
convertible notes since these notes were convertible into shares of common stock
at an effective conversion price lower than the fair value of the common
stock. The beneficial conversion amount was limited to the portion of
the cash proceeds allocated to those convertible notes.
On
October 22, 2008 the company received $25,000 from an accredited investor as a
90 day zero coupon note in which $30,000 was due in January 2009. Payments
on the $30,000 note through March 31, 2009 were $16,500 and the
balance is scheduled to be paid in full during April
2009.
The
Company recorded $467,098 and $17,822 as interest expense on the above notes for
the twelve month period ended December 31, 2008 and 2007, respectively. Also,
included in interest expense is the amortization of $2,446,939 and $279,903 of
loan origination fees associated with these notes for the year ended 2008 and
2007 respectively.
NOTE
8
|
COMMON
STOCK, WARRANTS AND PAID IN CAPITAL
|
Common
Stock
As of
December 31, 2007 our authorized capital stock consisted of 75,000,000 shares of
common stock, par value $.001 per share. As of December 31, 2007, there were
3,150,000 issued and outstanding shares of common stock, 34,458,067 shares
issuable, and 1,500,000 shares to be cancelled. The Company issued 6,478,076
shares of common stock during the twelve month period ended December 31,
2008.
Holders
of common stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, including the election of directors. Except as
otherwise required by law, the holders of our common stock will possess all
voting power. Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors, by a
plurality) of the votes entitled to be cast by all shares of our common stock
that are present in person or represented by proxy. A vote by the
holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation. Our Articles of Incorporation do not
provide for cumulative voting in the election of directors.
Holders
of our common stock have no pre-emptive rights, no conversion rights and there
are no redemption provisions applicable to our common stock.
The
Company on December 1, 2006 commenced a private placement offering 1,000,000
shares of Convertible 10% Cumulative Preferred Stock Series A ($.001 par value)
at $0.248 per share. This offering included piggy-back registration rights. The
Series A Preferred Stock was convertible on a 1:1 basis, at the option of the
holder into shares of the Company’s common stock. In December 2006, the Company
issued 383,800 shares and collected $95,000. This offering was completed in
January 2007 issuing 1,838,200 shares of preferred stock and generating net
proceeds of an additional $410,000. Prior to the merger, the Company
had cumulative undeclared and unpaid dividends for Series A Preferred Stock of
$95,266. The cumulative undeclared dividends were paid via an
additional .1 share of stock for each preferred share of stock outstanding.
These preferred shares and dividends were exchanged for 2,022,020 shares of
common stock upon consummation of the merger.
In
connection with the Series A Preferred Stock Offering, the Company issued
warrants to various parties to purchase a total of 80,800 shares of its common
stock in January 2007. These warrants all have an exercise price of
$0.01 per share, vested immediately and expire in December
2011. These warrants were valued to be $24,000.
In
connection with the Series A Preferred Stock Offering, the Company issued
warrants to various parties to purchase a total of 80,800 shares of its common
stock in January 2007. These warrants all have an exercise price of
$0.01 per share, vested immediately and expire in December
2011. These warrants were valued to be $24,000.
The
Company in January and February 2007 issued an additional 1,979,600 shares of
its common stock to a series of fifteen individuals for the services they
provided to the Company in 2007. These shares were valued at $0.149 per
share for a total of $294,000. $208,500 of this cost was expensed during the
three month period ended March 31, 2007 in professional fees, with the balance
of $85,500 being capitalized under Website Development.
The
Company in April 2007 issued an additional 505,000 shares of its common stock to
its advisory board for the services they provide to the Company in 2007. These
shares were valued by the Company at $0.149 per share for a total of $75,000.
The cost of this issuance was expensed in professional fees during the three
month period ended June 30, 2007. Also in April the Company issued 303,000
shares to three key employees for services that these employees have provided
the Company. These shares were also valued by the Company at $0.149 per share
for a total of $45,000. This cost was reflected under administrative expense
during the three month period ended June 30th
2007. In October 2007, 174,645 shares were cancelled due to employee
termination.
F -
20
On April
27, 2007, the Company fully accepted the Website software form Hype/Swapin
Networks (a related party; also see Note 13) for the development of the website
and delivered the final 202,000 shares of Series A Convertible 10% Cumulative
Preferred Stock ($0.001 par value) at $0.248 per share with piggy back
registration rights that were previously held back. On December 28, 2007, these
shares were exchanged for 222,200 shares of BOOMj.com common stock.
On May
10, 2007, Mountain Capital Natural Resource Fund, L.P. initiated the optional
conversion provision included in its note with the Company. The Company
subsequently issued 205,656 shares of common stock for the cancellation of the
12% Convertible Note. This included $1,808 of interest coupled with the
principal conversion of $100,000.
The
Company on February 1, 2007 commenced a private placement offering 5,050,000
shares of Convertible 10% Cumulative Preferred Stock Series B ($.001 par value)
at $0.99 per share. This offering included piggy-back registration rights. The
Preferred Stock Series B was convertible on a 1:1 basis, at the option of the
holder into shares of the Company’s common stock. The Company initially broke
escrow on May 24th 2007
issuing 1,066,560 shares of Preferred Stock Series B, receiving $918,720 in net
proceeds. The Company issued an additional 282,800 of Preferred Stock Series B,
on June 27th
after receiving $243,600 in net proceeds. During the three months ended
September 30, 2007 the Company issued an additional 449,450 shares of Preferred
B, receiving $392,150 in net proceeds during this time period. During the three
month period ended December 31, 2007 the Company issued an additional 50,500
shares of Preferred Stock Series B receiving $50,000 in net proceeds. On
December 12, 2007 the principal and accrued interest on the Carole Harder Note
was converted into shares of the Company’s Preferred Stock Series “B” at the
request of the holder at a price of $0.99 per share on December 12, 2007. The
Company subsequently issued 102,925 shares of its Preferred Stock Series “B” for
the cancellation of the 12% Convertible Note. This included $1,907 of interest
coupled with the principal conversion of $100,000. Prior to the Merger the
Company had cumulative undeclared and unpaid preferred dividends for series B
Preferred Stock of $93,698. These preferred shares and dividends were converted
into 2,147,460 shares of BoomJ (fka Reel Estate Services) common
stock.
In
connection with the Series B Preferred Stock Offering, on September 2007, the
Company issued two warrants to the placement agent to purchase a total of
115,500 shares of the Company’s common stock. The warrant to purchase
50,000 shares of common stock vested immediately, has an exercise price of $0.50
per share and expires in five years. The other warrant to purchase
65,500 shares of common stock also vested immediately, has an exercise price of
$2.40 per share and expires in five years. The Company valued these
two warrants by using the Black-Scholes model at a total of
$46,076.
On August
3, 2007 the Company issued 2,424,000 shares of the Company’s common stock to two
individuals for services rendered in connection with analyzing several potential
reverse merger candidates which would allow the Company to become a publicly
traded entity. These shares were valued by the Company at $0.149 per share for a
total of $360,000. The cost of this issuance was recorded as professional fees
on the Company’s statement of operations.
On
September 10, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $90,000. The term of this Note
was for thirty (30) days from the issuance with provisions to pay interest at
12%, in cash from the date of issuance until the Note is paid. On October 10,
2007 this Note was extended another thirty-two days with the same terms and
conditions. Also, issued with this note was warrant to purchase 15,000 shares of
common stock exercisable at $0.30 per share expiring in 2011. These warrants
were valued at $0.49 per share using the Black-Scholes method. This resulted in
a total value of $7,273 using a risk-free interest rate of 5.25% and 100%
volatility index.
F -
21
On
September 24, 2007, the Company entered into an agreement with a firm to provide
management and financial consulting services for publicly traded companies. The
Company in exchange for these services issued 80,800 shares of the Company’s
common stock. These shares were valued by the Company at $0.297 per share for a
total of $24,000. The Company has reported $12,000 in consulting fees in the
accompanying Statement of Operations and the remaining $12,000 is in Prepaid
Expense. This agreement was for a period of twelve months with piggy back stock
registration rights.
On
October 14, 2007 the Company issued a 12% Convertible Note to Carole Harder in
exchange for $100,000. The term of this Note was for thirty (30) days from the
issuance with provisions to pay interest at 12%, in cash. Also, included in this
note were the issuance of warrant to purchase 25,000 shares of our common stock
exercisable at $1.00 per share expiring in 2011, which was valued using the
Black-Scholes method at $0.59 per share. This resulted in a total value of
$9,494 assuming a risk-free interest rate of 5.25% and 100% volatility index. 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 $9,494 on the note, which is being amortized over the term of the
note. On December 12, 2007, the principal and accrued interest on
this note was converted into 102,925 shares of our Series B Preferred
stock.
On
October 19, 2007 the Company issued a short term Promissory Note to Centurion
Credit Resources, LLC (“Centurion”) in exchange for $500,000 (“Centurion Loan”).
The term of this Note is for ninety (90) days from the issuance with provisions
to pay interest at 12% in cash monthly from the date of issuance until the note
is paid. As a condition precedent to the note holder’s obligations under this
Note, the Company delivered to Lender (a) an origination fee in the amount of
$15,000, and (b) 404,000 shares of the Company’s $.001 par value common stock.
These shares were valued by the Company at relative fair value of $96,775. The
cost of this issuance is being captured within the debt financing costs a
component of interest. This Note has been guaranteed personally by Robert
McNulty, Chairman of BoomJ. On October 24, 2007 the Company issued 505,000
shares of the Company’s common stock to Robert McNulty, Chairman of BOOMj.com as
consideration for his guarantee to Centurion for the financing to the Company.
The amount of remuneration was determined by the independent members of the
Executive Committee. These shares were valued by the Company at $0.297 per share
for a total of $150,000, which is being amortized over the term of the Centurion
Loan.
On
October 19, 2007 the Company issued 404,000 shares of the Company’s common stock
to two individuals for services rendered in connection with obtaining the
Centurion Loan for the Company. These shares were valued by the Company at
$0.297 per share for a total of $120,000. The cost of this issuance is recorded
as prepaid financing costs and amortized over the term of the Centurion Loan.
Accordingly, on December 28, 2007 these shares were exchanged for 404,000 shares
of BOOMj.com common stock.
On
November 6, 2007, the Company entered into an agreement with the firm Richardson
& Patel LLC to provide legal services for publicly traded companies. The
Company in exchange for these services issued 20,200 shares of the Company’s
common stock. These shares were valued utilizing information provided from
Financial Valuation Group at $0.297 per share for a total of $6,000. Accordingly
on December 28, 2007 these shares were exchanged for 20,200 shares of BOOMj.com
common stock.
On
November 15, 2007 the Company issued 606,000 shares of the Company’s common
stock to an employee of the Company for the services provided in
2007. These shares were valued by the Company at $0.297 per share for
a total of $180,000.
On
January 18, 2008, the promissory note with Centurion Credit Resources, LLC was
modified to extend the term for an additional ninety (90) days. As a condition
precedent to modification, the Company paid Centurion Credit Resources (a) an
origination fee of $20,000, and (b) 300,000 shares of the Company’s 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,
2008 as debt financing fees. On April 18, 2008 the Company entered into a Second
Modification Agreement with Centurion Credit Resources, LLC on its $500,000
note. As a condition precedent to modification, the Company paid to Centurion
Credit Resources’ (a) an origination fee in the amount of $25,000, and (b)
100,000 additional shares of the Company’s common stock valued at
$30,000.
F -
22
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%, 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 to
the Company. These shares were valued by the Company at $0.30 per share for a
total of $31,500. The total amount was amortized during 2008 as debt financing
fees.
On
February 7, 2008, the Company issued a warrant to a media entity for services
rendered to 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 of 3.50% 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 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 described
above for February 7, 2008. These shares were valued by the Company at $0.30 per
share for a total of $105,000.
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 at an exercise price of $0.93 per share expiring in
2011.
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, 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 purchase 40,000 shares of our common stock at
an exercise price of $0.93 per share expiring in 2013.
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.
In May
2008, the Company entered into an agreement with Wealth Wise LLC to provide
investor relation and other services to the Company on a month-to-month basis.
As compensation for these services, we agreed to pay Wealth Wise
LLC $25,000 in cash and 25,000 shares of our common stock each month. In
2008 we issued a total of 100,000 shares of our stock under this agreement and
recorded expense in the amount of $303,730.
On
May 29, 2008 one of the January 2008 note holders converted an amount of $26,027
being principal and interest of their note into 37,182 shares of the Company’s
common stock.
During
2008 the Company issued 535,715 shares of the Company’s common stock, to one of
its service providers of technical and administrative assistance for the
Company’s e-commerce platform, in settlement of a liability incurred during
2008. The Company has an agreement with this provider to settle the
liability at $.70 per share. However, in accordance with generally
accepted accounting principles, since the trading price of the common stock on
the date of settlement was $3.21 per share, the Company recorded an additional
expense of $268,929 in 2008.
During 2008
the Company issued 425,376 shares of its common stock for $428,635 to foreign
investors.
During
2008, one of our placement agents and three of our investors exercised their
warrants utilizing a cashless option in their agreement, converting 744,027
warrants into 574,326 shares of the Company’s common stock at an exercise price
of $0.93.
F -
23
On August
22, 2008 the Company issued 224,646 shares of the Company’s common stock to
another one of our placement agents as part of their commission in connection
with the convertible note private placement. In accordance with
an agreement with the placement agent, the number of shares was determined by
converting the cost of services to common stock at $.70 per
share. However, at the time of settlement, in accordance with
generally accepted accounting principles, the Company used the trading price of
the stock, which ranged between $2.24 and $3.27 per share, to convert the
liability which resulted in us recording $607,289 of loan fees. In
addition this same placement agent was paid cash commission and fees of
$68,300.
On
September 26, 2008 the Company issued 50,400 shares of the Company’s common
stock to a placement agent for settlement of a liability incurred in a prior
period. In accordance with an agreement with this placement
agent the number of shares was determined by converting the cost of the services
to common stock at $.70 per share. However, in accordance with
generally accepted accounting principles, the Company used the trading price of
the stock on the settlement date, which was $2.50 per share, to record the
expense related to this liability. Since $15,000 was recorded as
expense in a previous period, this resulted in additional expense of $111,000 in
2008.
On
September 30, 2008 the Company sold 25,000 shares of its common stock for
$25,000. As part of this transaction, a warrant was issued to
purchase an additional 12,500 shares of common stock at $.70. This
warrant vested immediately and expires in 5 years.
During
2008, the holders of $1,598,232 of short term convertible notes along with the
accrued interest of $37,368 was converted into 1,635,600 shares of common stock
.
On
October 9, 2008 the Company issued 5,000 shares of common stock to a vendor for
computer software services valued at the trading price of the common stock on
the date of the transcations.
During
October 2008 the Company sold to five (5) different investors, an aggregate of
155,000 shares of its common stock for $155,000. As part of these transactions,
warrants were issued to the investors to purchase an additional 77,500 shares of
common stock at $0.70 per share.
On
October 22, 2008 $25,000 of principal from the short term convertible notes was
converted into 25,000 shares of common stock and the related accrued interest of
$904 was also converted into 904 shares of common stock.
In
December 2008 the Company sold to four (4) different investors, an aggregate of
25,000 shares of its common stock for $25,000. As part of these transactions,
warrants were issued to the investors to purchase an additional 25,000 shares of
common stock at $1.00 per share.
Warrants
The
following is a summary of the Company’s outstanding common stock purchase
warrants:
Outstanding
|
Outstanding
|
|||||||||||||||
Exercise Price
|
December 31,
2007
|
Issued in 2008
|
Exercised
|
December 31,
2008
|
||||||||||||
$0.01
|
193,920
|
—
|
(40,000
|
)
|
153,920
|
(1)
|
||||||||||
$0.30
|
30,300
|
—
|
—
|
30,300
|
||||||||||||
$0.50
|
101,000
|
—
|
—
|
101,000
|
(1)
|
|||||||||||
$0.70
|
0
|
5,087,480
|
—
|
5,087,480
|
||||||||||||
$0.93
|
896,429
|
3,917,858
|
(787,644
|
)
|
4,026,643
|
|||||||||||
$1.00
|
58,247
|
445,000
|
—
|
503,247
|
||||||||||||
$2.40
|
132,310
|
—
|
—
|
132,310
|
(1)
|
|||||||||||
1,412,206
|
9,450,338
|
(827,644
|
)
|
10,034,900
|
(1)
|
The
chart above includes in the outstanding December 31, 2007 balance warrants
to purchase BOOMj.com common stock. The BOOMj.com warrants to
purchase common stock should have been exchanged for warrants of the
Company. On June 28, 2008, the Company issued replacement
warrants for the BOOMj.com warrants. The outstanding
warrants as of December 31, 2008, therefore, include an additional
260,442 warrants issued to replace the warrants previously issued by
Boomj.com, Inc., which new warrants were issued at a rate of 2.02 shares
of the Company common stock for each warrant share of BOOMj.com. The
Company has reserved a sufficient number of shares of authorized common
stock for issuance upon exercise of the outstanding
warrants.
|
F -
24
2008
Stock Option Plan
In
September 2008, the Company's Board of Directors approved the 2008 Equity
Incentive Plan of Beyond
Commerce (the "Plan"). The Plan reserves 3,500,000 shares of common stock
for issuance pursuant to stock options that are either “incentive stock options”
(“ISOs”) intended to satisfy the requirements under Section 422 of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder, or
“non-qualified stock options” (“NQSOs”), (collectively the “Options”). Employees
of the Company, or any of the Company’s subsidiaries, at the option grant date
are eligible to receive NQSOs or ISOs. Consultants, or non-employee directors of
the Company or any of the Company's subsidiaries, are eligible to receive NQSOs.
The Plan is administered by the Board of Directors of the Company (the "Board").
In order to comply with certain rules and regulations of the Securities and
Exchange Commission or the Internal Revenue Code, the Board can delegate
authority to appropriate committees of the Board made up of “non-employee
directors”, as defined under Rule 16b-3 of the Securities and Exchange Act of
1934, and “outside directors” as defined by Section 162(m) of the Code. The
Board has full and final authority to: grant Options; determine the fair
market value of the shares subject to Options; determine the exercise price of
the Options granted; select the persons to whom awards may be granted; determine
the time or times at which Options shall be granted; interpret the Plan;
prescribe, amend and rescind rules and regulations relating to the Plan; to
modify or amend Options or defer the exercise date of the Options, with the
consent of the optionee; and to make all other determinations deemed necessary
for the administration of the Plan.
Under the
Plan, each option granted will be evidenced in a form satisfactory to the Plan
administrator, executed by the Company and the option grantee. Options issued
under the Plan have a term of no more than 10 years, an exercise price equal to
at least 100% of the fair market value of the Company's common stock on the
date of grant, are exercisable immediately as of the effective date of the stock
option agreement granting the option or in accordance with a schedule as may be
set up by the Plan administrator (each such date on such schedule, the
“Vesting Base Date”), and unless otherwise determined by the Board, may not be
transferred except by will, the laws of descent and distribution, or pursuant to
a domestic relations order. Option grants to any person owning more than 10% of
the total combined voting power of all of the Company’s classes of stock, either
directly or through attribution as defined by the Code, or any affiliate as
defined by the rules and regulations of the SEC (“Affiliate”), may not
carry an exercise price of less than 110% of the fair market value of the
Company’s common stock at the date of grant. The exercise period of ISOs granted
may not exceed ten years after the date of grant. Upon termination of
employment, all options immediately vest unless stipulated otherwise by the
Plan administrator at the time of issuance.
The
2008 Equity Incentive Plan was approved by the stockholders of
the Company on September 11, 2008.
Stock
Options Granted
On
September 11, 2008, the Board of Directors approved the issuance of stock
options as described below in accordance with the 2008 Equity Incentive
Plan. The employee options have a cliff vesting schedule over a three year
period that vest one third after one year of service and then 4.2% per month
over the remaining twenty-four months. Options issued to non-employees for
meeting performance-based goals vest immediately.
Option
Group
|
Number
of
Stock
Options
Issued
|
Exercise
Price
|
Expiration
|
||||||||||
$0.70
|
450,000
|
$
|
0.70
per share
|
September 10,
2019
|
|||||||||
$0.80
|
20,000
|
$
|
0.80
per share
|
September 10,
2019
|
|||||||||
$0.90
|
451,049
|
$
|
0.90
per share
|
September 10,
2019
|
|||||||||
$1.01
|
73,271
|
$
|
1.01
per share
|
September 10,
2019
|
|||||||||
$1.50
|
120,000
|
$
|
1.50
per share
|
September 10,
2019
|
F -
25
The
estimated fair value of the aforementioned options was calculated using the
Black-Scholes model. Consequently, the Company recorded a share-based
compensation expense of $630,832 for the year ended December 31, 2008. Total
compensation costs to be recognized over the next 2.4 weighted average number of
years will be $931,989 for all non-vested employee options as of December 31,
2008. The following table summarizes the weighted average of the assumptions
used in the method.
|
Year
ending
December 31,
2008
|
Year
ending
December 31,
2007
|
||||||
Expected
volatility
|
100%
|
n/a
|
||||||
Dividend
yield
|
n/a
|
n/a
|
||||||
Expected
terms (in years)
|
5-10
|
n/a
|
||||||
Risk-free
rate
|
1.50%-2.9%
|
n/a
|
The
following table summarizes the Company’s stock option activity and related
information:
Number
of
|
||||
Shares
|
||||
Balance
as of January 1, 2008
|
-
|
|||
Granted
|
1,114,320
|
|||
Options
to be issued
|
-
|
|||
Expired/forfeit
|
-
|
|||
Balance
as of December 31, 2008
|
1,114,.320
|
OPTIONS
OUTSTANDING
|
OPTIONS
EXERCISABLE
|
|||||||||||||||||
Range
of
Exercise
Prices
|
Number
of
Outstanding
Shares
at
December 31,
2008
|
Weighted
Average
Remaining
Contract
Life
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
at
December
31,
2008
|
Weighted
Average
Exercise
Price
|
|||||||||||||
$
|
0.70
|
450,000
|
9.75
years
|
$
|
0.70
|
69,300
|
$
|
0.70
|
||||||||||
$
|
0.80
|
20,000
|
9.75
years
|
$
|
0.80
|
--
|
$
|
0.80
|
||||||||||
$
|
0.90
|
451,049
|
9.75
years
|
$
|
0.90
|
448,584
|
$
|
0.90
|
||||||||||
$
|
1.01
|
73,271
|
9.75
years
|
$
|
1.01
|
56,502
|
$
|
0.90
|
||||||||||
$
|
1.50
|
120,000
|
9.75
years
|
$
|
1.50
|
103,300
|
$
|
1.50
|
The
weighted-average grant-date fair value of the option granted during the years
ending December 31, 2008 was $0.89.
F -
26
Dividends
In 2007
at the time of the merger and conversion of the preferred stock the Company
issued an additional 599,221 shares of common stock to the preferred
stockholders in full payment of preferred dividends totaling
$188,964.
The
Company anticipates that all future earnings will be retained to finance future
growth. The payment of dividends, if any, in the future to the
Company’s common stockholders is within the discretion of the Board of Directors
of the Company and will depend upon the Company’s earnings, its capital
requirements and financial condition and other relevant factors. The
Company has not paid a dividend on its common stock and does not anticipate
paying any dividends on its common stock in the foreseeable future but instead
intends to retain all earnings, if any, for use in the Company’s business
operations.
NOTE
9 – INCOME TAXES
A
reconciliation of the statutory income tax rates and the Company’s effective tax
rate is as follows:
2008
|
2007
|
|||||||
|
||||||||
Statutory
U.S. federal rate
|
(34.00
|
)%
|
(34.00
|
)%
|
||||
Permanent
differences
|
-
|
7.00
|
%
|
|||||
Valuation
allowance
|
34.00
|
%
|
27.00
|
%
|
||||
Provision
for income tax expense(benefit)
|
0.0
|
%
|
0.0
|
%
|
The tax
effects of the temporary differences and carry forwards that give rise to
deferred tax assets consist of the following:
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
5,106,757
|
1,306,238
|
||||||
Unamortized
start up costs
|
18,000
|
18,000
|
||||||
Accrued
expenses
|
219,729
|
-
|
||||||
Non-cash
compensation
|
678,392
|
-
|
||||||
Derivative
liabilities
|
606,925
|
-
|
||||||
Deferred
revenue
|
242,985
|
-
|
||||||
Total
deferred tax assets
|
6,872,788
|
1,324,238
|
||||||
Deferred
tax liabilities
|
||||||||
Beneficial
conversion features
|
(426,016
|
)
|
-
|
|||||
Deferred
commissions
|
(103,591
|
)
|
-
|
|||||
Total
deferred tax liabilities
|
(529,607
|
)
|
-
|
|||||
Valuation
allowance
|
(6,343,181
|
)
|
(1,324,238
|
)
|
||||
Net
deferred tax asset
|
-
|
-
|
At
December 31, 2008 the Company had U.S. federal net operating losses of
approximately $13,174,000 for income tax purposes which will expire in 2017 and
2018. For financial reporting purposes, the entire amount of the net
deferred tax assets has been offset by a valuation allowance due to uncertainty
regarding the realization of the assets. The net change in the total
valuation allowance for the year ended December 31, 2008 was an increase of
$5,018,983.
As of
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN
48), which requires a company to evaluate whether a tax position taken by the
company will “more likely than not” be sustained upon examination by the
appropriate tax authority. Pursuant to FIN 48, the Company has
analyzed filing positions in all of the federal and state jurisdictions where it
is required to file income tax returns, as well as all open tax years in these
jurisdictions. The Company believes that its income tax filing positions and
deductions would be sustained on audit and does not anticipate any adjustments
that would result in a material change to its financial
position. Therefore, no reserves for uncertain income tax positions
have been recorded pursuant to FIN 48. In addition, the Company
did not record a cumulative effect adjustment related to the adoption of FIN
48.
The
following table summarizes the activity related to the Company's gross
unrecognized tax benefits:
Amount
|
||||
Gross
unrecognized tax benefits at December 31,2007
|
-
|
|||
Increases
in tax positions for current year
|
-
|
|||
Settlements
|
-
|
|||
Lapse
in statute of limitations
|
-
|
|||
Gross
unrecognized tax benefits at December 31,2008
|
-
|
The
Company is subject to U.S. federal income tax including state and local
jurisdictions. Currently, no federal or state income tax returns are under
examination by the respective taxing jurisdictions.
The
Company's accounting policy is to recognize interest and penalties related to
uncertain tax positions in income tax expense. The Company has not accrued
interest for any periods.
F -
27
NOTE
10
|
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. In December 2007 the Company entered
into a four year lease for 4,560 square feet in Henderson, Nevada which houses
its corporate office.
On May 1,
2008 the Company relocated its Orange County office to Irvine, California. The
Irvine lease is for a twelve month period for approximately 2,042 square feet of
office space. The lease in Irvine houses the Company’s marketing and content
employees. Total rent expense incurred by the Company, which includes the leases
above and sundry month to month rental expenditures was $225,006 and $125,421
for the twelve month period ended December 31, 2008 and 2007,
respectively. The Company signed an amendment to its lease in Henderson, Nevada
in February 2009, effective March 16, 2009 for an additional 5,634 square feet
of office space adjacent to the current office. This amendment ties
to the expiration of the present lease and will expire January 31,
2012. The Company has future minimum lease obligations as
follows:
Twelve months ending
December 31,
|
2008
|
|||
2009
|
$
|
270,496
|
||
2010
|
290,025
|
|||
2011
|
298,726
|
|||
2012
|
12,138
|
|||
Total
|
$
|
871,385
|
NOTE 11 – SIGNIFICANT
CUSTOMERS AND SUPPLIERS
The
Company will derive a significant portion of its revenue from e-commerce based
customers. This is a very competitive market with many suppliers for the
products the Company offers. The Company believes that it can replace any one
product line with another supplier without any disruptions in
activity.
NOTE
12 – SEGMENT REPORTING
Beyond
Commerce, Inc manages its operations through two business segments:
BOOMj.com dba i-Supply and Local Ad Link . Each unit owns and
operates the segments under the respective names.
The
Company evaluates performance based on net operating profit. Administrative
functions such as finance, treasury, and information systems are centralized and
although they are not considered operating segments are presented below for
informative purposes. However, where applicable, portions of the administrative
function expenses are allocated between the operating segments. The operating
segments do share facilities in Henderson NV. In the event any supplies and/or
services are provided to one operating segment by the other, the transaction is
valued according to the company’s transfer policy, which approximates market
price. The costs of operating the segments are captured discretely within each
segment. The Company’s leasehold improvements, property, computer equipment,
inventory, and results of operations are captured and reported discretely within
each operating segment.
F -
28
Summary
financial information for the two reportable segments is as
follows:
2008
|
2007
|
|||||||
______________Operations:
I-Supply dba BOOMj.com
|
||||||||
Net
sales
|
$
|
1,060,272
|
$
|
94,485
|
||||
Gross
Margin
|
(23,102
|
)
|
(3,394
|
)
|
||||
Depreciation
|
181,134
|
137,255
|
||||||
Assets
|
598,016
|
852,202
|
||||||
Capital
Expenditures
|
111,882
|
149,698
|
||||||
______________Operations:
Local Ad Link
|
||||||||
Net
sales
|
$
|
782,959
|
-
|
|||||
Gross
Margin
|
(108,766
|
)
|
-
|
|||||
Depreciation
|
1,668
|
-
|
||||||
Assets
|
644,927
|
-
|
||||||
Capital
Expenditures
|
10,000
|
-
|
||||||
2008
|
2007
|
|||||||
Consolidated
Operations:
|
||||||||
Net
sales
|
$
|
1,843,231
|
$
|
94,485
|
||||
Depreciation
|
182,802
|
137,255
|
||||||
Assets
|
1,242,940
|
925,056
|
||||||
Capital
Expenditures
|
121,882
|
149,689
|
NOTE
13 – RELATED PARTIES
Rhett
McNulty is the son of Robert J. McNulty, our CEO. Rhett McNulty owns Linlithgow
Holdings, LLC, which is the Company’s largest shareholder. Rhett McNulty is also
the Chief Operating Officer and an 18% owner of Hype/Swapin Networks, Inc. In
December 2006 Boomj.com, Inc. purchased its proprietary website software from
Hype/Swapin Networks, Inc. for 500,000 shares of Boomj Series A Preferred stock.
Prior to the acquisition of BOOMj these 500,000 Series A Preferred shares were
converted into 550,000 shares of Boomj.com’s common stock. In connection the
acquisition of BOOMj.com, we issued 1,111,000 shares of our common stock in
exchange for these 550,000 shares.
During
2007 Boomj.com borrowed $218,000 from Linlithgow Holdings LLC in a series
of transactions. All of the loans bore interest at 12% per year and have since
been repaid. In connection with these loans Boomj.com issued Linlithgow Holdings
warrants to purchase 34,835 shares of its common stock. The warrants are
exercisable at price ranges from $0.01 to $1.00 per share and expire on December
31, 2011. The Company also paid Linlithgow Holdings $195,000 in consulting
fees for services provided. In 2008 we paid Linlithgow Holdings
$53,450 in commissions and consulting fees.
We also
have related party transactions with FA Corp in which the principal shareholder
is a member of our board of directors, Murray Williams. We paid FA
Corp in 2008 $102,673 for services rendered. Another one of our directors, Mr.
Barry Falk is a partner in the law firm Irvine Venture Law Firm. The Company
paid $185 in 2007 and $336 in 2008 for legal services provided to the Company by
Mr. Falk’s firm.
In 2009,
we started using a debit card issued by TAC Financial, Inc., which as of
December 31, 2008 was 85% owned by Linlithgow Holdings, LLC. Additionally, one
of our employees, Clark McNulty, the son of Robert J. McNulty, sits on the Board
of TAC Financial, Inc. The Company has not incurred any expenses
related to these debit cards in 2008. The Company uses their VISA
debit card as a means to pay commissions to our Local Ad Link sales
representatives. As of March 13, 2009 Linlithgow Holdings, LLC
ownership percentage of TAC Financial, Inc. was reduced to approximately
75%.
F -
29
NOTE
14 – NET LOSS PER SHARE OF COMMON STOCK
The
Company has adopted Financial Accounting Standards Board ("FASB") Statement
Number 128, "Earnings per Share," which requires presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. In the accompanying financial statements, basic loss
per share of common stock is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the
year. 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, stock options 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 stock options
shares excluded from the diluted net loss per common share presentation was
19,010,108 and 1,151,764 at December 31, 2008 and 2007,
respectively.
Outstanding
warrants of 10,034,900, 1,114,320 stock options, 6,764,285 convertible
debt to purchase the Company’s common stock are not included in the
computation of diluted earnings per share because the effect of these
instruments would be anti-dilutive (i.e., reduce the loss per share) for the
year ended December 31, 2008. The following is a reconciliation of the numerator
and denominator of the basic and diluted earnings per share computations for the
period ended December 31, 2008 and the year ended December 31,
2007:
Numerator
Basic and
diluted net loss per share:
2008
|
2007
|
|||||||
Net
loss available to common stockholders
|
$
|
(12,857,990
|
)
|
$
|
(4,973,477
|
)
|
||
Denominator
|
||||||||
Basic
and diluted weighted average number of shares outstanding
|
38,580,296
|
24,533,552
|
||||||
Basic
and diluted net loss per share
|
$
|
(0.33
|
)
|
$
|
(0.20
|
)
|
NOTE 15 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 $48,192
and $13,575 for the year ended December 31, 2008 and 2007, respectively for
interest. The Company did not make any payments for income tax during the year
ended December 31, 2008. As of December 31, 2008, prepaid loan fees included
$263,007 (net of amortization) of debt related fees, which were paid by issuing
common stock and warrants.
During
2007, prepaid expenses included $52,000 of prepaid loan and consulting fees
which were paid by issuing common stock. Also, during 2007 a note for $100,000
and interest expense of $1,907 was converted into Series B preferred
stock.
During
2007, the Company issued 202,000 shares of Series A preferred stock in payment
of a payable of $50,000 and issued warrants valued at $22,908 for additional
debt financing.
During
2007, the Company issued 404,000 shares of common stock valued at $96,775 as
additional consideration for a $500,000.
NOTE 16 SUBSEQUENT
EVENTS
In
January 2009, we issued 10,000 shares of our common stock for services provided
as a commission, and an addition 1,000 shares of common stock to an individual
for services rendered with setting up our debit card program used for paying our
sales representatives.
On
January 12, 2009 we issued 25,000 shares of common stock for cash at $0.80 per
share to an accredited investor.
F -
30
On
January 7, 2009 we received a bridge loan of $100,000 at 12% interest due May 7,
2009. In addition we issued warrants to the investor to purchase
100,000 shares of our common stock at an exercise price of $1.00.
On
January 26, 2009 we issued stock options to two of our Board members of 56,625
each with a $0.70 exercise price.
In
February 2009, we issued 52,000 shares of our common stock for services rendered
in connection with our convertible bridge loans procured during the fourth
quarter 2008.Also in February, we issued 5,000 shares of stock as compensation
to an employee.
During
the first quarter of 2009, three of our note holders converted the principal and
interest of their convertible promissory notes into shares of our common stock
at a conversion rate of $.70 per share. Total principal converted was
$205,000, which amount was converted into 292,858 common
shares. Total accrued interest converted was $23,627 into 33,752
common shares.
During
March 2009, the holders of $2,025,000 of our secured convertible promissory
notes that were scheduled to mature on March 31, 2009 agreed to extend the
maturity date to July 31, 2009. As consideration for their agreement
to extend the maturity date, we issued three-year warrants to the note holders
granting them the right to purchase an aggregate of 600,000 shares of our common
stock, at an exercise price of $1.00 per share.
F -
31
BEYOND
COMMERCE
CONDENSED
CONSOLIDATED BALANCE SHEET
Unaudited
|
|
September 30,
2009
|
|
|
December 31,
2008
as adjusted,
(Note 16)
|
|
||
ASSETS
|
||||||||
Current
assets :
|
||||||||
Cash
|
$
|
-
|
$
|
100,086
|
||||
Accounts
receivable
|
10,697
|
226,091
|
||||||
Prepaid
loan cost
|
1,079,633
|
562,665
|
||||||
Prepaid
commissions
|
736,274
|
260,055
|
||||||
Other
current assets
|
931,265
|
46,230
|
||||||
Total
current assets
|
$
|
2,757,869
|
$
|
1,195,127
|
||||
Property,
Web site and computer equipment
|
1,392,447
|
871,180
|
||||||
Less:
Accumulated depreciation and amortization
|
(515,898
|
)
|
(320,366
|
)
|
||||
Property,
Web site and computer equipment – net
|
$
|
876,549
|
$
|
550,814
|
||||
Other
Assets
|
75,656
|
60,067
|
||||||
Total
assets
|
$
|
3,710,074
|
$
|
1,806,008
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Short
term borrowings, net of discount
|
$
|
7,079,079
|
$
|
2,400,555
|
||||
Short
term borrowings, net of discount – related party
|
1,160,305
|
-
|
||||||
Accounts
payable
|
1,962,157
|
1,490,590
|
||||||
Accounts
payable - related party
|
135,302
|
19,552
|
||||||
Checks
Written In Excess of Cash
|
134,217
|
-
|
||||||
Note
derivative liability
|
3,451,215
|
3,396,935
|
||||||
Other
current liabilities
|
2,299,685
|
1,374,534
|
||||||
Deferred
Revenue
|
1,809,130
|
609,987
|
||||||
Total
current liabilities
|
$
|
18,031,090
|
$
|
9,292,153
|
||||
Stockholders’
Deficit :
|
||||||||
Common
stock, $0.001 par value, 200,000,000 and 75,000,000 shares authorized as
of September 30, 2009 and December 31, 2008,
respectively, and 46,640,941and 40,936,143 issued and outstanding at
September 30, 2009 and December 31, 2008,
respectively
|
$
|
46,641
|
$
|
40,936
|
||||
Additional
paid in capital
|
21,370,934
|
11,096,604
|
||||||
Accumulated
deficit
|
(35,738,591
|
)
|
(18,623,685
|
)
|
||||
Total
stockholders' deficit
|
$
|
(14,321,016
|
)
|
$
|
(7,486,145
|
)
|
||
Total
Liabilities and Stockholders' Deficit
|
$
|
3,710,074
|
$
|
1,806,008
|
See
accompanying notes of these unaudited condensed financial
statements.
F -
32
BEYOND
COMMERCE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the three month period ended September 30,
Unaudited
2009
|
2008
|
|||||||
Revenues
|
||||||||
Advertising
Revenue
|
$
|
1,811,788
|
$
|
57,562
|
||||
Merchandising
Revenue
|
240,078
|
147,248
|
||||||
Total
Revenue
|
2,051,866
|
204,810
|
||||||
Operating
expenses
|
||||||||
Cost
of advertising
|
$
|
1,441,623
|
$
|
-
|
||||
Cost
of merchandising
|
42,942
|
165,630
|
||||||
Selling
general & administrative
|
2,106,072
|
2,261,636
|
||||||
Selling
general & administrative - related party
|
90,412
|
-
|
||||||
Professional
fees
|
725,559
|
470,603
|
||||||
Professional
fees - related party
|
9,240
|
24,616
|
||||||
Depreciation
and amortization
|
88,759
|
47,762
|
||||||
Total
costs and operating expenses
|
$
|
4,504,607
|
$
|
2,970,247
|
||||
Loss
from operations
|
(2,452,741
|
)
|
(2,765,437
|
)
|
||||
Non-operating
income (expense)
|
||||||||
Interest
expense, net
|
(3,077,517
|
)
|
(1,266,619
|
)
|
||||
Interest
expense – related party
|
(62,800
|
)
|
-
|
|||||
Change
in derivative liability
|
(2,942,287
|
)
|
-
|
|||||
Total
non-operating expense
|
$
|
(6,082,604
|
)
|
$
|
(1,266,619
|
)
|
||
Loss
from operations before income taxes
|
(8,535,345
|
)
|
(4,032,056
|
)
|
||||
Provision
for income tax
|
-
|
-
|
||||||
Net
loss
|
$
|
(8,535,345
|
)
|
$
|
(4,032,056
|
)
|
||
Net
loss available to common stockholders
|
$
|
(8,535,345
|
)
|
$
|
(4,032,056
|
)
|
||
Basic
and diluted net loss per common share
|
$
|
(0.18
|
)
|
$
|
(0.10
|
)
|
||
Weighted
average shares of common stock outstanding - basic
|
46,619,719
|
39,481,833
|
See
accompanying notes of these unaudited condensed financial
statements.
F -
33
BEYOND
COMMERCE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the nine month period ended September 30,
Unaudited
2009
|
2008
|
|||||||
Revenues
|
||||||||
Advertising
Revenue
|
$
|
12,299,017
|
$
|
57,562
|
||||
Merchandising
Revenue
|
409,051
|
967,461
|
||||||
Total
Revenue
|
12,708,068
|
1,025,023
|
||||||
Operating
expenses
|
||||||||
Cost
of advertising
|
$
|
11,464,512
|
$
|
-
|
||||
Cost
of merchandising
|
63,437
|
1,050,113
|
||||||
Selling
general & administrative
|
8,444,784
|
5,128,603
|
||||||
Selling
general & administrative - related party
|
246,052
|
76,650
|
||||||
Professional
fees
|
2,764,040
|
1,141,854
|
||||||
Professional
fees - related party
|
39,578
|
102,673
|
||||||
Depreciation
and amortization
|
195,533
|
134,343
|
||||||
Total
costs and operating expenses
|
$
|
23,217,936
|
$
|
7,634,236
|
||||
Loss
from operations
|
(10,509,868
|
)
|
(6,609,213
|
)
|
||||
Non-operating
income (expense)
|
||||||||
Interest
expense, net
|
(7,565,985
|
)
|
(2,378,091
|
)
|
||||
Interest
expense – related party
|
(94,800
|
)
|
-
|
|||||
Change
in derivative liability
|
1,055,747
|
-
|
||||||
Total
non-operating expense
|
$
|
(6,605,038
|
)
|
$
|
(2,378,091
|
)
|
||
Loss
from operations before income taxes
|
(17,114,906
|
)
|
(8,987,304
|
)
|
||||
Provision
for income tax
|
-
|
-
|
||||||
Net
loss
|
$
|
(17,114,906
|
)
|
$
|
(8,987,304
|
)
|
||
Net
loss available to common stockholders
|
$
|
(17,114,906
|
)
|
$
|
(8,987,304
|
)
|
||
Basic
and diluted net loss per common share
|
$
|
(0.39
|
)
|
$
|
(0.23
|
)
|
||
Weighted
average shares of common stock outstanding - basic
|
43,737,435
|
37,805,466
|
See
accompanying notes of these unaudited condensed financial
statements.
F -
34
BEYOND
COMMERCE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the nine month period ended September 30,
Unaudited
2009
|
2008
|
|||||||
Net
cash used in operating activities
|
$
|
(6,200,151)
|
$
|
(5,590,315
|
)
|
|||
Cash
flows from investing activities:
|
||||||||
Cash
paid to purchase property and equipment
|
(521,268
|
)
|
(121,882
|
)
|
||||
Net
cash used in investing activities
|
$
|
(521,268
|
)
|
$
|
(121,882
|
)
|
||
Cash
flows from financing activities:
|
||||||||
Issuance
of stock - net of offering costs
|
20,000
|
530,927
|
||||||
Cash
received from short term borrowings
|
9,158,000
|
5,733,232
|
||||||
Cash
Paid for debt financing fees
|
(826,500)
|
-
|
||||||
Payment
on short term borrowings - related party
|
-
|
(635,000)
|
||||||
Payment
on short term borrowings
|
(1,730,167
|
)
|
-
|
|||||
Net
cash provided by financing activities
|
$
|
6,621,333
|
$
|
5,629,159
|
||||
Net
increase (decrease) in cash & cash equivalents
|
(100,086
|
)
|
(83,038
|
)
|
||||
Cash
& cash equivalents, beginning balance
|
100,086
|
111,247
|
||||||
Cash
& cash equivalents, ending balance
|
$
|
-
|
$
|
28,209
|
See
accompanying notes of these unaudited condensed financial
statements.
F -
35
BEYOND
COMMERCE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 DESCRIPTION OF
BUSINESS AND BASIS OF PRESENTATION
Beyond
Commerce, Inc., formerly known as BOOMj, Inc. (the “Company”, and “we”), is an
Internet company that has two interrelated business models aimed at generating
revenues primarily from Web site advertising and E-commerce transactions.
Our initial business was
BOOMj.com, Inc., www.BOOMj.com,
a niche portal and social networking site for Baby Boomers and Generation
Jones. Our BOOMj.com Web site provides social, political, financial,
and lifestyle content to the Baby Boomer/Generation Jones target audience as a
platform for our advertising and E-commerce businesses. Our LocalAdLink subsidiary
operates a website, a local search directory and advertising network that brings
local advertising to geo-targeted consumers. On October 9, 2009,
LocalAdLink Inc., a wholly-owned subsidiary of the Company sold its LocalAdLink
Software (the “Software”) and all of their assets related to the Software
including the rights to the name LocalAdLink, the LocalAdLink trademark,
the Web site, www.LocalAdLink.com
, and a local search directory and advertising network that brings local
advertising to geo-targeted consumers, (see Note 15). The Company will
continue to sell advertising as it had prior to inception of Local Ad Link,
Inc., however on a different scale with a greater emphasis on business to
business sales.
During
the second quarter we relaunched i-SUPPLY, www.i-SUPPLY.com,
an online storefront that offers easy to use, fully customizable E-commerce
services, and revenue solutions for any third party Web site large or small, and
hosts local ads, providing extensive reach for our proprietary advertising
partner network platform. During the third quarter of 2009 the
Company started another subsidiary, KaChing KaChing, which is an E-commerce
platform that provides a complete turn-key E-commerce solution. Individual
KaChing KaChing on line store owners have the ability to create, manage and earn
money from product sales generated from their individual Web
stores.
The
condensed consolidated financial statements and the notes thereto for the
periods ended September 30, 2009 and 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 except for those described in Note
16 and related to the derivatives in Note 7. These interim results are not
necessarily indicative of the results for any subsequent period or for the
fiscal year ending December 31, 2009.
Certain
information and footnote disclosures normally included in the 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
consolidated financial statements should be read in conjunction with the audited
financial statements and the notes thereto for the fiscal year ended December
31, 2008 in the Form 10-K, filed with the SEC on April 3, 2009.
History
of the Company
The
Company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated
in Nevada on January 12, 2006. As of December 28, 2007, RES was a
public shell company, defined by the Securities and Exchange Commission as an
inactive, publicly quoted company with nominal assets and
liabilities.
In
December 2008, the Company changed its name from BOOMj, Inc. to Beyond Commerce,
Inc. to more accurately reflect the new structure of the Company consisting of
two operating divisions: BOOMj.com dba i-SUPPLY and until its assets
were sold, LocalAdLink, Inc. (see Note 15).
The
Company currently maintains its corporate office in Henderson,
Nevada.
F -
36
NOTE 2 - SELECTED ACCOUNTING
POLICIES
Reclassifications
Certain
comparative amounts from prior periods have been reclassified to conform to the
current year's presentation. These changes did not affect previously reported
net loss.
Employee
Benefits
The
Company currently offers employees vacation benefits and during the second
quarter began offering a healthcare plan. During 2008, the Company implemented
the 2008 Equity Incentive Plan.
Accounting
Pronouncements
On
January 1, 2009, the Company adopted SFAS No. 157, Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. SFAS 157 defines
fair value, establishes a framework for measuring fair value under GAAP, and
expands disclosures about fair value measurements.
NOTE
3 – 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, even though the Company
has some degree of sales, it reflected a loss of $17,114,906 for the nine months
ended September 30, 2009 and it will need to accelerate its business model
implementation otherwise there is a need to raise additional capital and or
obtain financing to continue operations into 2010. The failure to realize the
improvement in the business model presents conditions that raise substantial
doubt about the Company’s ability to continue as a going concern. 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
has taken steps to improve the business operations along with raising additional
funds to address its operating and financial cash requirements to continue
operations in the next twelve months (see Notes 8 and 15). Management continues
to devote 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
4 - PROPERTY, WEB SITE AND COMPUTER EQUIPMENT
Property
and equipment at September 30, 2009 and December 31, 2008 consisted of the
following:
2009
|
2008
|
|||||||
Office
and computer equipment
|
$
|
307,542
|
$
|
186,614
|
||||
Web
site and software
|
1,084,905
|
684,566
|
||||||
Total
property, Web site and computer equipment
|
1,392,447
|
871,180
|
||||||
Less:
accumulated depreciation and amortization
|
(515,898
|
)
|
(320,366
|
)
|
||||
$
|
876,549
|
$
|
550,814
|
Depreciation
and amortization expense for the three months and nine months ended September
30, 2009 were $88,759 and $195,533, respectively compared to $47,762 and
$134,343 for the same periods in 2008.
NOTE
5 – OTHER CURRENT ASSETS
Other
current assets consist of the following at September 30, 2009 and December 31,
2008
2009
|
2008
|
|||||||
Credit
Card processor retention
|
$
|
728,255
|
$
|
1,362
|
||||
Prepaid
Insurance, legal, rent and advertising
|
8,356
|
-
|
||||||
Other
|
194,654
|
44,868
|
||||||
TOTAL
|
$
|
931,265
|
$
|
46,230
|
F -
37
OTHER
ASSETS
Other
assets consist of the following at September 30, 2009 and December 31,
2008
2009
|
2008
|
|||||||
Rent
Deposits
|
$
|
49,904
|
$
|
20,828
|
||||
Credit
Card Reserve
|
33,387
|
|||||||
Vendor
Deposit
|
25,752
|
5,852
|
||||||
TOTAL
|
$
|
75,656
|
$
|
60,067
|
NOTE
6 - ACCRUED EXPENSES
Accrued
expenses consist of the following at September 30, 2009 and December 31,
2008:
2009
|
2008
|
|||||||
Accrued
interest
|
522,163
|
388,783
|
||||||
Accrued
commission
|
-
|
220,869
|
||||||
Accrued
payroll and related expenses
|
1,460,517
|
625,997
|
||||||
Other
|
317,005
|
138,885
|
||||||
$
|
2,299,685
|
$
|
1,374,534
|
See
Note 14 for related parties.
NOTE
7 – DERIVATIVE INSTRUMENTS
Several
of the notes contain provisions which if triggered would reset the conversion
price of the Notes including; (1) In the event the Company failed to timely
convert or deliver the conversion shares, the Notes went into default as defined
under the agreement or a change of control event; (2) a reset provision in the
conversion and exercise prices, should the Company subsequently issue any common
stock or instruments convertible or exchangeable into common stock of the
Company at a per share price lower than the then-in-effect conversion price
which, would automatically reset the conversion price of the Notes to that lower
price. Because of these provisions, the Company determined that the
conversion feature was not clearly and closely related to the Note host contract
and under the guidance of Emerging Issues Task Force (“EITF”) 05-2 “The Meaning
of Conventional Convertible Debt Instrument Under EITF 00-19” and SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) it
has bifurcated the conversion feature. Because the conversion feature
is not considered to be conventional convertible and note holders have the
ability to demand cash settlement of the conversion feature, the amount recorded
has been shown as a liability at September 30, 2009 of
$3,451,215. This liability was $3,396,935, as adjusted at December
31, 2008. Under the requirements of SFAS 133, the Company has
remeasured the fair value of the conversion feature at each reporting period
after inception, with those changes in fair value being recorded in
the statement of operations.
NOTE
8 – SHORT TERM BORROWINGS
9/30/2009
|
12/31/2008
|
|||||||
Note
payable to Carole Harder bearing an annual interest rate of 12%,
unsecured, due 10/6/2009
|
$
|
140,000
|
$
|
140,000
|
||||
Convertible
Promissory Notes, bearing an annual interest rate of 12%, secured, due
1/31/10
|
2,280,000
|
4,280,000
|
||||||
Convertible
Promissory Notes, bearing an annual interest rate of 18%, secured, due
11/16/09
|
1,333,333
|
-
|
||||||
Convertible
Promissory Notes due 6/26/2010 (original note discount of
$83,330)
|
583,330
|
-
|
||||||
Convertible
Promissory Notes due 7/2/2010 (original note discount of
$83,330)
|
583,330
|
-
|
||||||
Convertible
Promissory Notes due 7/10/2010 (original note discount of
$83,330)
|
583,330
|
-
|
||||||
Convertible
Promissory Notes due 7/21/2010 (original note discount of
$250,010)
|
1,750,010
|
-
|
||||||
Convertible
Promissory Notes due 7/29/2010 (original note discount of
$98,145)
|
641,663
|
-
|
||||||
Convertible
Promissory Notes due 8/11/2010 (original note discount of
$41,665)
|
291,665
|
-
|
||||||
Convertible
Promissory Notes due 8/20/2010 (original note discount of
$11,666)
|
116,666
|
-
|
||||||
Convertible
Promissory Notes due 8/27/2010 (original note discount of
$53,332)
|
373,332
|
-
|
||||||
Convertible
Promissory Notes due 9/3/2010 (original note discount of
$99,996)
|
699,996
|
-
|
||||||
Sundry Bridge Notes, bearing an annual
interest rate 12%, unsecured, due between
10/6/09-1/4/2010
|
1,280,000
|
508,500
|
||||||
Total
principal
|
$
|
10,656,655
|
$
|
4,928,500
|
||||
Less
debt discount
|
(2,417,271
|
)
|
(2,527,945
|
)
|
||||
Net
balance
|
$
|
8,239,384
|
$
|
2,400,555
|
F -
38
The above
notes listed as Convertible Promissory Note Holders, except for $1,333,333, have
a lien on all the assets of the Company,
On
January 7, 2009 and February 10, 2009 the Company raised $100,000 and $60,000
respectively in a private offering from accredited investors. The securities
sold by the Company consisted of its 12% secured convertible promissory notes
and warrants to purchase 100,000 and 60,000 shares of the Company’s common
stock, respectively at an exercise price of $1.00. The warrants were valued
using the Black–Scholes method. This resulted in a total value of $117,885
assuming a fair value per share of $1.00, risk-free interest rates ranging of
1.50% to 1.74% respectively, based on the note issuance and 100% volatility
index. Under EITF 00-27 and APB No. 14, we allocated the proceeds
from issuance of these notes and warrants based on the proportional fair value
for each item. Consequently, we recorded a discount of $131,894 which
is being amortized over the term of these notes using an effective periodic
interest rate of between 46 and 63,146%,. A beneficial conversion
discount was recorded on these convertible notes since these notes were
convertible into shares of common stock at an effective conversion price lower
than the fair value of the common stock. The beneficial conversion
amount was limited to the portion of the cash proceeds allocated to those
convertible notes.
On
January 30 and February 25 and March 9, 2009, three of our 12% convertible note
holders converted their notes of $50,000, $105,000 and $50,000 respectively,
into shares of common stock at a conversion rate of $0.70. This
resulted in an issuance of 71,429, 150,000 and 71,429 shares of common stock,
respectively. In addition the three note holders also converted their
accumulated interest on their respective notes into shares of the Company’s
common stock at a conversion rate of $0.70. The total interest
converted was $6,283, $13,727 and $3,617 respectively and converted into 8,976,
19,609 and 5,167 of the Company’s common shares, respectively.
During
March 2009, the holders of $2,025,000 of our secured convertible promissory
notes that were scheduled to mature on March 31, 2009 agreed to extend the
maturity date to July 31, 2009. As consideration for their agreement
to extend the maturity date, we issued three-year warrants to the note holders
granting them the right to purchase an aggregate of 600,000 shares of our common
stock, at an exercise price of $1.00 per share. The Company recorded these
warrants at a value of $149,675 which is being amortized over the term of the
loan extensions. During July 2009, the note holders, who had not yet
converted their notes into common shares, along with our July and August
noteholders having this same July 31st
maturity date agreed to extend the maturity date to January 31, 2010. These
holders have an aggregate of $2,380,000 of our secured convertible
promissory notes. We issued three-year warrants to the note holders granting
them the right to purchase an aggregate of 680,000 shares of our common stock,
at an exercise price of $1.00 per share. The Company recorded these warrants at
a value of $115,600 which is being amortized over the term of the loan
extensions.
On April
9, 2009, the Company entered into financing with OmniReliant
Holdings, Inc. (“Omni”) pursuant to a purchase agreement whereby it sold to Omni
a convertible original issue discount promissory note in the principal amount of
$550,000 (the “First Note”), with the Company receiving proceeds of
$500,000. The First Note is convertible at any time at the option of
Omni at a conversion price of $1.00 and is due on May 9, 2009. Omni
also received warrants to purchase up to 500,000 shares of the Company’s Common
Stock with an exercise price of $1.00. There was a reset provision associated
with the note in regards to subsequent equity sales affecting the note and
warrants. Based on subsequent financing transactions, the exercise
price of the warrants and the conversion price of the debt was reset to
$0.70. In accordance with EITF 07-5, “Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock”, related
to the valuation of convertible notes and warrants with conversion features
and/or exercise features that can reset the conversion and/or exercise price
based on future equity transactions, the Company valued the warrants and
conversion feature of this note and bifurcated them from the host contract as a
derivative under SFAS 133 “Accounting for Derivative Instruments and Hedging
Activities” by recognizing an additional liability for the fair value assigned
to those derivative features of approximately $92,000. At
June 30, 2009 the value of the derivative related to the warrants was
approximately $10,000. The value of this derivative at September 30,
2009 was $55,000.The change in the derivative was reported in the statement of
operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $216,000 related to the value
of the warrants to be amortized over the term of the note. Since this
note was paid off on May 7, 2009, this discount was expensed and the derivative
related to the note was removed during the quarter ended June 30,
2009.
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During
April 2009, eight of our note holders converted the principal and interest of
their convertible promissory notes into shares of the Company common stock at a
conversion rate of $0.70 per share. Total principal converted was
$665,000, which was converted into 950,000 of the Company common
shares. Total accrued interest of $77,137 was converted into 110,580
of the Company common shares.
On May 1,
2009, the Company issued a 120 day promissory note at 12% interest to an
accredited investor for $800,000. As a condition of the note, the
company issued the lender 400,000 warrants to purchase the Company's common
shares at a price of $1.00 per share. The warrants were valued using the
Black–Scholes method. This resulted in a total value of $363,965, assuming a
fair value per share of $1.00, risk-free interest rate of 1.98% and, based on
the note issuance and 100% volatility index. Under EITF 00-27 and APB
No. 14, we allocated the proceeds from issuance of this note and warrants based
on the proportional fair value for each item. The relative fair value
of the warrant was $250,160. A beneficial conversion discount was
recorded on the convertible note since the note is convertible into shares of
common stock at an effective conversion price lower than the fair value of the
common stock. Consequently, we recorded a total discount of $772,160 which is
being amortized over the term of these notes using an effective periodic
interest rate of 436%. The note was extended on July 15, 2009 in return
for monthly cash interest payments with the maturity date being moved to January
28, 2010. The broker received a cash fee of $80,000
On May 7,
2009 one of our note holders converted the principal and interest of their
convertible promissory note into shares of the Company common stock at a
conversion rate of $1.00 per share. Total principal converted was $100,000,
which was converted into 100,000 shares of the Company common
stock. Total accrued interest converted was $4,000 into 4,000 of the
Company common shares.
On May
20, 2009, the Company executed a convertible promissory note (the “Note”) in the
principal amount of $1,600,000 payable to Linlithgow Holdings, LLC
(“Linlithgow”). Pursuant to the Note, the Company promises to pay to
Linlithgow $1,600,000 in cash on November 20, 2009. The Note is convertible at
any time at a conversion price of $1.00 per share which was reset to $0.70 due
to a subsequent offering. The Note bears an initial interest rate of
1.5% for the first month and increases by 1.5% per month until maturity. After
the maturity date, the default rate of interest becomes 18% per month or the
highest rate allowed by law, whichever is lower, until the date the Note amount
is actually paid. Further, as part of the consideration provided to the
Holder for the Note, the Holder also received a warrant for the purchase of up
to 1,782,000 shares of the Company’s common stock at an exercise price of $0.90
per share. The warrants are exercisable, in whole or in part, any time from and
after the date of issuance of the warrant. Due to a
subsequent ratchet adjustment based on the issuance of warrants at a
lower per share price, the exercise price of these warrants has been adjusted to
$0.70. In accordance with EITF 07-5, “Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own Stock”, related to the valuation
of convertible notes and warrants with conversion features and/or exercise
features that can reset the conversion and/or exercise price based on future
equity transactions, the Company valued the warrants and conversion feature of
this note and bifurcated them from the host contract as a derivative under SFAS
133 “Accounting for Derivative Instruments and Hedging Activities” by
recognizing an additional liability for the fair value assigned to those
derivative features of approximately $618,000 at inception of the
agreement. At September 30, 2009 the value of the derivative was
approximately $182,000. The change in the derivative was reported in
the statement of operations for the period ended September 30,
2009. The company recorded the discount on this note of approximately
$465,000 related to the value of the warrants and derivative liability to be
amortized over the term of the note at an effective rate
12%. Additionally, the warrants issued as costs of this financing
were valued at approximately $1,125,000 and are being amortized over the term of
the note. The broker also received a cash fee of $120,000
from the proceeds of this note.
During
May 2009, seven of our note holders converted the principal and interest of
their convertible promissory notes into shares of the Company common stock at a
conversion rate of $.70 per share. Total principal converted was
$920,000, which was converted into 1,314,285 of the Company common
shares. Total accrued interest of $105,340 was converted into 150,487
of the Company common shares.
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On June
4, 2009 the Company sold a Convertible Original Issue Discounted (OID)
promissory note for $526,316 to an accredited investor which is due
1/15/2010. The Company paid the broker a cash fee of
$50,000. However, on June 19, 2009, the average trading volume of the
common stock of the Company was under $80,000 for the ten prior consecutive
trading days, which constituted a technical “Event of Default” under the
Company’s Series 2009 Secured Convertible Original Issue Discount Note Due
January 15, 2010, dated June 4, 2009 (the “Note”), made by the Company, in favor
of St. George Investments, LLC (St. George). As a result of the Event of
Default, the principal amount of the Note, equal to $714,286, plus a penalty of
$71,428.60 (equal to 10% of the principal amount), became immediately due and
payable. At any time following either the Maturity Date or occurrence of an
Event of Default, the note may be convertible into shares of the Common Stock of
the Company valued at the Market Price which is hundred percent (100%) of the
lower of (a) the closing bid price on the trading day on which the Share
Conversion Request is made or (b) the average of the volume weighted average
prices as reported by Bloomberg, L.P. during the ten (10) trading days in the
primary trading market for Common Shares prior to and including the trading day
on which the Share Conversion Request is made.
The St.
George Note was secured by an aggregate of 4,020,000 shares of the Company’s
common stock pledged by affiliates of the Company, pursuant to stock pledge
agreements entered into by the affiliates in favor of St. George, including
2,020,000 shares pledged by Mark Noffke, the Company’s chief financial officer.
Pursuant to the pledge agreement entered into by Mr. Noffke, shares pledged by
Mr. Noffke may be transferred to St. George and sold in full satisfaction of the
Company’s obligations under the Note.
Subsequently,
the Company and St. George Investments, LLC, entered into an agreement dated
July 30, 2009 (the “Agreement”) pursuant to which the Company would satisfy the
remaining outstanding balance of $420,593.40 on its Series 2009 Secured
Convertible Original Issue Discount Note, due June 15, 2010, issued to St.
George (the “Note”). Pursuant to the Agreement, the Company was to
make the following payments (the “Scheduled Payments”) on the
Note: (i) $100,000 paid on July 30, 2009, (ii) $50,000 was to be paid
by August 6, 2009, (iii) 50,000 was to be paid by August 13, 2009, (iv) $50,000
was to be paid by August 20, 2009, (v) $50,000 shall be paid by August 27, 2009,
(vi) $50,000 was to be paid on or before September 3, 2009, (vii)
$50,000 was to be paid on or before September 10, 2009 and (viii) $20,995.40 was
to be paid on or before September 17, 2009. The Company settled the
first two payments of the Agreement. In addition, when the note was
deemed in default, St. George took collateral and monetized it towards payment
of the note. Provided the Scheduled Payments continued to be made in
accordance with the Agreement, the Note would be deemed paid in full and St.
George would return the remaining 3,015,424 shares of the Company’s common stock
not previously monetized which had been pledged as security for repayment of the
Note, and would not hold any other shares pledged in connection with the
Note. The August payments were not made and St. George monetized
1,988,592 of the 2,020,000 shares pledged by Mark Noffke for full payment of the
note. The average sale price of these shares range from $0.70 to $0.16 over a
three month period ending September 9, 2009 when the Company used $95,000 to pay
off the balance of the note.
On June
16, 2009, the Company entered into another financing with Omni pursuant to a
second purchase agreement whereby it sold Omni a convertible original issue
discount promissory note (the “Second Note”) in the principal amount of
$575,000, with the Company receiving proceeds of $500,000. Pursuant
to the terms of the Second Note, the Company must pay to the Holder $575,000 in
cash on August 1, 2009. The Second Note is convertible at any time at a
conversion price of $0.70 per share. In addition, the Company gave the lender
700,000 and the broker 121,714 warrants to purchase the Company stock,
respectively, both with an exercise price of $0.70. In accordance with EITF
07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity’s Own Stock”, related to the valuation of convertible notes and warrants
with conversion features and/or exercise features that can reset the conversion
and/or exercise price based on future equity transactions, the Company valued
the warrants and conversion feature of this note and bifurcated them from the
host contract as a derivative under SFAS 133 “Accounting for Derivative
Instruments and Hedging Activities” by recognizing an additional liability for
the fair value assigned to those derivative features of approximately
$24,000 at inception of the agreement. At September 30, 2009 the
value of the derivative was approximately $77,000. The change in the
derivative was reported in the statement of operations for the period ended
September 30, 2009. The company recorded a discount on this note of
approximately $175,000 related to the value of the warrants and derivative
liabilities to be amortized over the term of the note at an effective rate of
24%. Additionally, the warrants and related derivative liability
issued as costs of this financing were valued at approximately $25,000 and are
being amortized over the term of the note. The Broker received a cash payment of
$40,000 from the proceeds of the note. The note was paid in full on July 20,
2009.
On June
29, 2009, the Company entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with Omni. Additionally, on July 2, 2009, the
Company and Omni entered into an amended and restated Securities Purchase
Agreement (the Purchase Agreement as amended and restated is referred to herein
as the “Securities Purchase Agreement”). Pursuant to the Securities
Purchase Agreement, Omni agreed to purchase up to $3,500,000 in principal amount
of the Company’s Original Issue Discount Secured Convertible Debentures (the
“Debentures”) for a purchase price of up to $3,000,000. As part of
this Agreement 5,000,000 shares of the Company’s Common Stock held by Linlithgow
Holdings, LLC was pledged as collateral.
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41
Pursuant
to the Securities Purchase Agreement, the Company sold Omni an aggregate of
$1,166,660 of Debentures and received gross proceeds of $1,000,000 and Omni
agreed to purchase an additional Debenture with a face value of up to $2,333,340
on or before July 30, 2009. Omni was also issued warrants to purchase
4,999,972 shares of the Company’s Common Stock with an exercise price of $0.70
per share subject to a reset provision. The warrants are exercisable, for five
years from the date of issuance. The Debentures are convertible into
shares of the Company’s Common Stock at any time at the option of the Holder at
a conversion price of $0.70 per share, subject to adjustment (the “Conversion
Price”). Interest on the Debenture is 10% per annum. The
first Debenture was issued on June 29, 2009 and the second Debenture to be
issued on July 2, 2009. The principal amount of each of the
Debentures is $583,350 and each has a maturity date of twelve months from the
date of issuance. The Debentures cannot be converted to common stock
to the extent such conversion would cause the holder of the Debenture, together
with such holder’s affiliates, to beneficially own in excess of 4.99% (or a
maximum 9.99% in certain cases) of the Company’s outstanding common stock
immediately following such conversion. As part of the Agreement,
2,499,986 five year warrants to purchase the Company stock at $0.70 were issued
to Omni at a value of $270,000.
Beginning
six months from the original issue date of the Debentures, on the 1st of
each month (the “Monthly Redemption Date”) the Company must redeem the Monthly
Redemption Amount ($97,221.66 for each $583,330 Debenture, plus accrued but
unpaid interest, liquidated damages and any other amounts then owing to the
Holder under the Debenture). The Monthly Redemption Amount payable on each
Monthly Redemption Date shall be paid in cash at a rate of 110% of the Monthly
Redemption Amount or upon 30 trading days’ notice the Company may in lieu of
cash pay all or part of the Monthly Redemption Amount in conversion
shares.
Payment
of the Debentures issued to Omni is secured pursuant to a security interest and
pledge agreement (the “Security Interest and Pledge Agreement”) whereby, on June
29, 2009, Linlithgow Holdings LLC pledged 2,500,000 shares of BYOC common
stock. On July 2, 2009, the Company and Omni amended the Security
Interest and Pledge Agreement so that additional pledgors could pledge their
respective unpledged shares of BYOC Common Stock (the Security Interest and
Pledge Agreement, as amended and restated, is referred to herein as the
“Security Interest and Pledge Agreement”). Pursuant to the terms of
the Security Interest and Pledge Agreement, Linlithgow Holdings, LLC pledged an
additional 3,982,000 shares of BYOC Common Stock, Wendy Borow-Johnson, the
President of Brand Management pledged 480,000 shares BYOC Common Stock, and
Robert McNulty, the Chief Executive Officer of the Company, pledged 505,000
shares of BYOC Common Stock.
On June
29, 2009, the Company issued Omni the first Debenture in the amount of $583,350
and received gross proceeds of $500,000. There is a reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of
funds, the company issued the lender 2,499,986 and the broker 266,669 warrants
to purchase the Company’s common stock at a price of $0.70, respectively. In
accordance with EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock”, related to the valuation of
convertible notes and warrants with conversion features and/or exercise features
that can reset the conversion and/or exercise price based on future equity
transactions, the Company valued the warrants and conversion feature of this
note and bifurcated them from the host contract as a derivative under SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” by recognizing an
additional liability for the fair value assigned to those derivative features
of approximately $74,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$287,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $298,000 related to the value
of the warrants and derivative liability to be amortized over the term of the
note at an effective rate of 20%. Additionally, the warrants issued
and related derivative liability as costs of this financing were valued at
approximately $65,000 and are being amortized over the term of the note.
The Company also paid the broker a $40,000 cash fee.
Also,
during June 2009, two of our note holders converted the principal and interest
of their convertible promissory notes into shares of the Company common stock at
a conversion rate of $.70 per share. Total principal converted was
$110,000, which was converted into 157,143 of the Company common
shares. Total accrued interest of $12,940 was converted into 18,485
of the Company common shares.
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On July
2, 2009, the Company issued Omni the second Debenture in the amount of $583,350
and received gross proceeds of $500,000. There is reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of
funds, the company issued the lender 2,499,986 and the broker 266,669 warrants
to purchase the Company’s common stock at a price of $0.70, respectively. In
accordance with EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock”, related to the valuation of
convertible notes and warrants with conversion features and/or exercise features
that can reset the conversion and/or exercise price based on future equity
transactions, the Company valued the warrants and conversion feature of this
note and bifurcated them from the host contract as a derivative under SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” by recognizing an
additional liability for the fair value assigned to those derivative features
of approximately $46,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$286,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $325,000 related to the value
of the warrants, derivative liability and OID to be amortized over the term of
the note at an effective rate of 20%. Additionally, the warrants
issued and related derivative liability as costs of this financing were valued
at approximately $51,000 and are being amortized over the term of the
note. The Company also paid the broker a $40,000 cash fee.
On July
10, 2009, the Company issued Omni the third Debenture in the amount of $583,350
and received gross proceeds of $500,000. There is reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of
funds, the company issued the lender 2,499,986 and the broker 266,669 warrants
to purchase the Company’s common stock at a price of $0.70. In accordance with
EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed
to an Entity’s Own Stock”, related to the valuation of convertible notes and
warrants with conversion features and/or exercise features that can reset the
conversion and/or exercise price based on future equity transactions, the
Company valued the warrants and conversion feature of this note and bifurcated
them from the host contract as a derivative under SFAS 133 “Accounting for
Derivative Instruments and Hedging Activities” by recognizing an additional
liability for the fair value assigned to those derivative features
of approximately $46,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$288,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $319,000 related to the value
of the warrants, derivative liability and OID to be amortized over the term of
the note at an effective rate of 20%. Additionally, the warrants
issued and related derivative liability as costs of this financing were valued
at approximately $49,000 and are being amortized over the term of the
note. The Company also paid the broker a $40,000 cash fee.
On July
21, 2009, the Company issued Omni the fourth Debenture in the amount of
$1,750,010 and received gross proceeds of $1,500,000. There is reset provision
associated with the note in regards to the payment date. Additionally,
there is a provision in the agreement, whereby, if there is a change in control
of the Company, the holder has the right to accelerate payment which is based
off a formula which could result in a payment greater than the principal and
interest amount owing before the change of control. In addition for the
receipt of funds, the company issued the lender 7,500,042 and the broker 800,001
warrants to purchase the company common stock at a price of $0.70. In accordance
with EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity’s Own Stock”, related to the valuation of convertible notes
and warrants with conversion features and/or exercise features that can reset
the conversion and/or exercise price based on future equity transactions, the
Company valued the warrants and conversion feature of this note and bifurcated
them from the host contract as a derivative under SFAS 133 “Accounting for
Derivative Instruments and Hedging Activities” by recognizing an additional
liability for the fair value assigned to those derivative features
of approximately $112,000 at inception of the
agreement. At September 30, 2009 the value of the derivative was
approximately $863,000. The change in the derivative was reported in
the statement of operations for the period ended September 30,
2009. The company recorded a discount on this note of approximately
$853,000 related to the value of the warrants, derivative liability and OID to
be amortized over the term of the note at an effective rate of
20%. Additionally, the warrants issued and related derivative
liability as costs of this financing were valued at approximately
$112,000 and are being amortized over the term of the note. The Company
also paid the broker a $120,000 cash fee.
On July
21, 2009, the Company paid Omni in full an OID promissory note dated
June16, 2009 in the amount of $575,000. Also on this date, the Company paid on
behalf of Linlithgow Holdings, Inc, Debt Opportunity Fund a payment of $266,667
on a promissory note dated 5/20/09.
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On July
29, 2009, the Company issued Omni the fifth Debenture in the amount of $641,663
and received gross proceeds of $550,000. There is reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of
funds, the company issued the lender 2,777,764 and the broker 293,333 warrants
to purchase the Company’s common stock at a price of $0.70, respectively. In
accordance with EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock”, related to the valuation of
convertible notes and warrants with conversion features and/or exercise features
that can reset the conversion and/or exercise price based on future equity
transactions, the Company valued the warrants and conversion feature of this
note and bifurcated them from the host contract as a derivative under SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” by recognizing an
additional liability for the fair value assigned to those derivative features
of approximately $43,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$319,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $324,000 related to the value
of the warrants, derivative liability and OID to be amortized over the term of
the note at an effective rate of 20%. Additionally, the warrants
issued and related derivative liability as costs of this financing were valued
at approximately $44,000 and are being amortized over the term of the
note. The Company also paid the broker a $44,000 cash fee.
On August
4, 2009, one of our 12% convertible note holders converted their note of
$100,000 into shares of common stock at a conversion rate of $0.35. This
resulted in an issuance of 285,714 shares of common stock. In
addition the note holder also converted their accumulated interest on their note
into shares of the Company’s common stock at a conversion rate of
$0.35. The total interest converted was $18,567 and converted into
53,048 of the Company’s common shares.
On August
11, 2009 the Company issued Omni the sixth Debenture in the amount of $291,665
and received gross proceeds of $250,000. There is reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of funds,
the company issued the lender 1,250,000 and the broker 133,333 warrants to
purchase the Company’s common stock at a price of $0.70, respectively. In
accordance with EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock”, related to the valuation of
convertible notes and warrants with conversion features and/or exercise features
that can reset the conversion and/or exercise price based on future equity
transactions, the Company valued the warrants and conversion feature of this
note and bifurcated them from the host contract as a derivative under SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” by recognizing an
additional liability for the fair value assigned to those derivative features
of approximately $19,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$139,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $142,000 related to the value
of the warrants, derivative liability and OID to be amortized over the term of
the note at an effective rate of 20%. Additionally, the warrants
issued and related derivative liability as costs of this financing were valued
at approximately $19,000 and are being amortized over the term of the
note. The Company also paid the broker a $20,000 cash fee.
On August
20, 2009, the Company issued Omni the seventh Debenture in the amount of
$116,666 and received gross proceeds of $100,000. There is reset provision
associated with the note in regards to the payment date. Additionally,
there is a provision in the agreement, whereby, if there is a change in control
of the Company, the holder has the right to accelerate payment which is based
off a formula which could result in a payment greater than the principal and
interest amount owing before the change of control. In addition for the
receipt of funds, the company issued the lender 500,000and the broker 53,333
warrants to purchase the Company’s common stock at a price of $0.70,
respectively. In accordance with EITF 07-5, “Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own Stock”, related to the
valuation of convertible notes and warrants with conversion features and/or
exercise features that can reset the conversion and/or exercise price based on
future equity transactions, the Company valued the warrants and conversion
feature of this note and bifurcated them from the host contract as a derivative
under SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” by
recognizing an additional liability for the fair value assigned to those
derivative features of approximately $3,000 at inception of the
agreement. At September 30, 2009 the value of the derivative was
approximately $55,000. The change in the derivative was reported in
the statement of operations for the period ended September 30,
2009. The company recorded a discount on this note of approximately
$43,000 related to the value of the warrants, derivative liability and OID to be
amortized over the term of the note at an effective rate of
20%. Additionally, the warrants issued and related derivative
liability as costs of this financing were valued at approximately $5,000 and are
being amortized over the term of the note.
F -
44
On August
27, 2009 the Company issued Omni the eighth Debenture in the amount of $373,332
and received gross proceeds of $320,000. There is reset provision associated
with the note in regards to the payment date. Additionally, there is a
provision in the agreement, whereby, if there is a change in control of the
Company, the holder has the right to accelerate payment which is based off a
formula which could result in a payment greater than the principal and interest
amount owing before the change of control. In addition for the receipt of
funds, the company issued the lender 1,600,000 and the broker 170,667 warrants
to purchase the Company’s common stock at a price of $0.70, respectively. In
accordance with EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock”, related to the valuation of
convertible notes and warrants with conversion features and/or exercise features
that can reset the conversion and/or exercise price based on future equity
transactions, the Company valued the warrants and conversion feature of this
note and bifurcated them from the host contract as a derivative under SFAS 133
“Accounting for Derivative Instruments and Hedging Activities” by recognizing an
additional liability for the fair value assigned to those derivative features
of approximately $10,000 at inception of the agreement. At
September 30, 2009 the value of the derivative was approximately
$178,000. The change in the derivative was reported in the statement
of operations for the period ended September 30, 2009. The company
recorded a discount on this note of approximately $138,000 related to the value
of the warrants, derivative liability and OID to be amortized over the term of
the note at an effective rate of 20%. Additionally, the warrants
issued and related derivative liability as costs of this financing were valued
at approximately $13,000 and are being amortized over the term of the
note.
On
September 3, 2009 the Company issued Omni the ninth Debenture in the amount of
$699,996 and received gross proceeds of $600,000. There is reset provision
associated with the note in regards to the payment date. Additionally,
there is a provision in the agreement, whereby, if there is a change in control
of the Company, the holder has the right to accelerate payment which is based
off a formula which could result in a payment greater than the principal and
interest amount owing before the change of control. In addition for the
receipt of funds, the company issued the lender 3,000,000 and the broker 266,669
warrants to purchase the Company’s common stock at a price of $0.70,
respectively. In accordance with EITF 07-5, “Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own Stock”, related to the
valuation of convertible notes and warrants with conversion features and/or
exercise features that can reset the conversion and/or exercise price based on
future equity transactions, the Company valued the warrants and conversion
feature of this note and bifurcated them from the host contract as a derivative
under SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” by
recognizing an additional liability for the fair value assigned to those
derivative features of approximately $22,000 at inception of the
agreement. At September 30, 2009 the value of the derivative was
approximately $329,000. The change in the derivative was reported in
the statement of operations for the period ended September 30,
2009. The company recorded a discount on this note of approximately
$275,000 related to the value of the warrants, derivative liability and OID to
be amortized over the term of the note at an effective rate of
20%. Additionally, the warrants issued and related derivative
liability as costs of this financing were valued at approximately $23,000 and
are being amortized over the term of the note. The Company also paid the
broker a $40,000 cash fee.
The
Company recorded $7,608,178 and $3,136,792 as interest expense on the above
notes for nine month period ended September 30, 2009 and 2008, respectively.
Included in the interest expense amount noted above is the amortization of
$6,723,076 and $2,909,890 of loan origination fees and discount associated with
these notes for the Nine months ended September 30, 2009 and 2008
respectively.
NOTE
9 - COMMON STOCK, WARRANTS AND PAID IN CAPITAL
Common
Stock
On
January 5, 2009, we issued 1,000 shares of common stock to an individual for
services rendered with setting up our debit card program used for paying our
sales representatives valued at $1.00 per share
On
January 12, 2009 we issued 25,000 shares of common stock for cash at $0.80 per
share to an accredited investor.
F -
45
On
January 30, February 25 and March 9, 2009, three of our 12% convertible note
holders converted their notes of $50,000, $105,000 and $50,000 respectively,
into shares of common stock at a conversion rate of $0.70. This
resulted in an issuance of 71,429, 150,000 and 71,429 shares of common stock,
respectively. In addition these three note holders also converted
their accumulated interest on their respective notes into shares of the
Company’s common stock at a conversion rate of $0.70. The total
interest converted was $6,283, $13,727 and $3,617 respectively and converted
into 8,976, 19,609 and 5,167 of the Company’s common shares,
respectively.
In
January 2009, we issued 10,000 shares of our common stock for services provided
as a commission for assisting the Company with fund raising. The shares were
valued at $1.00.
On
February 11, 2009, we issued 52,000 shares of our common stock for services
rendered in connection with our convertible bridge loans procured during the
fourth quarter 2008. This amount had been accrued for at $1.00 per share when
the service was provided in 2008.
On
February 18, 2009, we issued 5,000 shares of stock as compensation to an
employee with a value of $1.00 per share.
On April
6, 2009 three individual warrant holders exercised the cashless option and
converted their warrants into 189,086; 47,276 and 48,504 of Company common
stock.
On April
14 and April 24, 2009 two individual warrant holders exercised the cashless
option and converted their warrants into 36,160 and 39,920 shares of Company
common stock, respectively.
On April
15, 2009, the Company issued 25,000 shares of common stock at $1.44 per share
value for professional services received.
On April
30, 2009, the Company issued 126,988 unrestricted shares of common stock in lieu
of $198,101 of cash commissions earned by 16 different independent sales
representatives.
On May 1,
2009, the Company issued 70,000 unrestricted shares of common stock in payment
of $101,100 of professional services received.
On May
21, 2009, the Company issued 2,500 shares of common stock valued at $1.00 as
compensation to an employee.
On May
22, 2009, the Company issued 14,514 unrestricted shares of common stock in lieu
of $14,514 of cash commissions earned by 16 different independent sales
representatives.
On June
1, 2009, the Company issued 15,000 unrestricted shares of common stock and
40,000 shares of restricted common stock in lieu of $55,000 of cash commissions
earned by 4 different independent sales representatives.
On June
2, 2009, the Company issued 200,000 shares of unrestricted common stock for
professional services received with a value of $202,000.
On June
9, 2009, the Company issued 15,000 unrestricted shares of common stock and
35,000 shares of restricted common stock in lieu of $61,000 of cash commissions
earned by 2 different independent sales representatives.
On June
25, 2009, the Company issued 2,000 unrestricted shares of common stock and 7,500
shares of restricted common stock in lieu of $9,500 of cash commissions earned
by 2 different independent sales representatives.
On June
25, 2009, the Company issued 100,000 unrestricted common stock valued at $84,000
for professional services received.
F -
46
During
the three months ended June 30, 2009, the Company had 17 of our 12% convertible
notes converted into shares of our common stock by 16 individual note holders as
follows:
Conversion
Date
|
Principal
Converted
|
Principal
Shares Issued
|
Interest
Converted
|
Interest Shares
Issued
|
Conversion
Rate
|
|||||||||||||||
4/6/2009
|
$
|
75,000
|
107,143
|
$
|
6,775
|
9,679
|
0.70
|
|||||||||||||
4/6/2009
|
$
|
200,000
|
285,714
|
$
|
17,533
|
25,048
|
0.70
|
|||||||||||||
4/6/2009
|
$
|
100,000
|
142,857
|
$
|
8,833
|
12,619
|
0.70
|
|||||||||||||
4/20/2009
|
$
|
50,000
|
71,429
|
$
|
7,983
|
11,405
|
0.70
|
|||||||||||||
4/27/2009
|
$
|
50,000
|
71,429
|
$
|
7,366
|
10,905
|
0.70
|
|||||||||||||
4/27/2009
|
$
|
100,000
|
142,857
|
$
|
15,267
|
21,810
|
0.70
|
|||||||||||||
4/6/2009
|
$
|
5,000
|
7,143
|
$
|
728
|
1,040
|
0.70
|
|||||||||||||
4/17/2009
|
$
|
5,000
|
7,143
|
$
|
747
|
1,067
|
0.70
|
|||||||||||||
4/22/2009
|
$
|
5,000
|
7,143
|
$
|
755
|
1,079
|
0.70
|
|||||||||||||
4/6/2009
|
$
|
25,000
|
35,714
|
$
|
3,642
|
5,202
|
0.70
|
|||||||||||||
4/17/2009
|
$
|
25,000
|
35,714
|
$
|
3,733
|
5,333
|
0.70
|
|||||||||||||
4/22/2009
|
$
|
25,000
|
35,714
|
$
|
3,775
|
5,393
|
0.70
|
|||||||||||||
5/6/2009
|
$
|
10,000
|
14,286
|
$
|
1,557
|
2,224
|
0.70
|
|||||||||||||
5/6/2009
|
$
|
50,000
|
71,429
|
$
|
7,783
|
11,119
|
0.70
|
|||||||||||||
5/1/2009
|
$
|
300,000
|
428,571
|
$
|
29,600
|
42,286
|
0.70
|
|||||||||||||
5/6/2009
|
$
|
200,000
|
285,714
|
$
|
20,200
|
28,857
|
0.70
|
|||||||||||||
5/6/2009
|
$
|
200,000
|
285,714
|
$
|
31,133
|
44,476
|
0.70
|
|||||||||||||
5/7/2009
|
$
|
30,000
|
42,857
|
$
|
2,750
|
3,929
|
0.70
|
|||||||||||||
5/7/2009
|
$
|
30,000
|
42,857
|
$
|
2,750
|
3,929
|
0.70
|
|||||||||||||
5/7/2009
|
$
|
100,000
|
100,000
|
$
|
4,000
|
4,000
|
1.00
|
|||||||||||||
5/19/2009
|
$
|
100,000
|
142,857
|
$
|
9,567
|
13,667
|
0.70
|
|||||||||||||
6/10/2009
|
$
|
10,000
|
14,286
|
$
|
1,673
|
2,390
|
0.70
|
|||||||||||||
6/12/2009
|
$
|
100,000
|
142,857
|
$
|
11,267
|
16,095
|
0.70
|
|||||||||||||
2nd
Quarter Total
|
$
|
1,795,000
|
$
|
2,521,428
|
$
|
199,417
|
283,552
|
On July
6, 2009, the Company issued 60,000 restricted shares of the Company’s common
stock valued at $13,162 for professional services received.
On July
8, 2009, the Company issued 350,000 unrestricted shares of the Company’s common
stock valued at $96,520 for professional services received.
On July
8, 2009, the Company issued 5,000 restricted shares of the Company’s common
stock valued at $1,016 for professional services received.
On August
4, 2009, one of our 12% convertible note holders converted their notes of
$100,000 into shares of common stock at a conversion rate of
$0.35. This resulted in an issuance of 285,714 shares of common
stock. In addition the note holder also converted their accumulated
interest on their note into shares of the Company’s common stock at a conversion
rate of $0.35. The total interest converted was $18,566.67 and
converted into 53,048 of the Company’s common shares.
On August
7, 2009, the Company issued 100,000 shares of the Company’s unrestricted common
stock valued at $20,715 for professional services received.
On August
10, 2009, the Company issued 250,000 shares of the Company’s unrestricted common
stock valued at $47,079 for professional services received.
On August
18, 2009, the Company issued 1,000 shares of the Company’s restricted common
stock valued at $180 to a current shareholder for compensation.
F -
47
On August
20, 2009, the Company issued 100,000 shares of the Company’s unrestricted common
stock valued at $16,000 for professional services received.
On
September 1, 2009, the Company issued 250,000 shares of the Company’s
unrestricted common stock valued at $47,500 for professional services
received.
Warrants
The
following is a summary of the Company’s outstanding common stock purchase
warrants:
|
Outstanding
|
|
|
Issued 9 months
|
|
|
|
|
Outstanding
|
|
||||||||
Exercise Price
|
|
December 31, 2008
|
|
|
Ended September 30, 2009
|
|
|
Exercised
|
|
|
September30, 2009
|
|
||||||
$ | 0.01 |
153,920
|
(1)
|
-
|
(40,400
|
)
|
113,520
|
(1)
|
||||||||||
$ | 0.30 |
30,300
|
-
|
-
|
30,300
|
|||||||||||||
$ | 0.50 |
101,000
|
(1)
|
-
|
-
|
101,000
|
(1)
|
|||||||||||
$ | 0.70 |
5,087,484
|
30,288,821
|
-
|
35,376,305
|
|||||||||||||
$ | 0.93 |
4,026,646
|
-
|
(898,786
|
)
|
3,127,860
|
||||||||||||
$ | 1.00 |
503,247
|
2,239,999
|
-
|
2,743,246
|
|||||||||||||
$ | 2.40 |
132,310
|
(1)
|
-
|
-
|
132,310
|
(1)
|
|||||||||||
10,034,907
|
32,528,820
|
(939,186
|
)
|
41,624,541
|
(1)
|
The
outstanding warrants as of December 31, 2008, include an
additional 260,442 warrants issued to replace the warrants previously
issued by BOOMj.com, Inc., which new warrants were issued at a rate of
2.02 shares of the Company common stock for each warrant share of
BOOMj.com. The Company has reserved a sufficient number of shares of
authorized common stock for issuance upon exercise of the outstanding
warrants.
|
2008
Stock Option Plan
In
September 2008, the Company's Board of Directors approved the 2008 Equity
Incentive Plan of Beyond
Commerce (the "Plan"). On June 12, 2009, the Company’s Board of Directors
amended and approved increasing the plan from 3,500,000 available options to
7,000,000. This amendment was approved by the shareholders on July
24, 2009 at the Company’s annual shareholder meeting.
Stock
Options Granted
On
September 11, 2008, the Board of Directors approved the issuance of stock
options as described below in accordance with the 2008 Equity Incentive
Plan. The employee options have a cliff vesting schedule over a three year
period that vest one third after one year of service and then 4.2% per month
over the remaining twenty-four months. Options issued to non-employees for
meeting performance-based goals vest immediately.
|
Outstanding
|
|
|
Issued 9 months
|
|
|
Cancelled or
|
|
|
Outstanding
|
|
|||||||
Option Group
|
|
December 31, 2008
|
|
|
Ended September 30, 2009
|
|
|
Exercised
|
|
|
September 30, 2009
|
|
||||||
$ | 0.35-0.49 |
173,000
|
(21,000
|
)
|
152,000
|
|||||||||||||
$ | 0.50-0.69 |
-
|
1,091,658
|
(223,384
|
)
|
868,274
|
||||||||||||
$ | 0.70-0.89 |
505,000
|
890,547
|
(119,445
|
)
|
1,276,102
|
||||||||||||
$ | 0.90-0.99 |
478,289
|
505,201
|
(286,646
|
)
|
696,844
|
||||||||||||
$ | 1.00-1.25 |
73,271
|
1,377,500
|
(350,577
|
)
|
1,100,194
|
||||||||||||
$ | 1.26-1.70 |
120,000
|
410,170
|
(185,533
|
)
|
344,637
|
||||||||||||
1,176,560
|
4,448,076
|
(1,186,585
|
)
|
4,438,051
|
F -
48
The
estimated fair value of the aforementioned options was calculated using the
Black-Scholes model. Consequently, the Company recorded a share-based
compensation expense of $213,814 and $1,718,290 for the three and Nine months
ended September 30, 2009, respectively. The credit for the three months ended
September 30, 2009 is due to the cancellation of options for independent
representatives no longer working with the Company. Total compensation costs to
be recognized over the next three years will be $1,514,812 for all non-vested
options as of September 30, 2009. Expense will equal or exceed the vested amount
of the options.
Dividends
The
Company has never issued dividends.
NOTE
10 – 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. In December 2007 the Company entered
into a four year lease for 4,560 square feet in Henderson, Nevada which houses
its corporate office. The Company also leases a fully furnished three
bedroom apartment in the Henderson, Nevada area effective June 11, 2009 through
July 30, 2010. The monthly rent expense is $4,250 plus
utilities. The Company rented the apartment for executives and
consultants to alleviate hotel expenses for these individuals that work in our
Henderson office but are not residents of the area. The Company closed its
Irvine, CA office on May 31, 2009.
Total
rent expense incurred by the Company, which includes the leases above and sundry
month to month rental expenditures was $220,533 and $164,643 for the nine month
period ended September 30th 2009
and 2008, respectively. The Company signed an amendment to its lease in
Henderson, Nevada in February 2009, effective March 16, 2009 for an additional
5,634 square feet of office space adjacent to the current
office. This amendment ties to the expiration of the present lease
and will expire January 31, 2012. The Company has future minimum
lease obligations as follows:
Twelve months ending
September 30,
|
|
2009
|
|
|
2010
|
$
|
553,271
|
||
2011
|
326,970
|
|||
2012
|
94,536
|
|||
Total
|
$
|
974,777
|
NOTE
11 – SEGMENT REPORTING
Beyond
Commerce, Inc manages its operations through two business segments:
BOOMj.com dba i-Supply and LocalAdLink. Each unit owns and operates
the segments under the respective names.
The
Company evaluates performance based on net operating profit. Administrative
functions such as finance, treasury, and information systems are centralized and
although they are not considered operating segments are presented below for
informative purposes. However, where applicable, portions of the administrative
function expenses are allocated between the operating segments. The operating
segments do share facilities in Henderson NV. In the event any supplies and/or
services are provided to one operating segment by the other, the transaction is
valued according to the company’s transfer policy, which approximates market
price. The costs of operating the segments are captured discretely within each
segment. The Company’s leasehold improvements, property, computer equipment,
inventory, and results of operations are captured and reported discretely within
each operating segment.
F -
49
Summary
financial information for the two reportable segments as of the Nine months ended September 30
is as follows:
2009
|
2008
|
|||||||
Operations:
BOOMj.com dba i-Supply
|
||||||||
Net
sales
|
$
|
409,051
|
$
|
1,025,023
|
||||
Gross
Margin
|
345,614
|
(25,090
|
)
|
|||||
Depreciation
|
(145,041
|
)
|
(133,509
|
)
|
||||
Assets
|
517,802
|
755,703
|
||||||
Capital
Expenditures
|
11,333
|
111,882
|
||||||
Operations:
LocalAdLink
|
||||||||
Net
sales
|
$
|
12,299,017
|
-
|
|||||
Gross
Margin
|
834,504
|
-
|
||||||
Depreciation
|
(50,492
|
)
|
(834
|
)
|
||||
Assets
|
2,088,816
|
9,186
|
||||||
Capital
Expenditures
|
509,935
|
10,000
|
||||||
Net
Loss
|
(4,734,251
|
)
|
(42,939
|
)
|
||||
Basic
and Diluted Loss Per Share
|
(0.11)
|
0.00
|
||||||
Consolidated
Operations:
|
||||||||
Net
sales
|
$
|
12,708,068
|
1,025,023
|
|||||
Gross
Margin
|
1,180,118
|
(25,090
|
)
|
|||||
Other
operating expenses
|
(11,494,453
|
)
|
(6,449,780
|
)
|
||||
Depreciation
|
(195,533
|
)
|
(134,343
|
)
|
||||
Non-operating
income (expense)
|
(6,605,038
|
)
|
(2,378,091
|
)
|
||||
Loss
from operations before income taxes
|
(17,114,906
|
)
|
(8,987,304
|
)
|
||||
Assets
|
3,710,074
|
1,737,747
|
||||||
Capital
Expenditures
|
521,268
|
121,882
|
Summary
financial information for the two reportable segments as of the three months ended September
30 is as follows:
2009
|
2008
|
|||||||
Operations:
BOOMj.com dba i-Supply
|
||||||||
Net
sales
|
$
|
240,078
|
$
|
204,810
|
||||
Gross
Margin
|
197,903
|
(39,180
|
)
|
|||||
Depreciation
|
(48,473
|
)
|
(46,928
|
)
|
||||
Assets
|
517,802
|
755,703
|
||||||
Capital
Expenditures
|
-
|
33,659
|
||||||
Operations:
LocalAdLink
|
||||||||
Net
sales
|
$
|
1,811,788
|
-
|
|||||
Gross
Margin
|
369,396
|
-
|
||||||
Depreciation
|
(40,286
|
)
|
(834)
|
|||||
Assets
|
2,088,816
|
9,186
|
||||||
Capital
Expenditures
|
400,339
|
10,000
|
||||||
Net
Loss
|
(410,070
|
)
|
(42,939
|
)
|
||||
Basic
and Diluted Loss Per Share
|
(0.01
|
)
|
0.00
|
|||||
Consolidated
Operations:
|
||||||||
Net
sales
|
$
|
2,051,866
|
204,810
|
|||||
Gross
Margin
|
567,299
|
39,180
|
||||||
Other
operating expenses
|
(2,931,281
|
)
|
(2,756,856
|
)
|
||||
Depreciation
|
(88,759
|
)
|
(47,762
|
)
|
||||
Non-operating
income (expense)
|
(6,082,604
|
)
|
(1,267,047
|
)
|
||||
Loss
from operations before income taxes
|
(8,535,345
|
)
|
(4,032,056
|
)
|
||||
Assets
|
3,710,074
|
1,737,747
|
||||||
Capital
Expenditures
|
400,339
|
43,659
|
F -
50
NOTE
12 – NET LOSS PER SHARE OF COMMON STOCK
The
Company has adopted Financial Accounting Standards Board ("FASB") Statement
Number 128, "Earnings per Share," which requires presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. In the accompanying financial statements, basic loss
per share of common stock is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the
year. 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, stock options 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 stock option
warrant shares and potential shares to be issued upon conversion of debt
excluded from the diluted net loss per common share presentation was 46,619,719
and 14,634,396 at September 30, 2009 and 2008, respectively.
The above
amounts are not included in the computation of diluted earnings per share
because the effect of these instruments would be anti-dilutive (i.e., reduce the
loss per share) for the three and Nine months ended September 30, 2009. The
following is a reconciliation of the numerator and denominator of the basic and
diluted earnings per share computations for the period ended September 30, 2009
and 2008:
Numerator
Basic and
diluted net loss per share for the nine months ended September 30:
Unaudited
|
Unaudited
|
|||||||
2009
|
2008
|
|||||||
Net
loss available to common stockholders
|
$
|
(17,114,906
|
)
|
$
|
(8,987,304
|
)
|
||
Denominator
|
||||||||
Basic
and diluted weighted average number of shares outstanding
|
43,737,435
|
37,805,466
|
||||||
Basic
and diluted net loss per share
|
$
|
(0.
39
|
)
|
$
|
(0.23
|
)
|
NOTE 13 - 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
$133,382 and $167,576 for the three months and nine months ended September 30,
2009 and $5,615 and $40,069 for the three months and nine months ended September
30 2008, respectively for interest. The Company did not make any payments for
income tax during the three months or nine months ended September 30, 2009 or
2008.
During
the quarter ended September 30, 2009, approximately $2,851,795 of expense was
recorded which was paid for by issuing stock, options and warrants.
F -
51
NOTE 14 - RELATED
PARTIES (not described elsewhere)
The
Company paid Linlithgow Holdings, LLC. (an affiliate shareholder) $246,052
and $90,412 in commissions and consulting fees for the nine months
ended September 30, 2009 and the three months ended September 30, 2009
respectively, as compared to $76,650 and $0 for the same periods in 2008,
respectively. The Company also accrued interest due Linlithgow Holdings, LLC in
the amount of $94,800 and $62,800 for the nine months and three months
ended September 30, 2009, respectively. We also have related party
transactions with FA Corp in which the principal shareholder is a member of our
board of directors, Murray Williams. We incurred expenses for FA Corp
of $39,578 and $9,240 for services rendered for the nine months ended September
30, 2009 and the three months ended September 30, 2009, respectively compared to
$102,673 and $24,616 for the nine months ended September 30, 2008 and the three
months ended September 30, 2008, respectively.
The
Credit Card merchant accounts are personally guaranteed by an officer of the
Company.
NOTE 15 - SUBSEQUENT
EVENTS
On
October 1, 2009, the Company issued 1,000,000 shares of stock valued at $60,000
for professional services received.
The
Company in attempt to monetize the current sales level within Local Ad Link,
Inc. and reduce its debt began soliciting multi-level
sales company’s who need added products to distribute. One of these
companies was an affiliate of Omni-Reliant Holdings called Zurvita Holdings Inc,
who showed interest in a potential transaction. On October 9, 2009, the
Company sold its LocalAdLink Software (the “Software”) and all of their assets
related to the Software, including the rights in the name LocalAdLink,
the trademark LocalAdLink, the Web site, www.LocalAdLink.com
, and a local search directory and advertising network that brings local
advertising to geo-targeted consumers. The Company entered into
an asset purchase agreement (the “Purchase Agreement”) with OmniReliant
Holdings, Inc. (“Omni”), pursuant to which, the Company sold its LocalAdLink
software, name rights ,and trademark to Omni, and Omni (i) forgave $4,000,000
principal amount of outstanding convertible debentures, (ii) returned for
cancellation warrants to purchase 18,321,037 shares of common stock and (iii)
agreed to extend the maturity date of outstanding convertible notes in the
principal amount of $1,623,323 to October 9, 2010. Sales related to this Local
Ad Link, Inc. for the three and nine months ended September 30, 2009 were
$1,811,787 and $12,299,017, respectively. Total assets associated with the sale
was $1,721,840 of which $367,000 were software related and sold in the
transaction. All liabilities associated with this division were retained by the
Company.
On
October 9, 2009, the Company sold 3,000,000 shares of common stock to Zurvita
for a purchase price of $300,000 and the Company agreed to sell, and Zurvita
agreed to purchase, an additional 5,000,000 shares of common stock for a
purchase price of $500,000, in three tranches which was completed on October 29,
2009. This triggered reset provisions for the remaining outstanding
debt and warrants as disclosed in Note 8.
On
October 26, 2009, one of our 12% convertible note holders converted their note
of $70,000 into shares of common stock at a conversion rate of $0.10. This
resulted in an issuance of 700,000 shares of common stock. In
addition the note holder also converted their accumulated interest on their note
into shares of the Company’s common stock at a conversion rate of
$0.10. The total interest converted was $15,237 and converted into
152,370 of the Company’s common shares.
On
October 26, 2009, one of our bridge loan note holders converted their note of
$30,000 into shares of common stock at a conversion rate of $0.10. This resulted
in an issuance of 300,000 shares of common stock. The total interest
outstanding on the note of $1,085was paid to the note holder.
During
October the Company received an extension of due date from the bridge loan note
holders to January 31, 2010.
On
November 11, 2009 one of our 12% convertible note holders converted their note
of $100,000 into shares of common stock at a conversion rate of $0.10. This
resulted in an issuance of 1,000,000 shares of common
stock.
On
December 16, 2009 one of our 12% convertible note holders converted their note
of $100,000 into shares of common stock at a conversion rate of $0.10. This
resulted in an issuance of 1,000,000 shares of common
stock.
On
January 30, 2010 the $3,500,000 of convertible notes became due.
These notes remain unpaid and the Company is currently seeking an additional
extension on the maturity date for the principal and interest due. All these
loans can be converted into shares of our common stock. Also there is no penalty
in regards to added interest or reparation regarding the non-payment of these
notes.
F -
52
NOTE
16 – CHANGE IN METHOD OF ACCOUNTING FOR CERTAIN CONVERSION AND EXERCISE
FEATURES
On
January 1, 2009, the Company adopted EITF 07-5, “Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock” and
changed its accounting, as required, for valuation of convertible notes and
warrants with conversion features and/or exercise features in which either the
conversion or exercise price or the number of warrant shares issuable was
determined by formula with inputs based on the operations of the
Company. This change required the Company to bifurcate the features
from the host contracts as derivatives under SFAS 133 “Accounting for Derivative
Instruments and Hedging Activities” by recognizing an additional liability for
the fair value assigned to those derivate features, whereas in the prior year
those convertible notes and warrants were accounted for using Emerging Issues
Task Force No. 01-6 “The Meaning of ‘Indexed to a Company's Own
Stock’". The new method of accounting for convertible notes and
warrants with these features requires that the Company revalue the instruments
at inception and each reporting date and to record the cumulative effect of the
changes in retained earnings into the opening period in which the standard is
adopted.
We
previously accounted for our convertible notes and warrants with these features
under EITF 01-6 which treated these features as if they were indexed to the
Company’s own stock and thus did not require separate accounting treatment or
bifurcation as derivatives.
Upon
implementing EITF 07-5 for all periods presented the Company recalculated and
replaced the original accounting by recognizing an additional liability for the
value of the bifurcated features. In addition, because these
instruments are now accounted for as derivatives under SFAS 133, the Company no
longer treats the warrants issued in conjunction with the 12% Secured
Convertible Promissory Notes as Temporary Equity and instead the values assigned
are now included in Note derivative liability.
The
following financial statement line items as of December 31, 2008 were affected
by the change in accounting (no proforma has been presented for the income
statement or cash flows as none of these instruments were outstanding during the
nine months ended September 30, 2008):
CONSOLIDATED
BALANCE SHEET
AS OF
DECEMBER 31, 2008
|
|
|
|
As Computed
|
|
|
|
|||||
|
|
As Originally
|
|
|
Under
|
|
|
Effect of
|
|
|||
|
|
Reported
|
|
|
& EITF 07-5
|
|
|
Change
|
|
|||
Total
Assets
|
$
|
1,806,008
|
$
|
1,806,008
|
$
|
-
|
||||||
Current
Liabilities
|
||||||||||||
Short-term
borrowings
|
2,400,555
|
2,400,555
|
-
|
|||||||||
Accounts
payable
|
1,490,590
|
1,490,590
|
-
|
|||||||||
Accounts
payable – related party
|
19,552
|
19,552
|
-
|
|||||||||
Note
derivative liability
|
1,523,651
|
3,396,935
|
1,873,284
|
|||||||||
Other
current liabilities
|
1,374,534
|
1,374,534
|
-
|
|||||||||
Deferred
revenue
|
609,987
|
609,987
|
-
|
|||||||||
Total
Current Liabilities
|
7,418,869
|
9,292,153
|
1,873,284
|
|||||||||
Commitments
and Contingencies
|
-
|
-
|
-
|
|||||||||
Temporary
Equity
|
1,135,980
|
-
|
(1,135,980
|
)
|
||||||||
Stockholders’
Deficit:
|
||||||||||||
Common
stock, $0.001 par value, 200,000,000 and 75,000,000 shares authorized as
of December 31, 2008 and 2007, respectively, and 40,936,143 and 36,108,067
issued and outstanding at December 31, 2008 and 2007,
respectively
|
40,936
|
40,936
|
-
|
|||||||||
Preferred
stock,$.001 par value of 50,000,000 shares authorized and no shares
issued
|
-
|
-
|
-
|
|||||||||
Additional
paid-in capital
|
11,096,604
|
11,096,604
|
-
|
|||||||||
Accumulated
deficit
|
(17,886,381
|
)
|
(18,623,685
|
)
|
(737,304
|
)
|
||||||
Total
Stockholders’ Deficit
|
(6,748,841
|
)
|
(7,486,145
|
)
|
(737,304
|
)
|
||||||
Total
Liabilities and Stockholders' Deficit
|
$
|
1,806,008
|
$
|
1,806,008
|
$
|
-
|
F -
53
Unaudited
Pro Forma Condensed Consolidated Financial Information
The
unaudited pro forma condensed consolidated financial information included herein
has been prepared pursuant to the rules and regulations of the United States
Securities and Exchange Commission.
Pro forma
adjustments are limited to the effects or events that are directly attributable
to the transaction, factually supportable and for the statement of operations
expect to have a continuing impact on the registrant.
The
following unaudited pro forma condensed consolidated balance sheet is based on
the historical balance sheet of Beyond Commerce, Inc (“BYOC”) as of September
30, 2009. The following unaudited pro forma condensed consolidated
statements of operations are based on the historical statements of operations of
BYOC for the year ended December 31, 2008 and the nine months ended September
30, 2009.
On
October 9, 2009, the Company sold its LocalAdLink Software (the “Software”) and
all of their assets related to the Software, including the rights in the name
LocalAdLink, the trademark LocalAdLink, the Web site, www.LocalAdLink.com , and a
local search directory and advertising network that brings local advertising to
geo-targeted consumers. The Company entered into an asset purchase agreement
(the “Purchase Agreement”) with OmniReliant Holdings, Inc. (“Omni”), pursuant to
which, the Company sold its LocalAdLink software, name rights ,and trademark to
Omni, and Omni (i) forgave $4,000,000 principal amount of outstanding
convertible debentures, (ii) returned for cancellation warrants to purchase
18,321,037 shares of common stock and (iii) agreed to extend the maturity date
of outstanding convertible notes in the principal amount of $1,623,323 to
October 9, 2010.
BYOC’s
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 2008 gives effect to the sale of LocalAdLink assets as if it
had occurred on January 1, 2008. The BYOC unaudited pro forma
condensed consolidated statement of operations for the nine months ended
September 30, 2009 gives effect to the sale of LocalAdLink assets as if it
had occurred on January 1, 2009. The unaudited pro forma condensed
consolidated balance sheet gives effect to the sale of LocalAdLink assets as if
it had occurred on September 30, 2009.
The
following unaudited pro forma condensed consolidated balance sheet as of
September 30, 2009 and unaudited pro forma condensed statement of operations for
the year ended December 31, 2008 and the nine months ended September 30, 2009
are presented for illustrative purposes only and are not necessarily indicative
of the financial position or operating results that would have been achieved,
nor are they necessarily indicative of the future operating results. These
unaudited pro forma balance sheet and statements of operations should be read in
conjunction with BYOC historical financial statements (and related notes
thereto) for the year ended December 31, 2008 and the Form 10-Q for the nine
months ended September 30, 2009 included in this registration
statement.
P -
1
BEYOND
COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30,
2009
|
Pro
Form Adjustments
|
Pro
Forma Balance
|
||||||||||||
ASSETS | ||||||||||||||
Current
assets :
|
||||||||||||||
Cash
|
$ | - | - | |||||||||||
Accounts
receivable
|
10,697 | 10,697 | ||||||||||||
Prepaid
loan cost
|
1,079,633 | 1a | 475,325 | 604,308 | ||||||||||
Prepaid
commissions
|
736,274 | 736,274 | ||||||||||||
Other
current assets
|
931,265 | 931,265 | ||||||||||||
Total
current assets
|
$ | 2,757,869 | $ | 475,325 | $ | 2,282,544 | ||||||||
Property,
Web site and computer equipment
|
1,392,447 | 2a | 400,339 | 992,108 | ||||||||||
Less:
Accumulated depreciation and amortization
|
(515,898 | ) | 2a | (44,482 | ) | (471,416 | ) | |||||||
Property,
Web site and computer equipment – net
|
$ | 876,549 | $ | 355,857 | $ | 520,692 | ||||||||
Other
Assets
|
75,656 | 75,656 | ||||||||||||
Total
assets
|
$ | 3,710,074 | $ | 831,182 | $ | 2,878,892 | ||||||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||||||||
Current
liabilities:
|
||||||||||||||
Short
term borrowings, net of discount
|
$ | 7,079,079 | 2b | 2,294,235 | $ | 4,784,844 | ||||||||
Short
term borrowings, net of discount – related party
|
1,160,305 | 1,160,305 | ||||||||||||
Accounts
payable
|
1,962,157 | 1,962,157 | ||||||||||||
Accounts
payable - related party
|
135,302 | 135,302 | ||||||||||||
Checks
Written In Excess of Cash
|
134,217 | 134,217 | ||||||||||||
Note
derivative liability
|
3,451,215 | 2c | 1,973,161 | 1,478,054 | ||||||||||
Other
current liabilities
|
2,299,685 | 2,299,685 | ||||||||||||
Deferred
Revenue
|
1,809,130 | 1,809,130 | ||||||||||||
Total
current liabilities
|
$ | 18,031,090 | $ | 4,267,396 | $ | 13,763,694 | ||||||||
Stockholders’
Deficit :
|
||||||||||||||
Common
stock, $0.001 par value, 200,000,000 and 75,000,000 shares authorized as
of June 30, 2009 and December 31, 2008,
respectively, and 45,186,179 and 40,936,143
issued and outstanding at June 30, 2009 and December 31, 2008,
respectively
|
$ | 46,641 | $ | $ | 46,641 | |||||||||
Additional
paid in capital
|
21,370,934 | 2d | 366,421 | 21,004,513 | ||||||||||
Accumulated
deficit
|
(35,738,591 | ) | 1a | 475,325 | (31,935,956 | ) | ||||||||
2e | (4,277,960 | ) | ||||||||||||
Total
stockholders’ deficit
|
$ | (14,321,016 | ) | $ | (3,436,214 | ) | $ | (10,884,802 | ) | |||||
Total
Liabilities and Stockholders’ Deficit
|
$ | 3,710,074 | $ | 831,182 | $ | 2,878,892 |
See notes
to pro forma statements.
P -
2
BEYOND
COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 2008
|
Pro
Forma
|
Pro
Forma
|
||||||||||||
Historical
|
Adjustments
|
Balance
|
||||||||||||
Revenues
|
||||||||||||||
Advertising,
net
|
$ | 782,959 | 3a | $ | 782,959 | $ | 0 | |||||||
Merchandise
sales, net
|
1,060,272 | 1,060,272 | ||||||||||||
Total
Revenue
|
$ | 1,843,231 | $ | 782,959 | $ | 1,060,272 | ||||||||
Operating
expenses
|
||||||||||||||
Cost
of products sold, net
|
2,175,099 | 3a | 1,091,725 | 1,083,374 | ||||||||||
Selling
general & administrative
|
6,764,238 | 3a | 626,954 | 6,137,284 | ||||||||||
Selling
general & administrative – related party
|
156,123 | 3a | 53,450 | 102,673 | ||||||||||
Professional
fees
|
1,345,091 | 3a | 24,745 | 1,320,346 | ||||||||||
Depreciation
and amortization
|
182,802 | 3a | 1,668 | 181,134 | ||||||||||
Total
costs and operating expenses
|
10,623,353 | 1,798,542 | 8,824,811 | |||||||||||
Loss
from operations
|
(8,780,122 | ) | (1,015,583 | ) | (7,764,539 | ) | ||||||||
Non-operating
income (expense)
|
||||||||||||||
Interest
expense
|
(3,325,662 | ) | (3,325,662 | ) | ||||||||||
Interest
expense – Related Party
|
- | |||||||||||||
Expense
related to derivative
|
(752,748 | ) | (752,748 | ) | ||||||||||
Interest
income
|
542 | 542 | ||||||||||||
Total
non-operating expense
|
(4,077,868 | ) | (4,077,868 | ) | ||||||||||
Loss
from operations before income taxes
|
(12,857,990 | ) | (1,015,583 | ) | (11,842,407 | ) | ||||||||
Provision
for income tax
|
- | |||||||||||||
Net
loss
|
(12,857,990 | ) | (1,015,583 | ) | (11,842,407 | ) | ||||||||
Less:
Preferred Dividends
|
- | |||||||||||||
Net
loss available to common stockholders
|
$ | (12,857,990 | ) | (1,015,583 | ) | $ | (11,842,407 | ) | ||||||
Basic
and diluted net loss per common share
|
$ | (0.33 | ) | $ | (.03 | ) | $ | (.30 | ) | |||||
Weighted
average number of common shares outstanding
|
38,580,296 | 38,580,296 | 38,580,296 |
See notes
to pro forma statements.
P -
3
BEYOND
COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For
the nine month period ended September 30, 2009
Unaudited
Historical
|
Pro
Forma Adjustments
|
Pro
Forma
Balance
|
|||||||||||
Revenues
|
|||||||||||||
Advertising
Revenue
|
$ | 12,299,017 | 3a | $ | 12,299,017 | $ | 0 | ||||||
Merchandising
Revenue
|
409,051 | 409,051 | |||||||||||
Total
Revenue
|
12,708,068 | 12,299,017 | 409,051 | ||||||||||
Operating
expenses
|
|||||||||||||
Cost
of advertising
|
$ | 11,464,512 | 3a | 10,095,880 | 1,368,632 | ||||||||
Cost
of merchandising
|
63,437 | 63,437 | |||||||||||
Selling
general & administrative
|
8,444,784 | 3a | 5,519,927 | 2,924,857 | |||||||||
Selling
general & administrative - related party
|
246,052 | 3a | 246,052 | - | |||||||||
Professional
fees
|
2,764,040 | 3a | 1,155,440 | 1,608,600 | |||||||||
Professional
fees - related party
|
39,578 | 39,578 | |||||||||||
Depreciation
and amortization
|
195,533 | 3a | 42,814 | 152,719 | |||||||||
Total
costs and operating expenses
|
$ | 23,217,936 | $ | 17,060,113 | $ | 6,157,823 | |||||||
Loss
from operations
|
(10,509,868 | ) | (4,761,096 | ) | (5,748,772 | ) | |||||||
Non-operating
income (expense)
|
Interest
expense
|
(7,565,985 | ) | 3a | (551,192 | ) | (7,014,793 | ) | ||||||
Interest
expense – related party
|
(94,800 | ) | (94,800 | ) |
Change
in derivative liability
|
1,055,747 | 3b | (1,661,962 | ) | 2,717,709 | ||||||||
Total
non-operating expense
|
$ | (6,605,038 | ) | (2,213,154 | ) | (4,391,884 | ) |
Loss
from operations before income taxes
|
(17,114,906 | ) | (6,974,250 | ) | (10,140,656 | ) | |||||||
Provision
for income tax
|
- | - | - | ||||||||||
Net
loss
|
$ | (17,114,906 | ) | (6,974,250 | ) |
(10,140,656
|
) | ||||||
Net
loss available to common stockholders
|
$ |
(17,114,906
|
) | (6,974,250 | ) |
(10,140,656
|
) | ||||||
Basic
and diluted net loss per common share
|
$ |
(0.39
|
) | $ | (0.16 | ) | (0.23 | ) | |||||
Weighted
average shares of capital outstanding - basic
|
43,737,435
|
43,737,435
|
43,737,435
|
See notes
to pro forma statements.
P -
4
Beyond
Commerce, Inc. and Subsidiaries
Pro Forma
Legend
1a.
|
To
record amortization of prepaid loan costs at time of extinguishment of
debt as part of sale of LocalAdLink
|
2a.
|
To
remove software and accumulated amortization as part of sale of
LocalAdLink
|
2b.
|
To
remove debt net of debt discount from debt extinguishment as
part of sale of LocalAdLink
|
2c.
|
To
remove derivative liability related to debt extinguished as part of sale
of LocalAdLink
|
2d.
|
To
record cancellation of warrants as part of sale of
LocalAdLink
|
2e.
|
To
record gain on sale of LocalAdLink
|
3a.
|
To
remove the revenues and expenses related to the divestiture of
LocalAdLink
|
3b.
|
Removal
of the expense previously reported related to the change in the derivative
liability from the warrants cancelled as part of the sale of
LocalAdLink
|
|
P -
5
PART
II--INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
estimated expenses of the offering, all of which are to be paid by the
registrant, are as follows:
Accounting,
Legal and Professional Fees
|
$
|
50,000
|
*
|
|
Edgar
Filing Fees
|
5,000
|
*
|
||
Blue
Sky Qualification Fees
|
5,000
|
*
|
||
Transfer
Agent Fees
|
1,000
|
*
|
||
TOTAL
|
$
|
61,000
|
*Estimated
Item
14. Indemnification of Directors and Officers
Our
Articles of Incorporation and Bylaws provide that we shall indemnify our
officers or directors against expenses incurred in connection with the defense
of any action in which they are made parties by reason of being our officers or
directors, except in relation to matters as which such director or officer shall
be adjudged in such action to be liable for negligence or misconduct in the
performance of his duty. One of our officers or directors could take the
position that this duty on our behalf to indemnify the director or officer may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to our directors, officers and
controlling persons pursuant to our Certificate of Formation, Bylaws, Nevada
laws or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
control persons, and the successful defense of any action, suit or proceeding)
is asserted by such director, officer or control person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Item
15. Recent Sales of Unregistered Securities
On
November 11, 2009, we issued 1,000,000 shares of common stock upon conversion of
a convertible note in the principal amount of $100,000, at a conversion price of
$0.10. The issuance of securities is exempt from the registration requirements
of the Securities Act, under Section 4(2), as transactions by an issuer not
involving a public offering.
On
October 9, 2009, the Company sold 3,000,000 shares of common stock to Zurvita
for a purchase price of $300,000 and the Company agreed to sell, and Zurvita
agreed to purchase, an additional 5,000,000 shares of common stock for a
purchase price of $500,000, in three tranches which was completed on October 29,
2009. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2), as transactions by an
issuer not involving a public offering.
On
October 26, 2009, one of our 12% convertible note holders converted their note
of $70,000 into shares of common stock at a conversion rate of $0.10. This
resulted in an issuance of 700,000 shares of common stock. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
On
October 26, 2009, one of our bridge loan note holders converted their note of
$30,000 into shares of common stock at a conversion rate of $0.10. This resulted
in an issuance of 300,000 shares of common stock. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2), as transactions by an issuer not involving a public
offering.
On August
11, 2009 as part of the Securities Purchase Agreement executed on July 30, 2009,
the Company sold Omni the second of the Debentures (the “Second Debenture”) in
the principal amount of $291,665 and received gross proceeds of $250,000. On
August 20, 2009, the Company sold Omni the third of the Debentures (the “Third
Debenture”) in the principal amount of $116,666 and received gross proceeds of
$100,000. On August 27, 2009, the Company sold Omni the fourth of the Debentures
(the “Fourth Debenture”) in the principal amount of $373,332 and received gross
proceeds of $320,000. On September 3, 2009, the Company sold Omni the fifth of
the Debentures (the “Fifth Debenture”) in the principal amount of $699,996 and
received gross proceeds of $600,000. The Debentures are due one year from when
they are issued and are convertible into shares of the Company’s Common Stock at
any time at the option of the Holder at a conversion price of $0.70 per share,
subject to adjustment (the “Conversion Price”). If the Company does
not repay the First Debenture by January 28, 2010, or upon the default of the
First Debenture, the Conversion Price shall be reset to equal 80% of the lowest
closing bid prices for the three days prior to the date such Debenture is being
converted. Interest on the Debentures is 10% per annum, payable in
cash or common stock, at the option of the Company, provided that, interest may
only be paid in common stock if the Equity Conditions (as defined in the
Debenture) are met or waived by Omni. Interest is payable on each
Monthly Redemption Date, upon conversion, and upon maturity. Omni also was
issued warrants to purchase up to 6,350,000 shares of the Company’s Common Stock
with an exercise price of $0.70 per share. In addition, the broker was
issued warrants to purchase up to 508,000 shares of the Company’s Common Stock
with and exercise price of $0.70. All the warrants are exercisable,
for five years from the date of issuance. A Debenture cannot be
converted to common stock to the extent such conversion would cause the holder
of the Debenture, together with such holder’s affiliates, to beneficially own in
excess of 4.99% (or a maximum 9.99% in certain cases) of the Company’s
outstanding common stock immediately following such conversion. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
On August
4, 2009, one of our 12% convertible note holders converted their note of
$100,000 into shares of common stock at a conversion rate of
$0.35. This resulted in an issuance of 285,714 shares of common
stock. In addition this note holder also converted their accumulated
interest into shares of the Company’s common stock at a conversion rate of
$0.35. The total interest converted was $18,567 and converted into
53,048 of the Company’s common shares. The issuance of securities is exempt from
the registration requirements of the Securities Act, under Section 4(2), as
transactions by an issuer not involving a public offering.
On July 30, 2009, the Company entered into
Securities Purchase Agreement (the “July 2009 Securities Purchase Agreement”)
with OmniReliant Holdings, Inc. (“Omni”), pursuant to which
Omni agreed to purchase a series of original issue discount secured
convertible debentures in such amounts and with such frequency as agreed by the
Company and Omni (the “July 2009 Debentures”). On July 30, 2009, the
Company sold Omni the first of the July 2009 Debentures (the “First Debenture”)
in the principal amount of $641,663 and received gross proceeds of
$550,000. The July 2009 Debentures are due one year from when
they are issued and are convertible into shares of the Company’s Common Stock at
any time at the option of the Holder at a conversion price of $0.70 per share,
subject to adjustment (the “Conversion Price”). If the Company does
not repay the First Debenture by January 28, 2009, or upon the default of the
First Debenture, the Conversion Price shall be reset to equal 80% of the lowest
closing bid prices for the three days prior to the date such July 2009 Debenture
is being converted. Omni also was issued warrants to purchase up to 2,777,764
shares of the Company’s Common Stock with an exercise price of $0.70 per
share. The warrants are exercisable, for five years from the date of
issuance.
In
connection with the sale of the July 2009 Debenture, Midtown Partners & Co,
LLC received a warrant to purchase 220,000 shares of the Company’s Common Stock
(the “July 2009 Midtown Warrant”) pursuant to the terms of its placement agent
agreement with the Company. The July 2009 Midtown Warrant may be
exercised at any time for a period of five years from the date of issuance and
has an exercise price of $0.70. The July 2009 Midtown Warrant may be
exercised on a cashless basis if there is no effective registration statement
registering the shares underlying the July 2009 Midtown Warrant.
The
Company claims an exemption from the registration requirements of the Act for
the private placement of these securities pursuant to Section 4(2) of the
Securities Act of 1933 and/or Regulation D promulgated thereunder since, among
other things, the transaction did not involve a public offering, the investor
was an accredited investor, the investor had access to information about the
Company and their investment, the investor took the securities for investment
and not resale, and the Company took appropriate measures to restrict the
transfer of the securities.
On July
21, 2009, pursuant to the Amended and Restated Securities Purchase Agreement
dated July 10, 2009 between the Company and Omni, the Company issued to Omni a
secured original issue discount convertible debenture (the “Debenture”) and a
warrant to purchase 7,500,042 shares of the Company’s common stock for an
aggregate purchase price of one million five hundred thousand dollars
($1,500,000). The Debenture has a face value of $1,750,010 and will
become due and payable on July 21, 2010. The Debenture may be
converted at any time at the option of the Investor and has a conversion price
of $0.70 per share. The conversion price is subject to reset to $0.35
if the Company does not repay the Debenture within six months of the date of
issuance or upon an “Event of Default”, as that term is defined in the
Debenture. The Warrant may be exercised at any time for a period of five years
from the date of issuance and has an exercise price of $0.70. The
Warrant may be exercised on a cashless basis if there is no effective
registration statement registering the shares underlying the
Warrant.
35
As of
July 21, 2009, the Company has sold Omni an aggregate of $3,500,000 of
Debentures and has received gross proceeds of $3,000,000.
In
connection with the sale of the Debenture, Midtown Partners & Co, LLC
received a warrant to purchase 600,003 shares of the Company’s Common Stock (the
“Midtown Warrant”) pursuant to the terms of its placement agent agreement with
the Company. The Midtown Warrant may be exercised at any time for a
period of five years from the date of issuance and has an exercise price of
$0.70. The Warrant may be exercised on a cashless basis if there is
no effective registration statement registering the shares underlying the
Warrant.
On July
10, 2009, the Company and Omni entered into an Amended and Restated Securities
Purchase Agreement (the “Amended Purchase Agreement”). Pursuant to
the Amended Purchase Agreement, Omni purchased from the Company a Debenture with
a face amount of $583,330, with the Company receiving gross proceeds of
$500,000. Pursuant to the Amended Purchase Agreement, Omni may still purchase
additional Debentures with face values of up to $1,750,010, with the Company
receiving proceeds of up to $1,500,000 on dates and amounts agreed upon by the
Company and Omni.
Pursuant
to the Amended Purchase Agreement, the Company has sold Omni an aggregate of
$1,750,010 of Debentures and received gross proceeds of
$1,500,000. Omni was also issued warrants to purchase 2,499,986
shares of the Company’s Common Stock with an exercise price of $0.70 per share.
The warrants are exercisable, for five years from the date of
issuance. The Debentures are convertible into shares of the Company’s
Common Stock at any time at the option of the Holder at a conversion price of
$0.70 per share, subject to adjustment.
On July
6, 2009 the Company issued a total of 320,000 common stock purchase warrants to
six of our bridge loan note holders. These warrants were issued due
to a provision in their original warrants that required the Company to hit
certain targets which were not met by June 30, 2009. The exercise
price on these warrants is $1.00. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2), as
transactions by an issuer not involving a public offering.
On July
2, 2009 the Company secured an Original Issue Discounted Promissory note of
$583,330 for the receipt of $500,000 that matures on June 29, 2010.
In addition for the receipt of funds, the company issued the lender 2,499,986
and the broker 199,999 warrants to purchase the Company’s common stock at a
price of $0.70. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2), as transactions by an
issuer not involving a public offering.
During
July 2009, the Company obtained a majority of their promissory note holders to
agree to extend their notes to January 31, 2010. Because of a
provision in the promissory notes, the acceptance of the extension of the notes
forced all secured promissory note holders to accept the extended
date. This resulted in the extension of the maturity of $2,380,000 of
secured promissory notes, plus the extension of certain
provisions. For the extension, we granted the note holders a total of
680,000 three year warrants to purchase common shares of Company stock at $1.00.
The issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
On June
29, 2009, the Company entered into Securities Purchase Agreement (the “Purchase
Agreement”) with Omni. Additionally, on July 2, 2009, the Company and Omni
entered into an amended and restated Securities Purchase Agreement (the Purchase
Agreement as amended and rested is referred to herein as the “Purchase
Agreement”). Pursuant to the Purchase Agreement, Omni agreed to
purchase, in three tranches, up to $3,500,000 in principal amount of the
Company’s Original Issue Discount Secured Convertible Debentures (the
“Debentures”) for a purchase price of up to $3,000,000.
Pursuant
to the Purchase Agreement, the Company has sold Omni an aggregate of $1,166,660
of Debentures and received gross proceeds of $1,000,000 and Omni agreed to
purchase an additional Debenture with a face value of up to $2,333,340 on or
before July 30, 2009. Omni was also issued warrants to purchase
4,999,972 shares of the Company’s Common Stock with an exercise price of $0.70
per share. The warrants are exercisable, for five years from the date of
issuance. The Debentures are convertible into shares of the Company’s
Common Stock at any time at the option of the Holder at a conversion price of
$0.70 per share, subject to adjustment (the “Conversion
Price”). Interest on the Debenture is 10% per annum. The
first Debenture was issued on June 29, 2009 and the second Debenture was issued
on July 2, 2009. The principal amount of each of the Debentures is
$583,350 and each has a maturity date of twelve months from the date of
issuance. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
During
June 2009, two of our note holders converted the principal and interest of their
convertible promissory notes into shares of the Company common stock at a
conversion rate of $.70 per share. Total principal converted was
$110,000, which was converted into 157,143 of the Company common
shares. Total accrued interest of $12,940 was converted into 18,485
of the Company common shares. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
During
the three months ended June 30, 2009, the Company had 17 of our 12% convertible
notes converted into shares of our common stock by 16 individual note holders as
follows:
36
The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2) of the Act as transactions by an issuer not
involving any public offering.
On June
25, 2009, the Company issued 7,500 shares of common stock in lieu of commissions
earned to 2 different independent sales representatives. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2) of the Act as transactions by an issuer not involving any
public offering.
On June
16, 2009, the Company entered into another financing with Omni pursuant to a
second purchase agreement whereby it sold Omni a convertible original issue
discount promissory note (the “Second Note”) in the principal amount of
$575,000, with the Company receiving proceeds of $500,000, with aggregate
Financing proceeds totaling $1,000,000. Pursuant to the terms of the
Second Note, the Company agreed to pay to the Holder $575,000 in cash on August
1, 2009. The Second Note is convertible at any time at a conversion price of
$0.70 per share. In addition, the Company gave the lender 700,000 and the broker
56,000 warrants to purchase the Company stock at a price of $0.70. The Broker
received a cash payment of $40,000 from the proceeds of the note. The note was
paid in full on July 20, 2009. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On June
9, 2009, the Company issued 35,000 shares of common stock in lieu of commissions
earned to 2 different independent sales representatives. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2) of the Act as transactions by an issuer not involving any
public offering.
On June
4, 2009 the Company sold a Convertible Original Issue Discounted (OID)
promissory note for $526,316 to an accredited investor which is due
1/15/2010. However, on June 19, 2009, the average trading volume of
the common stock of the Company was under $80,000 for the ten prior consecutive
trading days, which constituted a technical “Event of Default” under the
Company’s Series 2009 Secured Convertible Original Issue Discount Note Due
January 15, 2010, dated June 4, 2009 (the “Note”), made by the Company, in favor
of St. George Investments, LLC (St. George). As a result of the Event of
Default, the principal amount of the Note, equal to $714,286, plus a penalty of
$71,428.60 (equal to 10% of the principal amount), became immediately due and
payable. At any time following either the Maturity Date or occurrence of an
Event of Default, the note may be convertible into shares of the Common Stock of
the Company valued at the Market Price which is hundred percent (100%) of the
lower of (a) the closing bid price on the trading day on which the Share
Conversion Request is made or (b) the average of the volume weighted average
prices as reported by Bloomberg, L.P. during the ten (10) trading days in the
primary trading market for Common Shares prior to and including the trading day
on which the Share Conversion Request is made. The St. George Note is secured by
an aggregate of 4,020,000 shares of the Company’s common stock pledged by
affiliates of the Company, pursuant to stock pledge agreements entered into by
the affiliates in favor of St. George, including 2,020,000 shares pledged by
Mark Noffke, the Company’s chief financial officer. Pursuant to the pledge
agreement entered into by Mr. Noffke, shares pledged by Mr. Noffke may be
transferred to St. George and sold in full satisfaction of the Company’s
obligations under the Note.
Subsequently,
the Company and St. George Investments, LLC, entered into an agreement dated
July 30, 2009 (the “Agreement”) pursuant to which the Company will satisfy the
remaining outstanding balance of $420,593.40 on its Series 2009 Secured
Convertible Original Issue Discount Note, due June 15, 2010, issued to St.
George (the “Note”). Pursuant to the Agreement, the Company will make
the following payments (the “Scheduled Payments”) on the Note: (i)
$100,000 paid on July 30, 2009, (ii) $50,000 shall be paid by August 6, 2009,
(iii) 50,000 shall be paid by August 13, 2009, (iv) $50,000 shall be paid by
August 20, 2009, (v) $50,000 shall be paid by August 27, 2009, (vi) $50,000
shall be paid on or before September 3, 2009, (vii) $50,000 shall be
paid on or before September 10, 2009 and (viii) $20,995.40 shall be paid on or
before September 17, 2009. The Company has settled the first two
payments of the Agreement. In addition, when the note was deemed in
default, St. George took collateral and monetized it towards payment of the
note. Provided the Scheduled Payments continue to be made in
accordance with the Agreement, the Note shall be deemed paid in full and St.
George shall return 3,015,424 shares of the Company’s common stock which had
been pledged as security for repayment of the Note, and will not hold any other
shares pledged in connection with the Note. The issuance of securities is exempt
from the registration requirements of the Securities Act, under Section 4(2) of
the Act as transactions by an issuer not involving any public
offering.
On June
1, 2009, the Company issued 40,000 shares of common stock in lieu of commissions
earned to 4 different independent sales representatives. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2) of the Act as transactions by an issuer not involving any
public offering.
During
May 2009, seven of our note holders converted the principal and interest of
their convertible promissory notes into shares of the Company common stock at a
conversion rate of $.70 per share. Total principal converted was
$920,000, which was converted into 1,314,285 of the Company common
shares. Total accrued interest of $105,340 was converted into 150,487
of the Company common shares. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On May
21, 2009, the Company issued 2,500 shares of common stock as compensation to an
employee. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On May
20, 2009, the Company executed a convertible promissory note (the “Note”) in the
principal amount of $1,600,000 payable to Linlithgow Holdings, LLC
(“Linlithgow”). Pursuant to the Note, the Company promises to pay to
Linlithgow $1,600,000 in cash on November 20, 2009. The Note is convertible at
any time at a conversion price of $1.00 per share which was reset to $0.70 due
to a subsequent offering. Further, as part of the consideration
provided to the Holder for the Note, the Holder also received a warrant for the
purchase of up to 1,782,000 shares of the Company’s common stock at an exercise
price of $0.90 per share. The warrants are exercisable, in whole or in part, any
time from and after the date of issuance of the warrant. Due to a
subsequent ratchet adjustment based on the issuance of warrants at a
lower per share price, the exercise price of these warrants has been adjusted to
$0.70. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
37
On May 7,
2009 one of our note holders converted the principal and interest of their
convertible promissory note into shares of the Company common stock at a
conversion rate of $1.00 per share. Total principal converted was $100,000,
which was converted into 100,000 shares of the Company common
stock. Total accrued interest converted was $4,000 into 4,000 of the
Company common shares. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On May 1,
2009, the Company issued a 120 day promissory note at 12% interest to an
accredited investor for $800,000. As a condition of the note, the
company issued the lender 400,000 warrants to purchase the company common shares
at a price of $1.00 per share. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On April
15, 2009, the Company issued 25,000 shares of common stock for professional
services received. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On April
14 and April 24, 2009 two individual warrant holders exercised the cashless
option and converted their warrants into 36,160 and 39,920 shares of Company
common stock, respectively. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On April
9, 2009, the Company entered into the first tranche of a $1,000,000 financing
(the “Financing”) with Omni pursuant to a purchase agreement whereby it sold to
Omni a convertible original issue discount promissory note in the principal
amount of $550,000 (the “First Note”), with the Company receiving proceeds of
$500,000. The First Note was convertible at any time at the option of
Omni at a conversion price of $1.00 and was due on May 9, 2009. Omni
also received warrants to purchase up to 500,000 shares of the Company’s Common
Stock with an exercise price of $1.00.
The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2) of the Act as transactions by an issuer not
involving any public offering.
During
April 2009, eight of our note holders converted the principal and interest of
their convertible promissory notes into shares of the Company common stock at a
conversion rate of $0.70 per share. Total principal converted was
$665,000, which was converted into 950,000 of the Company common
shares. Total accrued interest of $77,137 was converted into 110,580
of the Company common shares. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On April
6, 2009 three individual warrant holders exercised the cashless option and
converted their warrants into 189,086; 47,276 and 48,504 shares of the Company’s
common stock. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On April
6, 2009, the Board approved the grant of a non-qualified stock option to acquire
up to 100,000 shares of the Company’s common stock (the “Option”) to Ronald L.
Loveless in consideration of the services to be rendered by Mr. Loveless to the
Company as a director. The Option has a five-year term, and an
exercise price of $0.70 per share of common stock. The Option was not
registered under the Securities Act of 1933, as amended (the “Act”) and was
issued to Mr. Loveless in reliance upon the exemption from registration
contained in Section 4(2) of the Act and Regulation D promulgated
thereunder.
During
March 2009, the holders of $2,025,000 of our secured convertible promissory
notes that were scheduled to mature on March 31, 2009 agreed to extend the
maturity date to July 31, 2009. As consideration for their agreement
to extend the maturity date, we issued three-year warrants to the note holders
granting them the right to purchase an aggregate of 600,000 shares of our common
stock, at an exercise price of $1.00 per share. The Company recorded these
warrants at a value of $149,675 which is being amortized over the term of the
loan extensions. During July 2009, the note holders, who had not yet
converted their notes into common shares, along with our July and August
noteholders having this same July 31st maturity date agreed to extend
the maturity date to January 31, 2010. Theses holders have an aggregate of
$2,380,000 of our secured convertible promissory notes. We issued three-year
warrants to the note holders granting them the right to purchase an aggregate of
440,000 shares of our common stock, at an exercise price of $1.00 per share. The
Company recorded these warrants at a value of $149,675 which is being amortized
over the term of the loan extensions. The issuance of securities is exempt from
the registration requirements of the Securities Act, under Section 4(2) of the
Act as transactions by an issuer not involving any public offering.
On March
31, 2009 the Company sold 25,000 shares of its common stock and a warrant to
purchase an additional 12,500 shares of common stock at $.80 per share, for
$20,000 in cash. This resulted in additional non cash expense of $75,600. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2) of the Act as transactions by an issuer not
involving any public offering.
38
On
January 30, February 25 and March 9, 2009, three of our 12% convertible note
holders converted their notes of $50,000, $105,000 and $50.000 respectively,
into shares of common stock at a conversion rate of $0.70. This
resulted in an issuance of 71,429, 150,000 and 71,429 shares of common stock,
respectively. In addition these three note holders also converted
their accumulated interest on their respective notes into shares of the
Company’s common stock at a conversion rate of $0.70. The total
interest converted was $6,283, $13,727 and $3,617 respectively and converted
into 8,976, 19,609 and 5,167 of the Company’s common shares, respectively. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2) of the Act as transactions by an issuer not
involving any public offering.
On
February 18, 2009, we issued 5,000 shares of stock as compensation to an
employee. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On
February 11, 2009, we issued 52,000 shares of our common stock for services
rendered in connection with our convertible bridge loans procured during the
fourth quarter 2008. This amount had been accrued for when the service was
provided in 2008. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On
January 12, 2009 we issued 25,000 shares of common stock for cash at $0.80 per
share to an accredited investor. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On
January 7, 2009 and February 10, 2009 the Company raised $100,000 and $60,000
respectively in a private offering from accredited investors. The securities
sold by the Company consisted of its 12% secured convertible promissory notes
and warrants to purchase 100,000 and 60,000 shares of the Company’s common
stock, respectively at an exercise price of $1.00. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2) of the Act as transactions by an issuer not involving any
public offering.
On
January 5, 2009, we issued 1,000 shares of common stock to an individual for
services rendered with setting up our debit card program used for paying our
sales representatives. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On
January 12, 2009 we issued 25,000 shares of common stock for cash at $0.80 per
share to an accredited investor. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
In
January 2009, we issued 10,000 shares of our common stock for services provided
as a commission for assisting the Company with fund raising. The issuance of
securities is exempt from the registration requirements of the Securities Act,
under Section 4(2) of the Act as transactions by an issuer not involving any
public offering.
On
October 22, 2008, a $25,000 short term convertible note was converted into
25,000 shares of common stock and the related accrued interest of $904 was also
converted into 904 shares of common stock.
On
October 9, 2008 the Company issued 5,000 shares of common stock to a vendor for
computer software services valued at the trading price of the common
stock. On October 22, 2008 the Company sold 1,100 shares to a foreign
investor for $1,108. During October 2008 the Company sold to five
qualified investors, an aggregate of 155,000 shares of its common stock for
$155,000. As part of these transactions, warrants were issued to the investors
to purchase an additional 77,500 shares of common stock at $0.70. In
December 2008 the Company sold an aggregate of 25,000 shares of its common stock
for $25,000 to four qualified investors. As part of these transactions, warrants
were issued to the investors to purchase an additional 25,000 shares of common
stock at $1.00. The issuance of the foregoing securities
was exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”), under Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering, or under Rule 506
of Regulation D promulgated under the Securities Act.
During
2008, the Company raised $2,025,000, in a private offering from accredited
investors. The securities sold by the Company consisted of its 12%
secured convertible promissory notes and warrants to purchase 2,892,858 shares
of the Company’s common stock at an exercise price of $0.93 per
share. The notes are convertible at a price of $0.70 per share.
The issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
The
Company in August 2008 issued warrants to the placement agent to purchase
289,286 shares of its common stock at an exercise price of $0.93 per
share. The warrants vested immediately and expire in five years. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
During
2008, one of our placement agents and three of our investors exercised their
warrants utilizing a cashless option in their agreement, converting 744,027
warrants into 574,326 shares of the Company’s common stock at an exercise price
of $0.93. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2), as transactions by an
issuer not involving a public offering.
During
the fiscal quarter ending September 30, 2008, the Company issued 408,338 shares
of its common stock for $412,394 to foreign investors. This issuance was exempt
from registration based on an exemption provided by Section 4(2) of the
Securities Act or Regulation S thereunder.
On
September 30, 2008 the Company sold 25,000 shares of its common stock and a
warrant to purchase an additional 12,500 shares of common stock at $.70 per
share, for $25,000 in cash. This resulted in additional non cash expense of
$75,600. The issuance of securities is exempt from the registration requirements
of the Securities Act, under Section 4(2) of the Act as transactions by an
issuer not involving any public offering.
39
On
September 26, 2008 the Company issued 50,400 shares of the Company’s common
stock to a placement agent for settlement of a liability incurred in a prior
period. In accordance with an agreement with this placement agent the number of
shares was determined by converting the cost of the services to common stock at
$.70 per share. However, in accordance with generally accepted accounting
principles, the Company used the trading price of the stock on the settlement
date, which was $2.50 per share, to settle this liability. Since $15,000 was
recorded as expense in a previous period, this resulted in additional expense of
$111,000 in the quarter ended September 30, 2008. The issuance of securities is
exempt from the registration requirements of the Securities Act, under Section
4(2) of the Act as transactions by an issuer not involving any public
offering.
On August
22, 2008 the Company issued 327,126 shares of the Company’s common stock to one
of our placement agents as part of their commission for assisting with a private
placement to accredited investors. This resulted in additional non cash expense
of $583,893. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On August
22, 2008 the Company issued 224,646 shares of the Company’s common stock to
another one of our placement agents as part of their commission in connection
with the convertible note private placement. In accordance with
an agreement with the placement agent, the number of shares was determined by
converting the cost of services to common stock at $.70 per
share. However, at the time of settlement, in accordance with
generally accepted accounting principles, the Company used the trading price of
the stock, which ranged between $2.24 and $3.27 per share, to convert the
liability which resulted in us recording $607,289 of loan fees. The
issuance of securities is exempt from the registration requirements of the
Securities Act, under Section 4(2), as transactions by an issuer not involving a
public offering.
On July
17, 2008 the Company issued 107,143 shares of the Company’s common stock, to one
of our service providers in consideration of technical and administrative
assistance for the Company’s ecommerce platform. This help includes desktop
support, back office, system architecture, design and implementation. This
resulted in additional non cash expense of $268,974. The issuance of securities
is exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”), under Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering, or under Rule 506
of Regulation D promulgated under the Securities Act.
On July
7, 2008 the Company issued Secured Convertible Notes (“Notes”) having a
principal balance of $1,175,000 to eight (8) investors (the “Subscribers”). In
connection with the sale of the Notes, the Company also issued to the
Subscribers Series A Common Stock Purchase Warrants to purchase an aggregate of
up to 1,678,571 shares of the Company’s
common stock. The issuance of securities is exempt from the registration
requirements of the Securities Act, under Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
On June
2, 2008 we issued 428,572 shares of common stock to one of our service providers
in consideration of technical and administrative assistance provided to us with
regard to our e-commerce platform. The services included desktop support, back
office, system architecture, design and implementation. These shares were valued
based on the services provided by this vendor at $0.70 per share. The issuance
of securities is exempt from the registration requirements of the Securities
Act, under Section 4(2) of the Securities Act as a transaction not involving any
public offering.
During
the month of June 2008, we issued 15,938 shares of common stock to six foreign
investors in consideration of $15,133. This issuance was exempt from
registration based on an exemption provided by Section 4(2) of the Securities
Act or Regulation S thereunder.
On May
29, 2008 one of holders of our convertible promissory notes converted the
principal and interest of the note into
37,182
shares of common stock. The issuance of securities is exempt from the
registration requirements of the Securities Act, under Section 4(2) of the Act
as transactions by an issuer not involving any public offering.
On April
18, 2008 we entered into a Second Modification Agreement with Centurion Credit
Resources, LLC with respect to the $500,000 loan made to us by Centurion Credit.
As consideration for the Second Modification, we paid Centurion Credit Resources
(a) an origination fee in the amount of $25,000, and (b) issued 100,000 shares
of our common stock to Centurion. The issuance of securities was exempt from the
registration requirements of the Securities Act of 1933, as amended, under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering.
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. This resulted in a total value of $27,288 assuming a risk-free
interest rate of 2.50% 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
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. 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.
40
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
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. 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 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 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.
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 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 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. 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
December 28, 2007, in connection with the merger acquisition of Boomj.com, Inc.,
we issued 34,458,067 shares of our common stock to the stockholders of
Boomj.com, Inc. in exchange for all of their shares of Boomj.com, Inc. All of
the Boomj.com, Inc. stockholders were “accredited investors,” as that term is
defined under Rule 501(a) of the Act, and the shares were issued pursuant to an
exemption available under Section 4(2) and Rule 506 of the Act.
41
Item
16. Exhibits
Exhibit No. | Description | |
3.1
|
Articles
of Incorporation (1)
|
|
3.2
|
Amendment
to Articles of Incorporation (name
change)(2)
|
|
3.3
|
Bylaws
(1)
|
|
4.1
|
Form
of Series A Common Stock Purchase Warrant(4)
|
|
5.1
|
Opinion
of Sichenzia Ross Friedman Ference LLP
|
|
10.1
|
Agreement
and Plan of Reorganization (3)
|
|
10.2
|
Employment
Agreement Wendy Borow-Johnson (13)
|
|
10.3
|
Property
Lease - Santa Ana, California (3)
|
|
10.4
|
Property
Lease - Henderson, Nevada (3)
|
|
10.5
|
2008
Equity Incentive Plan (12)
|
|
10.6
|
Form
of Incentive Stock Option Agreement (12)
|
|
10.7
|
Form
of Non-Qualified Stock Option Agreement (12)
|
|
10.8
|
Form
of Subscription Agreement by and among the Company and the Subscribers
named therein. (4)
|
|
10.9
|
Form
of Secured Convertible Note. (4)
|
|
10.10
|
Form
of Guaranty, dated July 7, 2008, by BoomJ.com, Inc. (4)
|
|
10.11
|
Collateral
Agent Agreement, dated as of July 7, 2008, by and among BoomJ.com, Inc.,
the Subscribers and the Company. (4)
|
|
10.12
|
Form
of Security Agreement, dated July 7, 2008, between the Company and the
Subscribers(4)
|
|
10.13
|
Secured
Original Issue Discount Promissory Note, due November 16, 2009
(5)
|
|
10.14
|
Common
Stock Purchase Warrant, dated May 20, 2009 (5)
|
|
10.15
|
Security
Interest and Pledge Agreement, dated May 20, 2009, between Linlithgow
Holdings LLC and the Company (5)
|
|
10.16
|
Purchase
Agreement, dated June 17, 2009, between the Company and OmniReliant
Holdings, Inc. (6)
|
|
10.17
|
Secured
Original Issue Discount Promissory Note due June 17, 2009
(6)
|
|
10.18
|
Common
Stock Purchase Warrant, dated June 17, 2009 (6)
|
|
10.19
|
Security
Interest and Pledge Agreement, dated June 17, 2009, among OmniReliant
Holdings, Inc., the Company, and Linlithgow Holdings LLC
(6)
|
|
10.20
|
Amended
and Restated Securities Purchase Agreement, dated July 2, 2009, between
the Company and OmniReliant Holdings, Inc. (7)
|
|
10.21
|
Original
Issue Discount Secured Convertible Debenture, due July 2, 2010
(7)
|
|
10.22
|
Common
Stock Purchase Warrant, dated July 2, 2009 (7)
|
|
10.23
|
Amended
and Restated Pledge and Security Agreement, dated July 2, 2009, among the
Company and the Pledgors named therein in favor of OmniReliant Holdings,
Inc. (7)
|
|
10.24
|
Security
Agreement, dated July 2, 2009, among the Company, the Company’s
subsidiaries, and the Secured Parties named therein (7)
|
|
10.25
|
Subsidiary
Guarantee, dated July 2, 2009, by the Guarantors named therein in favor of
OmniReliant Holdings, Inc. (7)
|
|
10.26
|
Amended
and Restated Securities Purchase Agreement, dated July 10, 2009, between
the Company and OmniReliant Holdings, Inc. (8)
|
|
10.27
|
Original
Issue Discount Secured Convertible Debenture, due July 10, 2010
(8)
|
|
10.28
|
Common
Stock Purchase Warrant, dated July 10, 2009 (8)
|
|
10.29
|
Original
Issue Discount Secured Convertible Debenture, due July 21, 2010
(9)
|
|
10.30
|
Common
Stock Purchase Warrant, dated July 21, 2009 (9)
|
|
10.31
|
Securities
Purchase Agreement, dated July 30, 2009, between the Company and
OmniReliant Holdings, Inc. (10)
|
|
10.32
|
Original
Issue Discount Secured Convertible Debenture, due July 30, 2010
(10)
|
|
10.33
|
Common
Stock Purchase Warrant, dated July 30, 2009 (10)
|
|
10.34
|
Security
Interest and Pledge Agreement, dated July 30, 2009, between OmniReliant
Holdings, Inc. and the Company (10)
|
|
10.35
|
Agreement,
dated July 30, 2009, between the Company and St. George Investments, LLC
(11)
|
|
10.36
|
Asset
Purchase Agreement, dated October 9, 2009, between the Company, Local
Adlink, Inc. and OmniReliant Holdings, Inc. (14)
|
|
10.37 |
Securities
Purchase Agreement, dated October 9, 2009, between the Company and Zurvita
Holdings, Inc. (14)
|
|
21.1
|
Subsidiaries
(previously filed)
|
|
23.1
|
Consent
of L J Soldinger Associates LLC
|
|
23.2
|
Consent of Sichenzia Ross Friedman Ference LLP (included in
Exhibit 5.1 )
|
|
99.1
|
Form
of Subscription Agreement (previously
filed)
|
(1) Previously
filed as an exhibit to the Company’s Registration Statement filed on January 22,
2007, which exhibit is hereby incorporated herein by reference.
(2) 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.
(3) 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.
(4) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on July 11,
2008, which exhibit is hereby incorporated herein by reference.
(5) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on May 21, 2009,
which exhibit is hereby incorporated herein by reference.
(6) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on June 23,
2009, which exhibit is hereby incorporated herein by reference.
(7) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on July 6, 2009,
which exhibit is hereby incorporated herein by reference.
(8) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on July 16,
2009, which exhibit is hereby incorporated herein by reference.
(9) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on July 22,
2009, which exhibit is hereby incorporated herein by reference.
(10) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on August 4,
2009, which exhibit is hereby incorporated herein by reference.
(11) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on August 5,
2009, which exhibit is hereby incorporated herein by reference.
(12) Previously
filed as an exhibit to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, filed with the SEC on April 3, 2009, which exhibit is
hereby incorporated herein by reference.
(13) Previously filed as an exhibit to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, filed with the SEC on April 4, 2008, which exhibit is hereby incorporated herein by reference.
(13) Previously filed as an exhibit to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, filed with the SEC on April 4, 2008, which exhibit is hereby incorporated herein by reference.
(14) Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on October
16, 2009, which exhibit is hereby incorporated herein by reference.
42
Item
17, Undertakings.
The undersigned registrant
hereby undertakes to:
(1) File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement,
and
(iii)
Include any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3) File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4) For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned small business issuer will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(5) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(6) For
the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
43
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Henderson, State of Nevada
on February 11, 2010.
Beyond Commerce, Inc | |||
|
By:
|
/s/ Robert McNulty | |
Robert McNulty | |||
Chief Executive Officer | |||
(Principal Executive Officer) |
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
stated on February 11, 2010.
/s/ Robert McNulty | ||
Robert
McNulty
Chief
Executive Officer (Principal
Executive
Officer)
|
February 11, 2010. | |
/s/ Mark V. Noffke | ||
Mark
V. Noffke
Executive
V.P., Finance and Chief
Financial
Officer (Principal Financial and Accounting Officer)
|
February 11, 2010. | |
/s/ Murray Williams * | ||
Murray
Williams
Director
|
February 11, 2010. | |
/s/ Michael Warsinske * | ||
Michael
Warsinske
Director
|
February 11, 2010. | |
/s/ Barry Falk * | ||
Barry
Falk
Director
|
February 11, 2010. | |
/s/ Ron Loveless * | ||
Ron
Loveless
Director
|
February 11, 2010. | |
*
By /s/Mark V. Noffke
Mark
V. Noffke
Attorney-in-fact