Attached files
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EX-31.1 - SECTION 302 CERTIFICATION - Solar Park Initiatives, Inc. | ex31-1.htm |
EX-32.1 - SECTION 906 CERTIFICATION - Solar Park Initiatives, Inc. | ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
S
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended December 31, 2009
£
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the
transition period from ______________ to _____________
Commission
file number 333-143672
CRITICAL
DIGITAL DATA, INC.
(Exact
name of small business issuer as specified in its charter)
Nevada
|
80-0189455
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
7770
Regents Road, Suite 113-129, San Diego, CA 92122
(Address
of principal executive offices)
858-518-0447
(Issuer’s
telephone number)
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the issues (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes S
No £
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes £ No
£
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes S
No £
APPLICABLE
ONLY TO CORPORATE ISSUES
Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date:
As
of February 11, 2010 the Company had 4,377,000 shares of $0.001 par value common
stock issued and outstanding.
Indicate
by check mark whether the Registrant is a large accelerated filer, an accredited
filer, a non-accredited filer,(or a smaller reporting company in Rule
12b-2 of the Exchange Act.(check one)
Large
Accredited filer £ Accelerated
filer £
Non-accredited
filer £ Smaller
reporting company S
2
CRITICAL
DIGITAL DATA, INC.
TABLE
OF CONTENTS
Page
|
|
Part I FINANCIAL INFORMATION | |
Item 1. Financial Statements: | |
Balance Sheets at December 31, 2009 (unaudited) and September 30, 2009 (audited) | 4 |
Statements of Operations for the three months ended December 31, 2009 and
2008
and
the period from May 2, 2008 (inception) to December 31, 2009
(unaudited)
|
5 |
Statements of Cash Flows for the three months ended December 31, 2009 and
2008
and the period from May 2, 2008 (inception) to September 31, 2009
(unaudited)
|
6 |
Notes to Financial Statements (unaudited) | 7 |
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
12 |
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
19 |
Item 4. Controls and Procedures
|
19 |
Part
II OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
19 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
Item
6. Exhibits
|
20 |
Signatures | 20 |
3
PART I – FINANCIAL INFORMATION
ITEM
1. Financial Statements
CRITICAL
DIGITAL DATA, INC.
|
||||||||
(A
Development Stage Company)
|
||||||||
BALANCE
SHEETS
|
||||||||
ASSETS
|
||||||||
December
31, 2009
|
September
30, 2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Current
assets:
|
||||||||
Cash
|
$ | 7,814 | $ | 9,361 | ||||
Prepaid
assets
|
4,326 | 4,635 | ||||||
Total
current assets
|
12,140 | 13,996 | ||||||
Website
in development, net
|
44,318 | 44,478 | ||||||
Total
assets
|
$ | 56,458 | $ | 58,474 | ||||
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 15,784 | $ | 9,568 | ||||
Accounts
payable and accrued expenses-related parties
|
3,243 | 2,930 | ||||||
Notes
payable - related party
|
18,672 | 15,172 | ||||||
Total
current liabilities
|
37,699 | 27,670 | ||||||
Total
liabilities
|
37,699 | 27,670 | ||||||
Commitments
|
||||||||
Stockholders’
equity
|
||||||||
Preferred
stock, $0.001 par value; 10,000,000 shares
|
||||||||
authorized;
no shares issued and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares
|
||||||||
authorized;
4,377,000 and 4,323,667 shares issued and outstanding at December 31, 2009
and September 30, 2009, respectively
|
4,377 | 4,324 | ||||||
Additional
paid-in capital
|
166,572 | 137,725 | ||||||
Deficit
accumulated during development stage
|
(152,190 | ) | (111,245 | ) | ||||
Total
stockholders’ equity
|
18,759 | 30,804 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 56,458 | $ | 58,474 |
See
accompanying notes to financial statements
4
CRITICAL
DIGITAL DATA, INC.
|
||||||||||||
(A
Development Stage Company)
|
||||||||||||
STATEMENTS
OF OPERATIONS
|
||||||||||||
(Unaudited)
|
||||||||||||
Three
months ended
December
31, 2009
|
Three
months ended
December
31, 2008
|
Period
from May 2, 2008 (inception) to
December
31, 2009
|
||||||||||
Revenues
|
$ | 1,750 | $ | - | $ | 1,750 | ||||||
Operating
expenses
|
||||||||||||
Professional
fees
|
20,985 | 975 | 59,258 | |||||||||
Software
licensing costs
|
- | - | 18,982 | |||||||||
Marketing
|
3,265 | 763 | 16,864 | |||||||||
Corporate
fees
|
5,628 | 901 | 8,512 | |||||||||
General
and administrative
|
12,351 | 1,581 | 46,053 | |||||||||
Total
operating expenses
|
42,229 | 4,220 | 149,669 | |||||||||
Loss
from operations
|
(40,479 | ) | (4,220 | ) | (147,919 | ) | ||||||
Taxes
|
- | - | 1,600 | |||||||||
Interest
expense-related party
|
466 | 382 | 2,671 | |||||||||
Net
loss
|
$ | (40,945 | ) | $ | (4,602 | ) | $ | (152,190 | ) | |||
Weighted
average number of common
|
||||||||||||
shares
outstanding - basic and fully diluted
|
4,369,464 | 4,038,478 | 4,026,725 | |||||||||
Net
loss per share - basic and fully diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) |
See
accompanying notes to financial statements
5
CRITICAL
DIGITAL DATA, INC.
|
||||||||||||
(A
Development Stage Company)
|
||||||||||||
STATEMENT
OF CASH FLOWS
|
||||||||||||
(Unaudited)
|
||||||||||||
Three Months ended December 31, | May 2, 2008 (inception) to | |||||||||||
2009 | 2008 | December 31, 2009 | ||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
$ | (40,945 | ) | $ | (4,602 | ) | $ | (152,190 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||||||
Stock
based compensation
|
12,900 | - | 28,517 | |||||||||
Depreciation
|
7,160 | - | 15,631 | |||||||||
Software
licensing costs
|
- | - | 18,982 | |||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Prepaid
assets
|
309 | (1,781 | ) | (4,326 | ) | |||||||
Accounts
payable and accrued expenses
|
6,215 | (1,450 | ) | 17,155 | ||||||||
Accounts
payable and accrued expenses-related parties
|
314 | 567 | 3,244 | |||||||||
Net
cash used in operating activities
|
(14,047 | ) | (7,266 | ) | (72,987 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of website development
|
(7,000 | ) | (4,225 | ) | (46,149 | ) | ||||||
Net
cash used in investing activities
|
(7,000 | ) | (4,225 | ) | (46,149 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from note payable
|
3,500 | - | 3,500 | |||||||||
Proceeds
from issuance of common stock
|
16,000 | 7,000 | 123,100 | |||||||||
Payments
on Founders' receivable
|
- | - | 350 | |||||||||
Net
cash provided by financing activities
|
19,500 | 7,000 | 126,950 | |||||||||
Net
increase (decrease) in cash
|
(1,547 | ) | (4,491 | ) | 7,814 | |||||||
Cash,
beginning of period
|
9,361 | 35,457 | - | |||||||||
Cash,
end of period
|
$ | 7,814 | $ | 30,966 | $ | 7,814 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Income
taxes paid
|
$ | - | $ | - | $ | - | ||||||
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
Supplementary
disclosure of noncash financing activities:
|
||||||||||||
Issuance
of common stock for founders' receivable
|
$ | - | $ | - | $ | 350 | ||||||
Issuance
of note payable for development of website and marketing of
Company
|
$ | - | $ | - | $ | 15,172 |
See
accompanying notes to financial statements
6
CRITICAL DIGITAL DATA, INC.
(A
Development Stage Company)
Notes to
the Financial Statements
December
31, 2009
NOTE
1 - ORGANIZATION AND OPERATIONS
Critical Digital Data, Inc. is a Nevada
Corporation (the “Company” or “CDD”) incorporated on May 2, 2008, with its
principal place of business in San Diego, California. CDD is a development
stage company that is developing and operating a direct-to-consumer online
data storage service (“HomeDataGuard Personal Digital Vault Application,” or
“Digital Vault”) specifically for data preservation and disaster recovery.
As well, CDD is developing, marketing and licensing the HomeDataGuard Personal
Digital Vault Application as an OEM/private label solution. The DigitalVault
enables subscribers to create a “back-up” copy of their most critical
documents and electronic personal data, in an off-site secure location.
We are operating the direct-to-consumer business of CDD under the
service and brand name “HomeDataGuard” (sometimes herein referred to as
“HDG”).
NOTE
2 - GOING CONCERN
No
assurance can be given that a market for the CDD product will develop, or that
customers will be willing to pay for the CDD product. For the three
months ended December 31, 2009, the Company incurred net losses totaling
$40,945; had net cash used in operating activities totaling $14,047; and had an
accumulated deficit of $152,190 as of December 31, 2009. If the Company is
unable to generate sufficient cash flow from operations and/or continue to
obtain financing to meet its working capital requirements, it may have to
curtail its business sharply or cease business altogether.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern that contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. However, the
ability of the Company to continue as a going concern on a longer-term basis
will be dependent upon the ability to generate sufficient cash flow from
operations to meet its obligations on a timely basis and the ability to
ultimately attain profitability. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The
Company has paid for the development of the Digital Vault through the borrowing
of funds from an entity controlled by the major shareholders of CDD (See Note 4
– Related Party Transactions) as well as through the sale of shares of its own
common stock (See Note 5-Stockholders’ Equity). Additionally, while
the Company has been successful in the past in raising capital, no assurance can
be given that these sources of financing will continue to be available to the
Company and/or that demand for the Company’s equity instruments will be
sufficient to meet its capital
needs.
Management
believes that the actions presently being taken to obtain additional funding and
market the Digital Vault will be sufficient to enable the Company to continue as
a going concern.
7
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying unaudited condensed financial statements of CDD have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and applicable regulations of the U.S.
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair statement of financial position and results of
operations have been included. Our operating results for the three
months ended December 31, 2009 are not necessarily indicative of the results
that may be expected for future quarters and the year ending September 30, 2010.
The accompanying unaudited condensed financial statements should be read in
conjunction with the Company’s Annual Report on Form 10-K filed with the SEC on
December 29, 2009 which includes the audited financial statements and notes
thereto of CDD as of September 30, 2009 and the risks factors contained
therein.
Development
Stage Company
The
Company’s financial statements are presented as those of a development stage
enterprise. Activities during the development stage primarily include
the creation of a business plan and the development and marketing of the Digital
Vault and raising capital.
Fair
Value Estimates
The
Company is required to estimate the fair value of all financial instruments
included on its balance sheet. The fair value of an asset or
liability is the amount at which it could be exchanged or settled in a current
transaction between willing parties. The carrying values for cash and cash
equivalents, prepaid assets, accounts payable and accrued liabilities
approximate their fair value due to their short maturities.
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.
Revenue
recognition
The
Company recognizes revenue when it is realized or realizable and earned. The
Company considers revenue realized or realizable and earned when it has
persuasive evidence of an arrangement that the services have been rendered to
the customer, the sales price is fixed or determinable, and collectability is
reasonably assured. Subscription revenues shall be recognized over
the period benefited. Deferred revenues shall be recorded when cash has been
collected, however the related service has not yet been provided.
8
During
November 2009, CDD entered into a contract with a third party LLC (“LLC”)
whereby CDD would provide a version of its online file cabinet to act as an
integrated subsection of LLC’s website. For each subscription of the
file cabinet sold, CDD will receive a monthly licensing fee. As an
inducement for CDD to enter into the contract, LLC agreed to pay
CDD a monthly minimum fee of $1,750, of which the first three minimum
monthly payments, totaling $5,250 were paid upon the execution of the
contract.. As of December 31, 2009, CDD has recognized one month of
revenues, or $1,750, under this contract and the remaining $3,500 of the
prepayment is recorded as deferred revenue and included in Accounts Payable and
Accrued Expenses in the accompanying interim financial statements.
Stock-based
Compensation
Stock
based compensation expense is recorded in accordance with FASB ASC Nos. 718 and
505 for stock and stock options awarded in return for goods and services
received. The expense is measured at the grant-date fair value of the award and
recognized as compensation expense on a straight-line basis over the service
period, which is the vesting period. The Company estimates forfeitures that it
expects will occur and records expense based upon the number of awards expected
to vest.
Recently
Issued Accounting Pronouncements
In June
2009, the FASB issued guidance to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash
flows; and a transferor’s continuing involvement, if any, in transferred
financial assets. The guidance is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period and for
interim and annual reporting periods thereafter. The Company does not expect the
guidance to have a material impact on its financial statements.
Also
during June 2009, the FASB issued guidance regarding financial reporting by
enterprises involved with variable interest entities. This guidance
is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009, for interim periods within
that first annual reporting period, and for interim and annual reporting periods
thereafter. The implementation of this guidance had no impact on the financial
statements of the Company.
In
December 2007, the FASB issued an update to business combination accounting. The
new pronouncement establishes principles and requirements for how the acquirer
in a business combination recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree at the acquisition date fair value. This update
significantly changes the accounting for business combinations in a number of
areas, including the treatment of contingent consideration, preacquisition
contingencies, transaction costs and restructuring costs. In addition, under the
new guidelines, changes in an acquired entity’s deferred tax assets and
uncertain tax positions after the measurement period could impact income tax
expense. The provisions of this standard will apply to any acquisitions we
complete after October 1, 2009.
9
NOTE
4 – RELATED PARTY TRANSACTIONS
In order
to develop the Company’s Digital Vault and begin marketing of the Company, an
entity owned by the founders of the CDD (the “Related Entity”) made payments to
various consultants on behalf of the Company in the amount of
$15,172. Subsequently, CDD entered into a note payable agreement with
the Related Entity evidencing the amount of the funds that had been paid to date
(the “2008 Note Payable”). The 2008 Note Payable bears interest at
10% per annum and is due on September 30, 2010. During October 2009,
CDD borrowed an additional $3,500 (the “2009 Note Payable”) from the Related
Entity in order to continue developing and marketing the Digital
Vault. The 2009 Note Payable bears interest at 6% per
annum and is due on October 5, 2010. As of December 31, 2009,
CDD had accrued interest totaling $2,671 related to both the 2009 and 2008 Note
Payables.
The
Company’s attorney is related to one of the founders of the Company and during
the fiscal year ended September 30, 2009 has billed CDD $572 for the
reimbursement of filing fees relating to CDD’s incorporation in the state of
Nevada as well as its registration to do business in the state of
California. Such expenses are recorded as General and administrative
expenses and included in Accounts payable and accrued expenses – related party
in the accompanying financial statements.
NOTE
5 – STOCKHOLDERS’ EQUITY
During
the three months ended December 31, 2009, the company sold 53,333 shares of its
common stock at $.30 per share resulting in proceeds of $16,000. These shares are restricted under Rule 144 of the
Securities Act of 1933.
NOTE
6–STOCK INCENTIVE PLAN
As of
December 31, 2009, we have granted options to purchase a total of 271,500 shares
of common stock under the Company Stock Option Plan. The options were
granted to advisors and consultants for services rendered at a price equal to
the fair market value of the common stock at the date of grant.
The
Company recognizes option expense ratably over the vesting
periods. For the three months ended December 31, 2009, the Company
recorded compensation expense related to options granted under the Plan of
$12,900.
Forfeitures
are estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from initial estimates. Stock-based
compensation expense was recorded net of estimated forfeitures for the three
months ended December 31, 2009 such that expense was recorded only for those
stock-based awards that are expected to vest.
The fair
value of option grants for the three months ended December 31, 2009 was
estimated using the Black-Scholes option pricing model with the following
assumptions:
Expected
dividend yield
|
0.00
|
Risk-free
interest rate
|
1.50-2.5%
|
Expected
volatility
|
70-90%
|
Expected
life (in years)
|
3
|
10
The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company’s employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management’s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock
options.
Stock
option activity under the Plan for the three months ended December 31, 2009 is
summarized as follows:
Shares
|
Weighted Average
Exercise Price per
Share
|
Weighted Average
Remaining
Contractual Life
(in years)
|
Grant
Date Fair Value
|
|||||||||||||
Outstanding
at September 30, 2009
|
201,500 | $ | 0.17 | 2.82 | $ | 18,069 | ||||||||||
Options
granted
|
70,000 | $ | 0.30 | 2.91 | 12,188 | |||||||||||
Options
exercised
|
- | $ | - | - | - | |||||||||||
Options
cancelled/forfeited/ expired
|
- | $ | - | - | - | |||||||||||
Outstanding
at December 31, 2009
|
271,500 | $ | 0.21 | 2.46 | $ | 30,257 | ||||||||||
Exercisable
at December 31 2009
|
261,500 | $ | 0.21 | 2.44 | $ | 28,516 |
As of
December 31, 2009, there was $1,741 of unrecognized compensation cost related to
unvested stock options. The Company intends to issue new shares to
satisfy share option exercises.
NOTE
7 – COMMITMENTS AND CONTINGENCIES
On August
27, 2009, CDD entered into an agreement with a consultant to solicit corporate
sponsorship and promotion for HomeDataGuard as well as to provide business
development activities for private label partnership
opportunities. The agreement calls for the payment of a retainer of
$2,000 upon the execution of the agreement followed by monthly retainer of
$2,000 in months two and three of the contract for a total of $6,000 for the
three month term of the agreement. As of December 31, 2009 the
retainer portion of the agreement had been paid in full. The
agreement also calls for various payments to be made in cash and/or options
based on performance, the execution of various sponsorship and/or promotion
transactions, and the consultant’s participation on CDD’s Strategic Advisory
Board. The consultant has also been granted options to purchase
35,000 shares of common stock at $0.30 per share, all of which have vested as of
December 31, 2009. The agreement shall continue in force until
terminated by either party with thirty days written notice.
11
On June
1, 2009, CDD entered into an agreement with a communications consultant to
perform public relations and media relations services. The agreement
calls for payments of $1,500 in June 2009 and $2,000 per month
thereafter. The agreement shall continue in force until terminated by
either party with thirty days written notice. As of October 1, 2009,
the parties agreed to place the agreement on hold until further
notice.
NOTE
8 – SUBSEQUENT EVENTS
Management
evaluated subsequent events of the Company through February 11, 2010 (the
available for issuance date of the Financial Statements) and concluded that no
subsequent events have occurred that would require recognition in the Financial
Statements or disclosure in the Notes to the Financial Statements, except as
follows:
On
February 1, 2010, CDD entered into a
contract with an additional third party LLC (“LLC2”) whereby CDD would provide a
private labeled version of its DigitalVault as a new product line for
LLC2. For each subscription of the file cabinet sold, CDD will
receive a minimum monthly licensing fee of $950. As an inducement for
CDD to enter into the contract, LLC2 agreed to pay CDD the first month’s minimum
licensing fee of $950 plus development fees of $1700 upon execution of the
agreement.
ITEM
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Safe
Harbor for Forward-Looking Statements
When used
in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,”
“estimate,” “project,” “intend,” and similar expressions are intended to
identify forward-looking statements within the meaning of Section 27a of the
Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934
regarding events, conditions, and financial trends that may affect the Company’s
future plans of operations, business strategy, operating results, and financial
position. Persons reviewing this report are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors are discussed under the “Item 2. Management’s
Discussion and Analysis of Financial Condition or Plan of Operations,” and also
include general economic factors and conditions that may directly or indirectly
impact the Company’s financial condition or results of operations.
12
Description
of Business:
Overview
Critical
Digital Data, Inc. is a Nevada Corporation (the “Company” or “CDD”) incorporated
on May 2, 2008, with its principal place of business in San Diego,
California. CDD is a development stage company that is developing and
operating a direct-to-consumer online data storage service (“HomeDataGuard
Personal Digital Vault Application,” or “Digital Vault”) specifically for
data preservation and disaster recovery. As well, CDD is developing, marketing
and licensing the HomeDataGuard Personal Digital Vault Application as an
OEM/private label solution. The
DigitalVault enables subscribers to create a “back-up” copy of their most
critical documents and electronic personal data, in an off-site secure
location. We are operating the direct-to-consumer business of CDD under
the service and brand name “HomeDataGuard” (sometimes herein referred to as
“HDG”). HDG provides:
1)
|
Secure
online digital storage (back-up) and reproduction services via
www.HomeDataGuard.com and HomeDataGuard Personal Digital Vault
Application, and;
|
|
|
2)
|
Access
to independent service providers, “HomeDataPros®”, trained by us to
provide
confidential, efficient assistance in the conversion of customers’
printed documents to digital documents and assist in the account set-up
for a secure HomeDataGuard Online File
Cabinet.
|
We are a
development stage business and entered into our first private label licensing
agreement of the DigitalVault in November 2009. As of mid June, 2009,
the HomeDataGuard.com website has been live and the HomeDataGuard Digital Vault
Application is undergoing user testing. Our common stock has been
accepted for trading on the OTC Bulletin Board under the symbol
"CDIX". However, there are currently no "market makers" making a
market for our common stock.
Background
A
person’s most important personal data is at risk from destruction or damage in
fires, floods, hurricanes, tornadoes, landslides and other natural disasters, as
well as theft. Such data includes but is not limited to homeowner insurance
policies, personal estate documents, mortgage and real estate documentation,
stock certificates, product warranties, photographs of assets/property, birth
certificates, tax records, etc. Most of this data oftentimes solely
exists in physical paper-based form.
We
believe that the average individual does not spend very much time or put much
thought into organizing and consolidating his or her most important physical
papers. Oftentimes, a person’s most valued and critical physical documents are
dispersed amongst boxes in garages, in closets, file cabinets at home and at
work, in piles in one’s bedroom or kitchen, in bank safety deposit boxes,
personal home safes, albums, etc. Likewise electronically stored data is
spread amongst hard drives, external hard drives, floppy disks, CD-ROMs,
flash drives, in email accounts, etc. Other critical documentation and data may
be held by advisors (attorneys, accountants, physicians), on diverse servers
etc.
HomeDataGuard
was developed with the intent to be a very simple-to-use and secure digital
repository for the aggregation, organization, storage and rapid retrieval of
that personal critical data.
HomeDataGuard
HomeDataGuard,
comprised of the HomeDataGuard Personal Digital Vault Application and the
HomeDataGuard.com website, will enable a Subscriber, at any time, to
digitally transfer a digital copy of their personal documents and information
(“upload” and/or “download”) to and from their HomeDataGuard file cabinet
on-demand. To facilitate the aggregation and uploading of a
Subscriber’s personal information, HomeDataPros, who will be independent
service providers trained by the Company to help subscribers scan, upload
and organize their data, will be available in select geographic regions,
commencing in San Diego County.
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Companies
in the information protection and storage services industry store and manage
information in a variety of media formats, which can broadly be divided into
physical and electronic records, and provide a wide range of services related to
the records stored. Physical records may include paper documents, as well
as all other non-electronic media such as microfilm and microfiche, master audio
and videotapes, film, X-rays and blueprints. Digital records may include files
retained on some form of hardware device and files in word processing formats,
database formats, spreadsheets, digital photographs, digital videos, pdfs, rtfs,
etc. HomeDataGuard’s services and functionality will be geared toward
storing and protecting inactive or semi-active information in most any digital
file format, which is not typically accessed frequently by its owners and
updated only occasionally.
The
HomeDataGuard Personal Digital Vault Application is designed to simulate a
traditional bank-like physical vault containing a private room with a
four-drawer file cabinet. The virtual interface is extremely
easy to use, and provides the Subscriber with a virtual experience that may feel
very much like the real experience of opening and closing a file cabinet drawer,
scrolling through file folders, inserting files inside folders, and moving
folders around.
A
Subscriber logs in and is presented with a video which shows a steel vault
unlocking and its door opening, complete with sound effects. The
registered user is taken inside the vault to his/her personal secure file
cabinet, which stands next to a whiteboard which contains
instructions. The Subscriber can choose to store, organize and/or
retrieve their data by accessing the appropriate file drawer and folders
presented within
The
Subscriber clicks on one of the file cabinet drawers, which rolls open to
display the file folders contained inside. When the Subscriber
scrolls over a folder and selects to open it, the folder displays thumbnail
images of the files contained within. The Subscriber can upload
a file into a pre-named folder. The top two drawers
contain several pre-named folders to help a Subscriber get started and be
organized. The Subscriber may also create dozens of new folders, edit
folders, even move them to other drawers. Subscribers have the
ability to choose which folders and drawers to place their important data
inside. The website will provide guidance, prompts and checklists to
subscribers, and ensure that they are reminded several times per year to make
necessary updates, changes and/or add new information to their digital file
cabinet.
When a
Subscriber opens an account they initially do so with the purpose of storing
important personal data and documents within their own private secure
HomeDataGuard Online File Cabinet. In order to transfer
documents or information to one’s HomeDataGuard Online File Cabinet, that data
must first exist in a digital format (“digital copy”.) It is then uploaded via
the Internet to HomeDataGuard’s servers. If the data does not
pre-exist in a digital format, it would need to be converted by one of several
methods, including but not limited to: being scanned; being faxed to a digital
destination; be digitally photographed; or made into a digital
movie.
Personal
files can be uploaded by the Subscriber or for a fee by a HomeDataPro® or other
trained professional. To store the digital copies into their personal file
cabinets, Subscribers would follow the prompts on the site. Users are
prompted to determine which named file folder to place the digital copies into,
for organizational purposes.
Subscribers
will be able to select an annual or monthly payment subscription plan, for
access to their four drawer file cabinet (the “Basic” HomeDataGuard OnlineFile
Cabinet.) A subscriber can obtain, automatically, as much additional
digital storage space as they need beyond the initial 4 gigabytes provided, and
will be charged for each additional incremental gigabyte of space used on a
monthly basis.
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Data
Access and Maintenance
Once a
digital copy is uploaded to a Subscriber’s personal file cabinet, it is easily
accessible to that Subscriber anytime from any hardware device that can access
the Internet and download that file from HomeDataGuard. Only
that Subscriber will have access, unless he/she provides the username and
password information directly to another party. HomeDataGuard will,
via email notifications, suggest that Subscribers change their password every
few months and remind them to update their account information and add fresh
data to their file cabinets if warranted.
Data
Storage Functionality & Encryption
Data
storage space is currently leased from Media Temple and Amazon Web
Services. In the future, CDD may select other storage and hosting providers that
meet HomeDataGuard’s system’s requirements. All files uploaded
to HomeDataGuard by its subscribers are always immediately and automatically
encrypted before they are stored on our servers.
HomeDataPros®
We intend
to recommend trained and qualified independent professionals, who the company
has certified as “HomeDataPros®.” HomeDataPros® will be trained
by us to provide confidential, efficient
assistance in the conversion of customers’ documents and information
to digital copies and assist in the account set-up and uploading to a
secure online HomeDataGuard Online File Cabinet.
HomeDataPros®
will assist the user in the following activities: document scanning; creating
digital video recordings of personal property and home inventory; digitally
photographing property; and uploading any Subscriber-requested digital
copies to the personal file cabinet on www.HomeDataGuard.com.
Market
for HomeDataGuard
We
anticipate that our initial customers will be consumer households that reside in
San Diego County and other geographic locations where there is a high risk
of damage to homes as a result of fires, floods, hurricanes, earthquakes and
other disasters.
Market
for Private Labeling the HomeDataGuard Personal Digital Vault
Application
We
anticipate that there will be an interest by other companies to private label
the HomeDataGuard Personal Digital Vault Application, and are aggressively
pursuing business development initiatives to seek out such
relationships.
On
November 18, 2009, the Company entered into a one year contract with a company
who is private labeling a limited version of the HomeDataGuard Online
File Cabinet. This licensee offers consumers a bundled product
offering providing several identity theft and fraud protection services,
including the secure online document storage provided by CDD.
Revenue
We expect
to derive our revenue primarily from monthly license fees paid by the private
label customers of the DigitalVault, and through initial and recurring
subscription revenues to HomeDataGuard.com. We expect that the
typical private label customer will pay based upon a monthly revenue formula
that includes total number of user/subscriber accounts and the total amount of
storage space utilized.
For
business-to-consumer subscriptions, it is anticipated that customers will
subscribe for an annual license, at this time expected to start at $49.95 per
year or $4.95 per month for a HomeDataGuard Online File Cabinet and that a
portion of those subscribers will renew annually. Starting with 4
gigabytes of storage space, a HomeDataGuard Online File Cabinet account will
automatically expand its storage space on demand, and charge the subscriber for
each incremental gigabyte of digital storage space used.
A la
carte services provided by HomeDataPros® will be charged by the service provided
and will be priced based upon time and services provided.
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Growth
Strategy
Our
objective for HomeDataGuard.com is to establish a leadership position in the
niche of record protection and storage services of critical personal
information, protecting and storing our customers’ information without regard to
media format or geographic location. Our primary avenues of growth are expected
to be: (1) acquire consumer household customers within the US and Canada,
starting within fire-prone and earthquake-prone regions of California; (2)
establish and expand a workforce of HomeDataPro® professionals in those regions;
(3) eventually expand into other regions of the United States.
Our
objective for private labeling is to establish a leadership position in the
niche of consumer-centric OEM online storage solutions which companies can
provide to their customers/members/employees as a free benefit or as a
revenue-generating service for any data-storage related purpose. Our
primary avenues of growth are expected to be: (1) acquire private label
customers from non-competing industry sectors within the domestic U.S.; (2)
acquire larger, institutional private label customers domestically and
internationally.
Intellectual
Property
We rely
on a combination of trademark, copyright, trade secret and patent laws in the
United States as well as confidentiality procedures and contractual provisions
to protect our proprietary technology and our brand. HomeDataGuard™ and
HomeDataPro® are not registered trademarks as of the date of this S-1filing. An
application to register HomeDataPro® as a service mark was submitted to the U.S.
Patent & Trademark Office, as well as a follow-up Response to Office Action
statement, and is expected to be granted within the next three to six months.
The owners of the filed service mark are our co-founders, Dina Moskowitz &
Marc Zimmerman who have agreed to assign the service mark to us.
In
September 2008 the company submitted a copyright application to the U.S.
Copyright Office for the HomeDataGuard.com Personal Digital Vault
Application. As of December 5, 2008, we have received confirmation
that the copyright has been granted effective November 19, 2008.
We also
rely on copyright laws to protect copy on our web site and all marketing
materials. We have registered at least 40 Internet domain names related to our
business in order to protect our proprietary interests. From time to time, we
may encounter disputes over rights and obligations concerning
intellectual property. 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, our
brand and reputation, or our ability to compete. Also, protecting our
intellectual property rights could be costly and time consuming.
On
February 2, 2009, the Company entered into a licensing agreement with a third
party software development firm for a non-exclusive, perpetual and
non-sublicensible right to use certain proprietary software code for
the Digital Vault application and HomeDataGuard website. This
relationship was terminated in September 2009 and the related proprietary
software code has been removed from the Digital Vault application and
HomeDataGuard website.
On
November 18, 2009, the Company entered into a one year contract with a company
which is private labeling the HomeDataGuard Online File Cabinet. The
company is offering consumers a bundled product offering providing several
identity theft and fraud protection services, including the secure online
document storage provided by CDD.
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Employees
At the
present time our Chief Executive Officer, Dina Moskowitz, and our President,
Marc Zimmerman, are our only employees as well as our sole officers, directors
and major shareholders. Ms. Moskowitz and Mr. Zimmerman will devote such
time as required to actively market and further develop our services and
software products. At present, we expect Ms. Moskowitz and Mr. Zimmerman
to each devote at least 20 hours per week to our business. Our
executive officers have not received any compensation since the date of our
incorporation, and we did not accrue any compensation. We do not anticipate
hiring any additional employees until such time as additional staff is required
to support our operations.
Results
of Operations
The
following discussion should be read in conjunction with our financial statements
and the related notes that appear elsewhere in this Quarterly
Report.
Revenues
CDD began
recognizing revenues during the quarter ended December 31, 2009. Such
revenue, totaling $1,750, relates to our private label agreement where we
receive monthly revenues based on active subscriptions.
Operating
Expenses – For the Three Months ended December 31, 2009 and 2008
Total
operating expenses for the three months ended December 31, 2009 and 2008 totaled
$42,229 and $4,220, respectively, and consisted primarily of the
following:
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Stock
based compensation expense was approximately $12,900 and $0 during the
three months ended December 31, 2009 and 2008, respectively. On
March 11, 2009, the Company adopted its 2009 Stock Incentive Plan in which
we are authorized to grant stock options and stock appreciation rights to
our employees, officers, directors and consultants. In
conjunction with the Plan, we granted options to purchase a total of
70,000 shares of common stock during the three months ended December 31,
2009. All such options vested within the three month period
resulting in $12,189 of stock based compensation expense. The
value of the options is expensed over the vesting period of the
options.
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Professional
fees, excluding those recognized in relation to the 2009 Stock Incentive
Plan, totaled approximately $8,100 for the three months ended December 31,
2009 and relate primarily to accounting fees incurred in preparation of
the Company’s Form 10-K for the fiscal year ended September 30, 2009 as
well as public relations fees incurred in promoting the Company’s
product. Professional fees for the three months ended December
31, 2008 totaled $975 and related primarily to accounting
fees.
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Marketing
fees for the three months ended December 31, 2009 and 2008 totaled
approximately $3,300 and $760, respectively and were incurred in promoting
the Company’s name and product to the market place. These costs
have increased significantly in the current fiscal year due to the launch
of the HomeDataGuard Online File
Cabinet.
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Incorporation
and filing fees totaled approximately $5,600 and $900 for the three months
ended December 31, 2009 and 2008,
respectively.
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Various
general and administrative fees consisting primarily of the monthly
liability insurance, depreciation, internet and web design services and
office expenses totaled approximately $12,000 and $1,600 for the three
months ended December 31, 2009 and 2008,
respectively.
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Operating Expenses – For the Period from May 2, 2008 (Inception) through December 31, 2009
Total
operating expenses for the period from May 2, 2008 (Inception) through December
31, 2009 totaled $149,669 and consisted primarily of the following:
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Stock
based compensation expense was approximately $28,000 for the period from
May 2, 2008 (Inception) through December 31, 2009 resulting from the
granting of options to purchase 271,500 shares of common stock
during said period. The options were valued at $30,257 using the
Black-Scholes option pricing model. The value of the options is
expensed over the vesting period of the
options.
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Accounting
fees relating to the Company’s Registration Statement filed on Form S-1 in
December 2008, as well as Quarterly Reports and the Annual Report of the
Company’s financial statements totaled approximately $20,000 for the
period from May 2, 2008 (Inception) through December 31,
2009
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Marketing
fees incurred to launch HDG and begin advertising the Company to the
public totaled approximately $17,000 for the period from May 2, 2008
(Inception) through December 31,
2009.
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In
January 2009, we issued warrants to purchase 133,333 shares of CDD common
stock at $0.015 per share to a third party software development firm in
exchange for a Licensing Agreement providing CDD the right to
use for internal purposes certain software developed by the software
development firm. The warrant is exercisable at any time on or
before January 22, 2019 and may be exercisable in either cash or through
the receipt of shares equal to the value of the warrant as defined in the
Licensing Agreement. The fair value of the 133,333 warrants was
estimated to be approximately $19,000 and was expensed as software
licensing costs.
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Various
general and administrative fees consisting primarily of the monthly
liability insurance, depreciation, internet and web design services and
office expenses totaled approximately $46,000 for the period from May 2,
2008 (Inception) through December 31,
2009
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Other
Expenses
During
the three months ended December 31, 2009 and 2008, the Company incurred $466 and
$382, respectively of other expenses resulting from interest incurred on notes
payable to a related entity. During the period from May 2, 2008
(Inception) through December 31, 2009 the Company incurred $4,271 of other
expenses of which $1,600 represents the state minimum tax imposed on
corporations and $2,671 results from interest incurred on the notes payable. In
order to develop the Company’s Digital Vault and begin marketing of the Company,
an entity owned by the founders of CDD (the “Related Entity”) made payments to
various consultants on behalf of the Company in the amount of
$15,172. Subsequently, CDD entered into a note payable agreement with
the Related Entity evidencing the amount of the funds that had been paid to date
(the “2008 Note Payable”). The 2008 Note Payable bears interest at
10% per annum and is due on September 30, 2010. During October 2009,
CDD borrowed an additional $3,500 (the “2009 Note Payable”) from the Related
Entity in order to continue developing and marketing the Digital
Vault. The 2009 Note Payable bears interest at 6% per
annum and is due on October 5, 2010. As of December 31, 2009,
CDD had accrued interest totaling $2,671 related to both the 2009 and 2008 Note
Payables.
Net
Loss
During
the three months ended December 31, 2009 and for the period from May 2, 2008
(Inception) through December 31, 2009 the Company incurred a net loss of
$40,945, and $152,190 respectively, due primarily to operating expenses as
described above.
Capital
Resources and Liquidity
Net cash
used in operating activities was $14,047, $7,266 and $72,987 for the three
months ended December 31, 2009, 2008, and for the period from May 2, 2008
(Inception) through December 31, 2009, respectively and is primarily
attributable to the payment of marketing and professional fees, liability
insurance and office expenses.
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Net cash
used in investing activities was $7,000, $4,225 and $46,149 for the three months
ended December 31, 2009, 2008, and for the period from May 2, 2008 (Inception)
through December 31, 2009, respectively, resulting from the development of the
HomeDataGuard Online Digital Vault.
Net cash
provided by financing activities during the three months ended December 31,
2009, 2008 and for the period from May 2, 2008 (Inception) through December 31,
2009 was $19,500, $7,000 and $126,950, respectively and resulted primarily from
the Company’s sale of its common stock via private placement memorandums during
each respective period.
We
currently rely on cash flows from financing activities to fund our capital
expenditures and to support our working capital requirements. We expect that
future cash requirements will principally be for capital expenditures and
working capital requirements.
We
anticipate that depending on market conditions and our plan of operations, we
may continue to incur operating losses in the foreseeable future. Therefore, our
auditors have raised substantial doubt about our ability to continue as a going
concern.
ITEM
3. Quantitative and Qualitative Disclosures About Market Risk.
As a
“smaller reporting company,” we are not required to provide the information
under this Item 3.
ITEM
4. Controls and Procedures
(a) Evaluation of disclosure controls
and procedures. Based on the evaluation of our disclosure controls and
procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e) required by Securities Exchange Act Rules 13a-15(b) or
15d-15(b), our Chief Executive Officer/Chief Financial Officer has concluded
that as of the end of the period covered by this report, our disclosure controls
and procedures were effective.
(b) Changes in internal controls.
There were no changes in our internal controls over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
ITEM
1. Legal Proceedings
We know
of no material, existing or pending legal proceedings against us, nor are we
involved as a plaintiff in any material proceeding or material pending
litigation. There are no proceedings in which any of our directors, officers or
affiliates, or any registered or beneficial shareholder, is an adverse party or
has a material interest adverse to our company.
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ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
During
the three months ended December 31, 2009, the company sold 53,333 shares of its
common stock at $.30 per share resulting in proceeds of $16,000. These shares
are restricted under Rule 144 of the Securities Act of
1933. Proceeds from the sale of the common stock is being
utilized for the development and marketing of HomeDataGuard.
ITEM
6. Exhibits
Copies of
the following documents are included as exhibits to this report pursuant to Item
601 of Regulation S-B.
SEC
Ref. No.
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Title
of Document
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31.1
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Certification
of the Principal Executive
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Officer/
Principal Financial Officer pursuant
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to
Section 302 of the Sarbanes-Oxley Act of 2002*
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32.1
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Certification
of the Principal Executive Officer/
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Principal
Financial Officer pursuant to U.S.C.
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Section
1350 as adopted pursuant to Section 906
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of
the Sarbanes-Oxley Act of 2002*
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* Filed
herewith.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CRITICAL
DIGITAL DATA, INC.
Date:
February 11, 2010
By: /s/ Dina
Moskowitz
Dina
Moskowitz
Chief
Executive Officer/Chief Financial Officer
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