Attached files
file | filename |
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EX-3.1 - Thwapr, Inc. | v179918_ex3-1.htm |
EX-99.2 - Thwapr, Inc. | v179918_ex99-2.htm |
EX-10.4 - Thwapr, Inc. | v179918_ex10-4.htm |
EX-10.5 - Thwapr, Inc. | v179918_ex10-5.htm |
EX-99.1 - Thwapr, Inc. | v179918_ex99-1.htm |
EX-10.8 - Thwapr, Inc. | v179918_ex10-8.htm |
EX-10.7 - Thwapr, Inc. | v179918_ex10-7.htm |
EX-10.9 - Thwapr, Inc. | v179918_ex10-9.htm |
EX-10.6 - Thwapr, Inc. | v179918_ex10-6.htm |
EX-10.4(A) - Thwapr, Inc. | v179918_ex10-4a.htm |
EX-99.3 - Thwapr, Inc. | v179918_ex99-3.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
March 29, 2010
Date of
Report (Date of earliest event reported)
Seaospa, Inc.
(Exact
Name of Registrant as Specified in Charter)
Nevada
|
000-53640
|
26-1359430
|
||
(State
or Other
|
(Commission
File Number)
|
(IRS
Employer
|
||
Jurisdiction
of Incorporation)
|
|
Identification
No.)
|
220
12th
Avenue, 3rd
Floor
New York, NY 10001
(Address
of Principal Executive Offices)
(212) 268-0220
(Registrant’s
telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Cautionary
Notice Regarding Forward-Looking
Statements
This
Current Report on Form 8-K (“Form 8-K”) and other reports filed by the
Registrant from time to time with the Securities and Exchange Commission
(collectively the “Filings”) contain or may contain forward-looking statements
and information that are based upon beliefs of, and information currently
available to, the Registrant’s management as well as estimates and assumptions
made by the Registrant’s management. When used in the filings the words
“anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the
negative of these terms and similar expressions as they relate to the Registrant
or the Registrant’s management identify forward-looking statements. Such
statements reflect the current view of the Registrant with respect to future
events and are subject to risks, uncertainties, assumptions and other factors
(including the risks contained in the section of this report entitled “Risk
Factors”) relating to the Registrant’s industry, the Registrant’s operations and
results of operations and any businesses that may be acquired by the Registrant.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended or
planned.
Although
the Registrant believes that the expectations reflected in the forward looking
statements are reasonable, the Registrant cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the
Registrant does not intend to update any of the forward-looking statements to
conform these statements to actual results. The following discussion should be
read in conjunction with the Registrant’s pro forma financial statements and the
related notes filed with this Form 8-K.
Unless
otherwise indicated, in this Form 8-K, references to “we,” “our,” “us,” the
“Company” or the “Registrant” refer to Seaospa, Inc., a Nevada corporation and
its wholly owned subsidiary, Thwapr, Inc., a Delaware corporation.
Section
2 - Financial Information
Item
2.01 Completion of Acquisition or Disposition
of Assets.
On March
29, 2010 (the “Closing Date”), Seaospa, Inc., a Nevada corporation (“Seaospa”),
closed a voluntary share exchange transaction with Thwapr, Inc., a Delaware
corporation (“Thwapr”), that is a mobile to mobile video and photo service
provider, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by
and among Seaospa, certain stockholders of Seaospa, Thwapr and the stockholders
of Thwapr (the “Thwapr Stockholders”).
Prior to
the voluntary share exchange under the Exchange Agreement (“Exchange
Transaction”), we were a public reporting “shell company,” as defined in Rule
12b-2 of the Securities Exchange Act of 1934, as amended. As a result
of the Exchange Transaction, the Thwapr Stockholders acquired approximately 90%
of our issued and outstanding common stock, Thwapr became our wholly-owned
subsidiary, and the Company acquired the business and operations of
Thwapr.
The
Exchange Agreement contains customary representations, warranties, and
conditions to closing. The following description of the terms and
conditions of the Exchange Agreement and the transactions contemplated
thereunder that are material to the Company does not purport to be complete and
is qualified in its entirety by reference to the full text of the Exchange
Agreement, a copy of which was filed as Exhibit 2.1 to a Current Report on Form
8-K on March 9, 2010 and is incorporated by reference into this
Item 2.01.
2
From and
after the Closing Date, our primary operations will consist of the business and
operations of Thwapr. Therefore, we disclose information about the
business, financial condition, and management of Thwapr in this Form
8-K.
Issuance of Common Stock and
Warrants. At the closing of the Exchange Transaction, the Company issued
142,676,508 shares of its common stock and warrants to acquire 12,181,363 shares
of its common stock to the Thwapr Stockholders in exchange for 100% of the
issued and outstanding capital stock of Thwapr. Immediately prior to
the Exchange Transaction, the Company had 14,609,754 shares of common stock
issued and outstanding, subsequent to the Stock Split described
below. Immediately after the Exchange Transaction, the Company had
157,286,262 shares of common stock issued and outstanding, of which 141,562,908
cannot be sold or traded (i) until June 9, 2012, if Thwapr has 10,000,000
registered users on such date, or (ii) upon a change of control of
Thwapr. Additionally, of the warrants outstanding, 10,950,003 shares
of the underlying securities cannot be sold or traded (i) until June 9, 2012, if
Thwapr has 10,000,000 registered users on such date, or (ii) upon a change of
control of Thwapr.
Change in Management.
As a condition to closing the Exchange Agreement and as more fully described in
Item 5.02 below, Mr. Yakov Terner has resigned as President, Treasurer, and
Director of the Company, and Mr. Yossi Benitah has resigned as Secretary and
Director of the Company. Effective March 22, 2010, Messrs. Bruce
Goldstein, Maurizio Vecchione, and Barry Hall, the current directors of Thwapr,
were appointed to the Company’s board of directors. At the closing of
the Exchange Transaction, Mr. Goldstein was appointed President and Chief
Executive Officer, Maurizio Vecchione was appointed as Chairman of the Board,
and Mr. Hall was appointed Chief Financial Officer, Treasurer, and
Secretary. Other key members of the management team include Mr. Eric
Hoffert as Integrated Chief Technology Officer, Mr. Duncan Kennedy as Chief
Operating Officer, and Mr. Leigh Newsome as Vice President of User Experience,
each of whom were appointed as of the Closing Date.
The
following persons consist of the Company’s new executive officers and
directors:
Name
|
Age
|
Position
|
||
Bruce
Goldstein
|
61
|
Director,
President and Chief Executive Officer
|
||
Maurizio
Vecchione
|
48
|
Chairman
of the Board
|
||
Barry
Hall
|
|
61
|
|
Director
and Chief Financial Officer
|
The
Company previously filed and mailed the Information Statement required under
Rule 14(f)-1 to its stockholders on or about March 10, 2010, and the ten-day
period prior to the change in the majority of the Company’s directors as
required under Rule 14(f)-1 expired on March 20, 2010. Additional
information regarding the above-mentioned directors and/or executive officers is
set forth below under the section titled “Management”.
Stock
Split. As a further condition to the closing of the Exchange
Transaction, the Company has undertaken a recapitalization whereby each share of
the Company’s common stock was exchanged for three shares of the Company’s
common stock, with the same rights, privileges, and obligations (the “Stock Split”),
effective March 29, 2010. Subsequent to the Stock Split, the
authorized capital stock of Seaospa currently consists of 300,000,000 shares of
common stock and 50,000,000 shares of preferred stock.
3
DESCRIPTION
OF BUSINESS
General
Thwapr,
Inc. was incorporated in the State of Delaware on March 14, 2007 under the name
Mobile Video Development, Inc. In July 2009, the company’s name was
changed to Thwapr, Inc. The primary purpose of Thwapr is to develop systems,
applications and software that allow users and brands to share pictures and
video to mobile phone users regardless of device, platform or carrier.
Additionally, Thwapr expects to enable users to easily capture and share
pictures and videos on their phones with other mobile and desktop users and into
social networks. Thwapr plans to derive revenues from banner and video
advertising on its mobile and desktop websites and from mobile media messaging
fees from brand sponsors. Thwapr also plans to sell premium services to users
and brands via subscriptions and other fees. In December 2009, Thwapr launched a
public beta test of its service. Thwapr expects to launch its service
in 2010 but does not anticipate generating any meaningful revenues until such
time that a significant number of users and brands have signed up for and are
using the service. This service will be launched under the name
of Thwapr, a trademark it owns.
Thwapr
has been in the developmental stage since inception and has conducted virtually
no revenue generating operations. The technology underlying Thwapr’s product is
complex and as such, a significant amount of development expense has gone into
the creation of the Thwapr service infrastructure. To
minimize start-up costs, Thwapr uses only consultants for its activities at this
time and has no full-time employees and owns no real estate or personal
property. For its development and other operations, Thwapr employs independent
contractors on a part-time and full-time basis. Thwapr expects to convert most
of these independent contractors to employees over time as funding becomes
available.
Thwapr’s
business is subject to several significant risks, any of which could materially
adversely affect its business, operating results, financial condition and the
actual outcome of matters as to which it makes forward-looking statements.
(See “Risk Factors.”)
Market
Overview
While
video and picture sharing on the Internet have been around for some time now,
the task can be cumbersome and frustrating on most mobile
devices. Multiple carriers and phone types with limited or no
interoperability can make this potentially powerful communications tool languish
in the background while texting and social networking Internet sites continue to
grow and thrive. As a result, Thwapr believes that mobile phone users
have in the past struggled to use this feature on their phone to the extent that
they would like. Compounding this problem is the continuing trend for
mobile phone equipment manufacturers to offer new phones with additional
capabilities while the mobile phone carriers are enhancing their 3G (and soon
4G) networks to allow users to take advantage of these
capabilities. Additionally, users wishing to share videos from a
camera phone are at times required to synchronize their phones with a computer,
making the process impossible while strictly mobile. As a result, Thwapr
believes that the power of real-time video sharing which many camera phones
promise is rarely realized.
MMS. One possible
solution is the use of MMS (Multimedia Messaging Service) to send pictures and
videos. MMS is a standard developed by the Open Mobile Alliance, an industry
consortium. MMS can be an effective way to send pictures from one
person to another, but as the mobile experience moves from photo to videos and
more importantly from point to point communication to social networks, MMS may
begin to encounter substantial scalability issues. MMS approaches sending of
rich media with a lowest common denominator to provide a video experience that
will be common across handsets rather than providing the best possible
experience a handset can provide. More specifically, MMS does not
work consistently for video and relies on the H.263 legacy video compression
method (which is no longer state of the art) which typically generates quarter
screen resolution and which Thwapr believes is limited to just 176 x 144
pixels. Also, in Thwapr’s internal tests between different types of
handset and carriers, MMS delivery failures were frequent, in some cases
approaching an 80% failure rate.
4
Other
limitations of MMS are as follows:
|
·
|
File size limitation.
MMS videos are generally limited in duration by file size. Limits include
10, 15, or 30 second duration for video, and file size is often limited to
100, 200, or 300 Kbytes. These limits can be imposed both by carriers and
by handset makers. While most customers understand a limitation by
duration (for example 30 seconds), most phone users, in Thwapr’s
experience, have no idea how to even find the file size of a
video on their handset.
|
|
·
|
MMS video is not stored in
“The Cloud.” An MMS file is generally not accessed
easily from a PC. If the mobile phone user switches to another handset,
that user must often first manually transfer the MMS picture or video to
PC and then transfer it back to the new handset, a cumbersome
process.
|
|
·
|
Conversation
limitations. It is Thwapr’s opinion that on most
devices, MMS does not allow a fluid interface for back and forth
“video conversations.” You cannot easily comment on
someone's MMS video which Thwapr believes is an important aspect of social
networking when sending and receiving videos and pictures. The most
notable exception is Apple’s iPhone, where a good interface exists for
this type of commenting. Even on the iPhone, however, this is limited to
one-to-one conversations, instead of communicating with groups of
users.
|
|
·
|
Inability to
geotag. MMS video generally does not include location
information, also called a “geotag.” Thwapr believes that
geotagging can significantly enhance the social networking
experience.
|
|
·
|
Difficulty interfacing with
social networks. While it is
possible to post an MMS picture or video to a Facebook or Twitter account,
it can be a very complicated
process.
|
|
·
|
Standard setting
delays. As new technologies to enhance MMS are
developed, their adoption will be governed by the MMS standards setting
process. This is likely to result in significant delays in
enhancement, implementation and evolution of the
technology.
|
Video on Mobile
Phones. Most major manufacturers of mobile phones either
already have, or plan to, deliver handsets with video capabilities into the
market, often with multiple tiers of devices with unique
profiles. Dozens of companies have developed and continue to maintain
databases that capture the differences between handsets, at significant expense.
Some of the hardware-related mobile video considerations include:
|
·
|
High
resolution color screens that can render a quality video experience in
portrait or landscape mode is a key consideration. Quality is determined
by brightness, the ability to generate a high number of colors, and screen
visibility indoors and outdoors. Screen size also impacts the overall user
experience; half an inch can make a world of difference. The diversity of
handsets in the display area is
substantial.
|
|
·
|
Video
tends to have little value without being accompanied by acceptable audio.
A number of standard and proprietary audio codecs have been developed to
achieve maximum quality with minimum network impact at the lowest
cost.
|
5
|
·
|
Handset
based clients are required for streamed and downloaded video content. The
variety of media players — and associated DRM schemes — means phones can
often only play formats that are supported by that
player.
|
Smartphones. Smartphones
have emerged as a fast growing sector of the market, blending multi-media, data
and internet access and mobile communications. Additionally, Thwapr
believes that the smartphone market, most of which by definition is media
enabled, will be a growth market that will allow carriers to add a
variety of revenue streams attached to data and multi-media
messaging. Thwapr also believes that as smartphones continue to
penetrate the market, demand for video sharing services will grow
dramatically. Mobile phone equipment manufacturers continue to
offer new phones with additional capabilities while the mobile phone carriers
will need to enhance their 3G and soon 4G networks to allow users to take
advantage of these capabilities.
Video and Picture Sharing
Approaches. The current market is highly fragmented, with many
companies and organizations offering service for the mobile phone video and
picture market. Generally, these services fall under five
categories:
|
·
|
MMS,
which was described earlier.
|
|
·
|
Mobile-to-Web,
where mobile phone users post their pictures or videos on a Website to
share with others. This category has a number of participants,
and there is little product differentiation between and among
them.
|
|
·
|
Web-to-Mobile,
when pictures or videos are posted on Websites and then download to phones
using a proprietary application. This category usually requires
some kind a relationship with a carrier and also has a number of
participants.
|
|
·
|
Propriety
Mobile-to-Mobile, where the user utilizes a proprietary application to
send pictures or video from one phone to another. Again, a
carrier relationship is usually required for this
service.
|
|
·
|
The
Thwapr Open Mobile-to-Mobile, where no proprietary application is
required, nor is a carrier
relationship.
|
While the
entire market is nascent, Thwapr believes that leaders will emerge based on
their brand recognition, number or users in their network, ease of use and
financial resources. Additionally, many of
these service are free while others charge a use or monthly
fee. Others appear to be focused on an advertizing based
model. At this time, the size of the market is indeterminable but is
generally thought to be growing and viable. Thwapr believes that the
size and ultimate viability of the market will be based on the ease of use, cost
to use, adoption rate of smartphones and the acceptance of brands that mobile is
a viable advertizing medium.
Competition. The
industry for services and applications related to mobile phones is extremely
competitive and fragmented but includes several large companies with worldwide
name brand recognition and substantial financial resources. In attempting
to attract users to its proposed service, Thwapr will be competing with online
providers of audio and video entertainment, web-based video channels, social
networking Internet sites and other similar businesses that compete for the
general public’s business in this market. There can be no assurance that other
companies will not develop technologies superior to Thwapr’s technology, that
new technologies will not emerge that render Thwapr’s technology obsolete or
that a competing company or companies will not be able to capture more market
share than Thwapr is able to capture due to name recognition and the expenditure
of greater amounts for marketing and advertising. Moreover, such
brands as YouTube and Facebook have already begun a move to the mobile
market.
6
Other
competitors include the following, segregated by their video and picture sharing
approaches:
|
·
|
Mobile-to-Web
and Web-to-Mobile: Flixwagon, Kyte, qik, 12seconds, Zannel, twitvid,
Shozu, livestream, vidly and
twitpic.
|
|
·
|
Proprietary
Mobile-to-Mobile: Movius, LiveCast, Aylus Networks, and
knocking.
|
To the
best of Thwapr’s knowledge, there are no direct competitors in the Open
Mobile-to-Mobile approach.
Strategy
Thwapr is
developing mobile media services directly for the mobile phone
industry. In addition, Thwapr plans for these services to allow its
customers to interact with a variety of other services available through the
Internet, such as Facebook and Twitter. Today, Thwapr’s web browser
application supports more than 200 mobile handsets with coverage planned to
expand to thousands of handsets; the service also runs on Macs and PCs. An
extended set of native mobile phone applications are planned to optimize the
capture and sharing experience for Apple iPhone, iPad, Android, and Research in
Motion OS, among others. Even though applications are expected to be available,
there is no need to download or install any additional software to receive
Thwapr media.
Thwapr
continues to develop what it believes to be a seamless solution to the problem
of video and picture sharing using mobile phones and
devices. Thwapr’s service is expected to allow anyone with an
Internet and picture or video enabled mobile phones to be able to both send and
receive these images regardless of technical sophistication. In the
future, the service capabilities may also allow Thwapr’s customers to create
their own personal media social networks, where members can share and
communicate through rich media mostly through their mobile
phones. Thwapr’s goal is to become the leading service for sharing
pictures and video to mobile phones – regardless of carrier or device – for
brands and users alike.
In
summary, Thwapr plans for its service to provide the following innovations to
its users:
|
·
|
Mobile
technology for sending photos and videos directly to friends’ mobile
phones optimized for socialization and communication amongst
users;
|
|
·
|
Support
the largest possible number of mobile carriers worldwide through Thwapr’s
adaptive transcoding and delivery service, expecting to offer the ultimate
in interoperability;
|
|
·
|
Support
most WAP enabled camera phones, video phones, smartphones and
full-featured browsers for wide compatibility in video
playback;
|
|
·
|
Require
no applications to download (i.e., not limited to
just smartphones or phones running a certain operating system) or on-deck
solutions requiring a user to have a certain phone or operating system;
and
|
|
·
|
Target
to deliver industry leading ease of use so that if you can send an SMS,
you can create your own Thwapr
channel.
|
7
Thwapr is
expected to make it easy to share pictures or video on mobile devices and to
distribute this content into social networks. End-users can share multimedia
content with mobile family and friends, and brands can distribute content to
mobile fans and consumers. Thwapr’s goal is to enable easy mobile
picture and video sharing and conversations around content on a global basis
supporting both consumers and brands.
Thwapr
believes that mobile phones with text messaging and a data plan can
automatically show a Thwapr picture or play a Thwapr video clip. Thwapr can
serve instant-play video to a phone dynamically using its cloud-based
servers. A Thwapr user can shoot or select a picture or video, and
email it to their Thwapr account. From Thwapr’s mobile browser interface, a user
can select one or more people with whom to share the picture or
video. Thwapr then sends the recipients a text message with a URL
link in it, which enables the viewing of the picture or the video. Thwapr users
may also upload media content from a desktop computer such as a Mac or PC and
share the content to mobile users; likewise they can upload content from a
native application platform (i.e., Apple iPhone OS) and
share to those same users.
Recipients
of the video or picture do not need to sign-up, login, or even know that their
phone has a media player to receive media content. Thwapr determines mobile
phone attributes that a user has based on a set of unique device detection
processes. Thwapr deploys a distributed database regarding how to
serve pictures or video to each kind of phone. Thwapr delivers
different types of video experiences based on phone type. For
example, on an Apple iPhone, progressive download video is served; for a
Blackberry Curve, streaming video is deployed; on a Motorola RAZR, a 3GP
download file is utilized, and on a legacy flip phone, an animated GIF preview
may be shown. Users who receive content can also post their Thwapr media into
major social networks such as Facebook or Twitter.
Smartphone
Apps. One popular feature of Smartphones is the use of
“Apps.” Apps, short for application software, are designed to help a
user perform specific tasks. Generally, Apps are downloaded by users
from an app store directly on to their mobile phone. While the Thwapr
service does not require an App, Thwapr understands the desirability of having a
Thwapr App for the most popular Smartphones on the market to ease
usability. To that end, Thwapr has partnered with a mobile app
software developer to develop an App for the Apple iPhone. This App
should allow iPhone users to more easily and quickly capture pictures and video
and share this media with contacts in the iPhone address book via the Thwapr
service. The App is expected to also provide additional features such
a geotagging. In the future, Thwapr plans to have additional Apps
developed for Smartphones using the Android, RIM and Symbian mobile phone
operating systems. This will be subject to the availability of
funding and the relative take up rates of the service on those platforms.
Additionally, when new Smartphone operating systems are introduced and penetrate
the market, it is Thwapr’s intention to continue developing Thwapr Apps for
those that become market leading.
Disadvantages of
Thwapr. While Thwapr believes its approach to mobile video and
picture sharing has many advantages over alternative approaches, it does also
have some disadvantages. First, to use the Thwapr service, the user
must purchase a data plan from their service provider. Second, Thwapr
customers are notified of their Thwapr via text messaging. Should the
user not have an unlimited data plan, this could result additional usage
charges. Finally, Thwapping is a multi-step process and until we
develop apps for the service, some users may believe the process is too time
consuming and complicated.
Revenues
and Customers
General. Thwapr is expected to be
principally an advertising and sponsor supported business. Thwapr believes that
it has the potential to achieve significant market penetration and growth since
every user of the product, by virtue of his inviting his friends to be part of
his personal media network, could generate many additional users for the Thwapr
service. Thwapr believes that the viral nature of its business model is
essential to understanding the potentially explosive growth of its user base.
While this potential exists, Thwapr has not yet experienced the material growth
of users that evidences this potential. As a result, the assumption for viral
user acquisition remains untested at this time.
8
Advertising. Thwapr’s
customers are expected to drive the opportunity for advertising insertions.
Thwapr is designing its service interface and workflow to maximize the use of ad
insertions without becoming obtrusive. Additionally, in the
future, Thwapr may offer premium services for which it will be able to charge
the user directly. Finally, Thwapr expects to partner with
brands that will sponsor the delivery of pictures and videos and to charge a fee
for delivering each unit of media. Thwapr is building into its products revenue
opportunities to monetize users. Thwapr believes that it may offer a strong
ability to have users attract more users. This is because when sharing a video,
Thwapr users are likely to naturally invite others to use the system. This viral
model has the potential to drive dramatically up the user numbers, and in turn
the page-views activated by these users. Thwapr’s business model is expected to
be principally ad-supported, leveraging the large volume of page-views generated
by its users as well as leveraging Thwapr’s unique ability to provide
ad-insertions pre- and post-roll, automatically transcoded to play on each
target mobile device. Additionally, Thwapr has identified
sponsorship-advertising opportunities leveraging its ability to contextualize
advertising around user profiles and geo-location information. This combination
of video insertion and contextualized targeted advertising should make Thwapr
compelling to advertisers targeting the mobile space. Additionally, Thwapr is
planning to offer premium services, as well as ad-free services for monthly
subscription levels. Thwapr is currently surveying the market to
determine what can be charged for such services; however, its immediate focus
will be on gaining as many users of Thwapr as possible in the shortest amount of
time.
While the
potential for developing significant revenue streams in the future by monetizing
users exists, Thwapr has not yet reached a stage where that potential has been
validated. As a result, delivering on this potential contains significant risks,
as discussed in the “Risk Factors” section of this document.
Sales and
Distribution. Thwapr intends to acquire new users of its
service through strategic partnerships, targeted paid user acquisition campaigns
and the viral growth derived from social media.
Thwapr
intends to generate revenue from three sources: (a) advertising sales; (b)
premium services; and (c) sponsored services. Sponsored services are
‘Thwaps’ or video messages sold to sponsors on a volume basis.
There are
5 planned distribution channels for Thwapr’s services:
|
·
|
Thwapr’s
mobile and desktop website;
|
|
·
|
Partner
and sponsor websites that will offer a “send to mobile” button, which
accesses Thwaprs service and enables sending of partner content to
partners users;
|
|
·
|
App
stores;
|
|
·
|
Handset
and carrier partnerships and bundling deals;
and
|
|
·
|
Third
party applications which access Thwapr’s Application Programmers Interface
(API).
|
Pending Business
Relationships. Thwapr has entered into a Memorandum of
Understanding agreement with a popular photosharing Website to deliver
advertising supported photos to mobile users. This is a prototypical
service and is no guarantee of a future contract and future
revenues. Additionally, Thwapr is in various stages of discussion and
negotiations with a variety of entertainment and sports brands to provide mobile
video distribution service to these entities.
9
Third Party
Developers. Thwapr also intends two services for third party
developers: (a) a ‘Thwap It Now’ button which allows any website to add Thwapr’s
services and (b) an Application Programmers Interface (API), which will allow
third party smartphone application developers to utilize our services from
multiple platforms.
Technology
Thwapr is
designed to provide a solution to the problem of sharing multimedia content,
particularly digital video from one mobile device user to another, from one
mobile device user to a number of mobile device users, or from a brand
delivering media content to thousands, tens of thousands, or hundreds of
thousands of users. To successfully support interoperable multimedia sharing,
Thwapr’s platform must deal with a multitude of file formats, bit rates, screen
resolutions, interaction modes, and audio and video codecs all of which create
complexity within the framework of mobile video experience.
Transcoding. Transcoding
is the decoding and re-encoding of digital content from one video format to
another. Transcoding is often necessary to enable playback of media
on different devices. Transcoding video is especially challenging
because the sheer number of parameters can make devices that support the same
video “standards” incompatible. When you add the complexities layered
on top of the devices from the carriers either for delivery, playback,
interaction, and interoperability, the result is a very difficult technological
challenge. To better understand this complexity, and technical
challenges, consider the process to track video content from creation through
the various paths that lead to consumption. Along the way, the
content may need to be transcoded many times so that it may be distributed over
various networks and to a wide assortment of devices.
Interoperability
Issues. Significant interoperability issues begin with the
variables associated with simple home video, involving NTSC or PAL, standard or
widescreen video and competing next-generation high-definition
formats. These issues increase dramatically when Internet video is
added with codecs such as Windows Media Video (WMV) and VC-1, H.264, DivX, On2’s
VP6, Sorenson 3 and Sorenson. Adding to this complexity is the
ongoing evolution of Flash video. Additional challenges result from
content providers and device manufacturers that optimize bit rates, resolutions
and other parameters to balance video quality and download
times. Finally, on the mobile side, the thousands of different
handset configurations in use today force specific unique video
formats. In simplest terms, a single piece of multimedia content
might need to be transcoded to 100 variations (i.e., video bit rate, video
frame rate, video picture resolution, compression algorithm, audio sampling
rate, audio bit depth, streaming, progressive download, and download, among
others) to guarantee playback across various mobile devices.
No
service can mandate that all content must be produced in a specific standard if
they are dealing with User Generated Content (UGC) or mobile media
sharing. For UGC, there is a need to deal with the uncertainties
associated with numerous end-user devices and multiple networks with differing
technical infrastructures and speeds. The approach used by most
content aggregators to deal with this issue is
“pre-transcoding”. That is, the content aggregator ingests content
and transcodes it into all of the proper formats a priori; only then is the
content distributed. This time-consuming process delays the posting
of content and creates the need for massive amounts of hardware required for the
processing of the ingested video.
A great
deal of content is pre-transcoded. That is, content aggregators ingest content
and transcode it into their “chosen” format or formats; only then is the content
is put online. This can delay the posting of content for access by
end-users. However the challenge of transcoding takes on a new
dimension when one considers the enormous volume of online
content. Thwapr anticipates that volume will continue to
skyrocket in the coming years as consumption increases. With many
individual sites taking in thousands upon thousands of videos each day, there is
a non-stop process, especially if the target is the myriad formats and codecs
that target many of the top mobile phones. This problem is
exacerbated by the fact that the type and underlying formats of mobile phones
are moving targets with a high velocity of change. Transcoding in this context
is already a complex process.
10
Transcoding
Solution. The centerpiece of the Thwapr technology is a hybrid
transcoding system. Thwapr’s transcoding technology can detect, in
real-time, the handset, carrier and operating system of each destination device
in order to determine mobile device attributes (video formats, screen size and
type, browser, operating system) and then delivers videos and photos
individualized for each user's device and carrier in real-time; this is combined
with selective pre-transcoding for a small commonly used set of formats. The
complete process utilizes hybrid transcoding and adaptive rendering, a
differentiator versus other approaches to mobile media sharing. Thwapr
anticipates that this seamless process should make it possible to achieve high
level of ease of use while delivering the highest quality video and Web
experience that each user's phone can support. Thwapr’s
infrastructure integrates multiple databases, sourced commercially and via open
source, and updated on a regular basis to determine optimization parameters for
the transcoding process. Ultimately thousands of devices and
permutations of operating systems may have to be addressed in the Thwapr device
optimization database. There can be no assurance that Thwapr will be
able to service all of the mobile phones that will be introduced into the
market.
In
addition to a broadly accessible Web service, Thwapr plans to release native
applications for major smartphone operating systems such as Apple iPhone OS,
Android, and Research in Motion OS; these applications are expected to optimize
the Thwapr user experience for capturing and sharing media.
Intellectual
Property
Patents. Thwapr is
developing unique intellectual property for its service. The centerpiece of the
Thwapr technology is expected to be a process that detects mobile device
attributes (video formats, image formats, video capabilities, screen size,
screen type (i.e.,
touch vs. static), mobile web browser, operating system) and delivers videos and
photos individualized for each user's device and carrier in real-time. This
process is covered by a provisional patent filing and Thwapr is expecting to
leverage that into a series of patent applications within the required statutory
terms of the provisional patent filing. The Thwapr process utilizes hybrid
transcoding and adaptive rendering, key differentiators versus other approaches
to mobile media sharing. Hybrid transcoding combines pre-transcoding and
real-time transcoding while adaptive rendering scales the end-user web
experience from a simplistic HTML web browser on a flip phone all the way up to
a large screen multi-touch modern WebKit browser. This seamless process makes it
possible to achieve an extraordinary level of ease of use while delivering the
highest quality video and Web experience that each user's phone can
support.
Key topic
areas for the Thwapr provisional patent filed on September 22, 2009
include:
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Email
/ SMS methods to enable adaptive multimedia upload and playback on mobile
devices;
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Hybrid
transcoding via pre-transcoding and on-demand
transcoding;
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Automatic
video compositing of adaptively transcoded
media;
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Client
multimedia playback, device rendering, and device interaction attribute
detection;
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Adaptive
device rendering for multimedia playback
optimization;
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Adaptive
download and playback including segmented file structures;
and
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11
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Social
networks and communication models for adaptively transcoded and played
back media.
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There can
be no guarantee that Thwapr will be awarded a patent on any or all of the
subject areas described above. Subject to available funding, Thwapr
plans to file a number of full patent applications. This will be done
on the basis of the provisional patent as well as any new inventions that Thwapr
may develop.
Thwapr
will continue to evaluate its business benefits in pursuing patents in the
future. Thwapr currently protects all of its development work with
confidentiality agreements with its engineers, employees and any outside
contractors. However, third parties may, in an unauthorized manner,
attempt to use, copy or otherwise obtain and market or distribute Thwapr’s
intellectual property or technology or otherwise develop a product with the same
functionality as its service. Policing unauthorized use of intellectual property
rights is difficult, and nearly impossible on a worldwide basis. Therefore,
Thwapr cannot be certain that the steps it has taken or will take in the future
will prevent misappropriation of its technology or intellectual property,
particularly in foreign countries where it does business or where its service is
sold or used, where the laws may not protect proprietary rights as fully as do
the laws of the United States or where the enforcement of such laws is not
common or effective.
Trademarks. Thwapr
has filed and received approval for trademarks on its company name “Thwapr” and
its tagline “Get Your Moments Moving.” There can be no assurance that
Thwapr will receive trademark protection on any future
applications.
Regulation
Thwapr
will be subject to various federal, state and local laws that govern the conduct
of its business, including state and local advertising, digital rights
management, consumer protection, credit protection, licensing, and other labor
and employment regulations. Thwapr does not anticipate at this time that
the costs of complying with such regulations will have a material effect on its
business or financial condition, but there are no guarantees that new regulatory
and tariff legislation may not have a materials negative effect on Thwapr’s
business in the future.
Employees
Thwapr
currently has no employees. Thwapr engages the services of independent
contractors to assist it with management in developing its product
offering. Thwapr plans to engage full-time employees, including
transferring some or all of these contractors to employee status, as its
business develops and when it obtains sufficient working capital.
Corporate
Information
The
principal executive office for Thwapr is located at 220 12th Avenue,
3rd
Floor, New York, New York 10001. Thwapr’s main telephone number is (212)
268-0220 and its fax number is (212) 537-5804.
RISK
FACTORS
You
should carefully consider the risks described below together with all of the
other information included in this on Form 8-K before making an investment
decision with regard to our securities. The statements contained in or
incorporated into this Form 8-K that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by
forward-looking statements. If any of the following events described in these
risk factors actually occurs, our business, financial condition or results of
operations could be harmed. In that case, the trading price of our common stock
could decline, and you may lose all or part of your investment.
12
Risks
Relating to Our Business and Industry
We
are a development stage company with a limited operating history on which to
evaluate our business or base an investment decision.
Our
business prospects are difficult to predict because of our limited operating
history, early stage of development, unproven business strategy and unproven
product. We are a development stage company that has yet to generate any
revenue. Since our inception on March 14, 2007, it has been our business plan to
design, develop, manufacture and distribute our Thwapr service. Thwapr has only
been introduced in selected test markets and there is no guarantee that our
product will be able to generate any significant revenues. As a
development stage company, we face numerous risks and uncertainties in the
competitive markets. In particular, we have not proven that we
can:
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develop
our product offering in a manner that enables us to be profitable and meet
our customers’ requirements;
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develop
and maintain relationships with key customers and strategic partners that
will be necessary to optimize the market value of our products and
services;
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raise
sufficient capital in the public and/or private markets;
or
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respond
effectively to competitive
pressures.
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If we are
unable to accomplish these goals, our business is unlikely to succeed and you
should consider our prospects in light of these risks, challenges and
uncertainties.
We
have no revenues and have incurred and expect to continue to incur substantial
losses.
Since
inception through September 30, 2009, we have not generated any revenues and
approximately $3,579,000 has been invested in the Company to date. We
have generated significant operating losses since our formation and expect to
incur substantial losses and negative operating cash flows for the foreseeable
future. For the year ended December 31, 2008, our net loss was
$891,552 and as of September 30, 2009 our accumulated deficit, excluding
non-cash charges, was $2,568,554. We anticipate that our existing
cash and cash equivalents will not be sufficient to fund our short term business
needs and we will need to generate revenue or receive additional investment in
the Company to continue operations. In addition, our business
operations may prove more expensive than we currently anticipate and we may
incur significant additional costs and expenses. We expect that capital outlays
and operating expenditures will continue to increase as we attempt to expand our
infrastructure and development activities and we will require significant
additional capital in order to implement our business plan and continue our
operations. It is uncertain when or if we will generate revenues from
product sales or the licensing of our technology.
Our
auditors have expressed uncertainty as to our ability to continue as a going
concern.
Primarily
as a result of our recurring losses and our lack of liquidity, we
received a report from our independent auditors that includes an explanatory
paragraph describing the substantial uncertainty as to our ability to continue
as a going concern as of our fiscal year ended December 31, 2008.
13
We
are in the early stages of product development and, if we are unable to
successfully develop our products and services, we will not be able to implement
our business strategy.
We are a
development stage company and are in the early stages of developing our products
and services and we have not yet successfully completed the development of any
products or services. We may be unable to complete the development of our
products or services or, if developed, update our products and services to
address changing industry conditions and our competition. Furthermore, no
assurance can be given that our products or services, even if successfully
developed, will generate sufficient revenues to enable us to be
profitable. If we do not successfully develop our products and services,
our ability to implement our business strategy and our results of operations and
financial condition will be materially adversely affected.
If
we are unable to establish sales and marketing capabilities we may not be able
to generate sales and product revenue.
We do not
currently have an organization for the sales, marketing and distribution of our
services. Our strategy is to enter into agreements or other arrangements
with carriers to market our products and services. We need to develop and
maintain strategic relationships with these entities in order for them to market
our products and services to their end users. We expect to face severe
competition in this effort to establish strategic relationships from other
companies vying for the same type of relationships with carriers. Some of
these competitors may have a competitive advantage over us in obtaining
agreements with carriers due to their size, reputation, relative financial
stability or longer operating history. If we are unable to establish such
relationships on terms that are favorable to us, or at all, we may not be able
to penetrate the market on a scale required to become viable or
profitable.
If
we fail to raise additional capital, our ability to implement our business model
and strategy could be compromised.
We have
limited capital resources and operations. To date, our operations have been
funded entirely from the proceeds from equity and debt financings. We
expect to require substantial additional capital in the near future to develop
and market new products, services and technologies. We currently do not
have commitments for financing to meet our expected needs and we may not be able
to obtain additional financing on terms acceptable to us, or at all. Even
if we obtain financing for our near term operations and product development, we
expect that we will require additional capital beyond the near term. If we
are unable to raise capital when needed, our business, financial condition and
results of operations would be materially adversely affected, and we could be
forced to reduce or discontinue our operations.
If
we borrow money to expand our business, the likelihood that investors may lose
some or all of their investment may increase.
We
anticipate that we may incur debt for financing our growth. Our ability to
borrow funds will depend upon a number of factors, including the condition of
the financial markets. If we receive debt financing, it will have priority
in any liquidation over the claims of holders of our stockholders, which could
increase the risk of loss of your investment in our common stock. In
addition, our payment obligations with respect to any indebtedness could divert
funds away from operations, marketing and product development
efforts.
14
Our
products and services are based on new and unproved technologies and are subject
to the risks of failure inherent in the development of new products and
services.
Because
our products and services are and will be based on new technologies, they are
subject to risks of failure that are particular to new technologies, including
the possibility that:
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our
new approaches will not result in any products or services that gain
market acceptance;
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our
products and services may unfavorably interact with other types of
commonly used applications and services, thus restricting the
circumstances in which they may be
used;
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proprietary
rights of third parties may preclude us from marketing a new product or
service; or
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third
parties may market superior or more cost-effective products or
services.
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As a
result, our activities may not result in any commercially viable products or
services, which would harm our sales, revenue and financial
condition.
We
face intense competition and expect competition to increase in the future, which
could prohibit us from developing a customer base and generating
revenue.
There are
many companies who will compete directly with our planned products and
services. These companies may already have an established market in our
industry. Most of these companies have significantly greater financial and
other resources than us and have been developing their products and services
longer than we have been developing ours. Additionally, there are not
significant barriers to entry in our industry and new companies may be created
that will compete with us and other, more established companies who do not now
directly compete with us, may choose to enter our markets and compete with us in
the future.
Our business
depends upon our ability to keep pace with the latest technological changes, and
our failure to do so could make us less competitive in our
industry.
The
market for our products and services is characterized by rapid change and
technological change, frequent new product innovations, changes in customer
requirements and expectations and evolving industry standards. Products
using new technologies or emerging industry standards could make our products
and services less attractive. Furthermore, our competitors may have access
to technology and strategic relationships not available to us, which may enable
them to produce products of greater interest to consumers or at a more
competitive cost. In addition, our competitors may have greater financial
resources, greater experience in critical areas such as development, testing,
marketing and sales, and proprietary rights that prevent us from developing
certain technology without compensating them. Failure to respond in a
timely and cost-effective way to technological developments in our markets may
result in serious harm to our business and operating results. As a result, our
success will depend, in part, on our ability to develop and market product and
service offerings that respond in a timely manner to the technological advances
available to our customers, evolving industry standards and changing
preferences.
If
our services developed for mobile devices do not gain widespread adoption by the
devices’ users, we will not generate sales or substantial revenue and our
financial condition will be adversely affected.
The
commercial success of our future products and services will be dependent on
their acceptance by potential customers. Our services are developed for
mobile devices and may not be compelling to users due to a number of reasons,
including, among others, competitors’ services, service failures, or our
inability to adequately market our services. If we are unable to attract
mobile device users to our services, we may be unsuccessful in attracting both
advertisers and premium service subscribers to these services, which could have
a material adverse impact on our financial condition and operating
results.
15
Our
services may experience quality problems from time to time that can result in
decreased sales and operating margin.
We expect
to provide a highly complex service that may contain defects in design and
manufacture that may not enable our service to operate on all devices for which
they are intended. There can be no assurance we will be able to detect and
fix all defects in the products or services we provide. Failure to do so could
result in lost revenue, harm to our reputation, and other expenses, and could
have a material adverse impact on our financial condition and operating
results.
Major
network failures could have an adverse effect on our business.
Major
equipment failures, natural disasters, including severe weather, terrorist acts,
acts of war, cyber attacks or other breaches of network or information
technology security that affect third-party networks, transport facilities,
communications switches, routers, microwave links, cell sites or other
third-party equipment on which we rely, could cause major network failures
and/or unusually high network traffic demands that could have a material adverse
effect on our operations or our ability to provide service to our customers.
These events could disrupt our operations, require significant resources to
resolve, result in a loss of customers or impair our ability to attract new
customers, which in turn could have a material adverse effect on our business,
results of operations and financial condition.
If we
experience significant service interruptions, which could require significant
resources to resolve, it could result in a loss of customers or impair our
ability to attract new customers, which in turn could have a material adverse
effect on our business, results of operations and financial
condition.
In
addition, with the growth of wireless data services, enterprise data interfaces
and Internet-based or Internet Protocol-enabled applications, wireless networks
and devices are exposed to a greater degree to third-party data or applications
over which we have less direct control. As a result, the network infrastructure
and information systems on which we rely, as well as our customers’ wireless
devices, may be subject to a wider array of potential security risks, including
viruses and other types of computer-based attacks, which could cause lapses in
our service or adversely affect the ability of our customers to access our
service. Such lapses could have a material adverse effect on our business and
our results of operations.
Concerns
about health risks associated with wireless equipment may reduce the demand for
our services.
Portable
communications devices have been alleged to pose health risks, including cancer,
due to radio frequency emissions from these devices. The actual or
perceived risk of mobile communications devices could adversely affect us
through a reduction in mobile communication devise users, thereby reducing
potential users of our services.
16
If
we are not able to adequately protect our intellectual property, we may not be
able to compete effectively.
Our
ability to compete depends in part upon the strength of our proprietary rights
in our technologies, brands and content. We expect to rely on a combination of
U.S. and foreign patents, copyrights, trademark, trade secret laws and
license agreements to establish and protect our intellectual property and
proprietary rights. We have filed for certain patents on our core
technology, however, to date no patents have been issued and there is no
certainty that we will ever be issued patents protecting our intellectual
property. The efforts we have taken and expect to take to protect our
intellectual property and proprietary rights may not be sufficient or effective
at stopping unauthorized use of our intellectual property and proprietary
rights. In addition, effective trademark, patent, copyright and trade secret
protection may not be available or cost-effective in every country in which our
services are made available. There may be instances where we are not able
to fully protect or utilize our intellectual property in a manner that maximizes
competitive advantage. If we are unable to protect our intellectual property and
proprietary rights from unauthorized use, the value of our products may be
reduced, which could negatively impact our business. Our inability to obtain
appropriate protections for our intellectual property may also allow competitors
to enter our markets and produce or sell the same or similar products. In
addition, protecting our intellectual property and other proprietary rights is
expensive and diverts critical managerial resources. If we are otherwise unable
to protect our intellectual property and proprietary rights, our business and
financial results could be adversely affected.
If we are
forced to resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive. In addition, our
proprietary rights could be at risk if we are unsuccessful in, or cannot afford
to pursue, those proceedings. In addition, the possibility of extensive
delays in the patent issuance process could effectively reduce the term during
which a marketed product is protected by patents.
We may
also need to obtain licenses to patents or other proprietary rights from third
parties. We may not be able to obtain the licenses required under any patents or
proprietary rights or they may not be available on acceptable terms. If we do
not obtain required licenses, we may encounter delays in product development or
find that the development, manufacture or sale of products requiring licenses
could be foreclosed. We may, from time to time, support and collaborate in
research conducted by universities and governmental research organizations. We
may not be able to acquire exclusive rights to the inventions or technical
information derived from these collaborations, and disputes may arise over
rights in derivative or related research programs conducted by us or our
collaborators.
A
dispute concerning the infringement or misappropriation of our intellectual
property or proprietary rights or the intellectual property or proprietary
rights of others could be time consuming and costly and an unfavorable outcome
could harm our business.
There is
significant litigation in the telecommunications technology field regarding
patents and other intellectual property rights. Other companies with greater
financial and other resources than us have gone out of business from costs
related to patent litigation and from losing a patent litigation. We may be
exposed to future litigation by third parties based on claims that our
technologies or activities infringe the intellectual property rights of others.
Although we try to avoid infringement, there is the risk that we will use a
patented technology owned or licensed by another person or entity and be sued
for patent infringement or infringement of another party’s intellectual property
or proprietary rights. If we or our products are found to infringe the
intellectual property or proprietary rights of others, we may have to pay
significant damages or be prevented from making, using, selling, offering for
sale or importing such products or services or from practicing methods that
employ such intellectual property or proprietary rights.
17
Confidentiality
agreements with employees and others may not adequately prevent disclosure of
our trade secrets and other proprietary information.
Our
success depends upon the skills, knowledge and experience of our technical
personnel, our consultants and advisors as well as our licensors and
contractors. Because we operate in a highly competitive field, we rely almost
wholly on trade secrets to protect our proprietary technology and processes.
However, trade secrets are difficult to protect. We enter into confidentiality
and intellectual property assignment agreements with our corporate partners,
employees, consultants, outside scientific collaborators, developers and other
advisors. These agreements generally require that the receiving party keep
confidential and not disclose to third parties confidential information
developed by us during the course of the receiving party’s relationship with us.
These agreements also generally provide that inventions conceived by the
receiving party in the course of rendering services to us will be our exclusive
property. However, these agreements may be breached and may not effectively
assign intellectual property rights to us. Our trade secrets also could be
independently discovered by competitors, in which case we would not be able to
prevent use of such trade secrets by our competitors. The enforcement of a claim
alleging that a party illegally obtained and was using our trade secrets could
be difficult, expensive and time consuming and the outcome would be
unpredictable. In addition, courts outside the United States may be less willing
to protect trade secrets. The failure to obtain or maintain meaningful trade
secret protection could adversely affect our competitive position.
Adverse
changes in general economic or political conditions in any of the countries in
which we do business or intend to launch our products could adversely affect our
operating results.
If we
grow our business to customers located in the United States as well as customers
located outside of the United States as we intend, we expect to become subject
to the risks arising from adverse changes in both domestic and global economic
and political conditions. For example, the direction and relative strength of
the United States and international economies remains uncertain due to softness
in the housing markets, difficulties in the financial services sector and credit
markets and continuing geopolitical uncertainties. If economic growth in the
United States and other countries continue to slow, the demand for our
customer’s products could decline, which would then decrease demand for our
products. Furthermore, if economic conditions in the countries into which our
customers sell their products continue to deteriorate, some of our customers may
decide to postpone or delay certain development programs, which would then delay
their need to purchase our products. This could result in a reduction in sales
of our service or in a reduction in the growth of our service revenues. Any of
these events would likely harm investors view of our business, our results of
operations and financial condition.
Our
business depends substantially on the continuing efforts of our executive
officers and our ability to maintain a skilled labor force and our business may
be severely disrupted if we lose their services.
Our
future success depends substantially on the continued services of our executive
officers. We do not maintain key man life insurance on any of our executive
officers and directors. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace
them readily, if at all. Therefore, our business may be severely disrupted, and
we may incur additional expenses to recruit and retain new officers. In
addition, if any of our executives joins a competitor or forms a competing
company, we may lose some of our customers.
If
we are unable to attract, train and retain technical and financial personnel,
our business may be materially and adversely affected.
Our
future success depends, to a significant extent, on our ability to attract,
train and retain technical and financial personnel. Recruiting and retaining
capable personnel, particularly those with expertise in our chosen industries,
are vital to our success. There is substantial competition for qualified
technical and financial personnel, and there can be no assurance that we will be
able to attract or retain our technical and financial personnel. If we are
unable to attract and retain qualified employees, our business may be materially
and adversely affected.
18
Litigation
may adversely affect our business, financial condition and results of
operations.
From time
to time in the normal course of our business operations, we may become subject
to litigation that may result in liability material to our financial statements
as a whole or may negatively affect our operating results if changes to our
business operation are required. The cost to defend such litigation may be
significant and may require a diversion of our resources. There also may be
adverse publicity associated with litigation that could negatively affect
customer perception of our business, regardless of whether the allegations are
valid or whether we are ultimately found liable. As a result, litigation may
adversely affect our business, financial condition and results of
operations.
Corporate
insiders or their affiliates may be able to exercise significant control matters
requiring a vote of our stockholders and their interests may differ from the
interests of our other stockholders.
Upon the
Closing of the Exchange Transaction, our directors and officers collectively own
approximately 22% of our issued and outstanding common stock. In addition,
one stockholder owns approximately 65% of our issued and outstanding common
stock. As a result, these officers and directors and stockholder are able
to exercise significant control over matters requiring approval by our
stockholders. Matters that require the approval of our stockholders include the
election of directors and the approval of mergers or other business combination
transactions. Certain transactions are effectively not possible without the
approval of these officers and directors and stockholder by virtue of their
control over a majority of our outstanding shares, including, proxy contests,
tender offers, open market purchase programs or other transactions that can give
our stockholders the opportunity to realize a premium over the then-prevailing
market prices for their shares of our common stock.
We
will incur significant increased costs as a public company and our management
will be required to devote substantial time to new compliance
initiatives.
As a
public company, we will incur significant legal, accounting and other expenses
that we would not incur if we were a private company. SEC rules and
regulations impose heightened requirements on public companies, including
requiring changes in corporate governance practices. Our management and
other personnel will devote a substantial amount of time to these compliance
initiatives. We may also need to hire additional finance and administrative
personnel to support our compliance requirements. Moreover, these rules and
regulations will increase our legal and financial costs and make some activities
more time-consuming.
In
addition, as described above, we will be required to maintain effective internal
controls over financial reporting and disclosure controls and procedures
pursuant to the Sarbanes-Oxley Act. Our testing, and the subsequent testing by
our independent registered public accounting firm, may reveal deficiencies or
material weaknesses in our internal controls over financial reporting. Our
compliance with Section 404 of the Sarbanes-Oxley Act will require that we
incur substantial accounting expense and expend significant management
effort. We currently do not have an internal audit group and we may need
to hire additional accounting and financial staff with appropriate public
company experience and technical accounting knowledge. If we are not able
to comply with the requirements of Section 404 in a timely manner, or if we
or our independent registered public accounting firm identifies deficiencies or
material weaknesses in our internal controls over financial reporting, the
market price of our securities could decline and we could be subject to
sanctions or investigations by the SEC or other regulatory authorities, which
would require additional financial and management resources.
19
We
will be required to evaluate our internal control over financial reporting under
Section 404 of the Sarbanes-Oxley Act and, since we have not been subject to
Sarbanes-Oxley regulations we may lack the financial controls and safeguards now
required of public companies.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC, for the fiscal year ending December 31, 2010, we are
required to include in our annual report our assessment of the effectiveness of
our internal control over financial reporting. Our independent registered
public accounting firm will also be required to issue a report on management’s
assessment of our internal control over financial reporting and their evaluation
of the operating effectiveness of our internal control over financial
reporting. Our assessment will require us to make subjective judgments and
our independent registered public accounting firm may not agree with our
assessment.
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended,
(the "1934 Act"), as of the quarter ended September 30, 2009, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. This evaluation was carried out under the supervision
and with the participation of our management, including our Principal Executive
Officer and Principal Financial Officer. Based upon the results of that
evaluation, our Principal Executive Officer and Principal Financial Officer have
concluded that, as of September 30, 2009, our disclosure controls and procedures
were effective and provided reasonable assurance that the material information
related to our Company required to be disclosed in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to management to allow timely
decisions on required disclosure.
Our
annual report for the year ended December 31, 2009 did not include a report of
management’s assessment regarding internal control over financial reporting or
an attestation report of the company’s registered public accounting firm due to
a transition period established by rules of the Securities and Exchange
Commission for newly public companies. However, we do not
currently have the internal infrastructure necessary to complete an attestation
about our financial controls that would be required under Section 404 of
the Sarbanes-Oxley Act. We expect to incur additional expenses and expend
management’s time as a result of performing the system and process evaluation,
testing and remediation required in order to comply with the management
certification and auditor attestation requirements. There can be no assurance
that there are no significant deficiencies or material weaknesses in the quality
of our financial controls.
Nevertheless,
our management has determined that all matters to be disclosed in this report
have been fully and accurately reported. We are in the process of
improving our processes and procedures to ensure full, accurate and timely
disclosure in the current fiscal year, with the expectation of establishing
effective disclosure controls and procedures and internal control over financial
reporting as soon as reasonably practicable. Achieving continued
compliance with Section 404 may require us to incur significant costs and expend
significant time and management resources. We cannot assure you that we will be
able to fully comply with Section 404 or that we and our independent registered
public accounting firm would be able to conclude that our internal control over
financial reporting is effective at fiscal year end. As a result, investors
could lose confidence in our reported financial information, which could have an
adverse effect on the trading price of our securities, as well as subject us to
civil or criminal investigations and penalties. In addition, our independent
registered public accounting firm may not agree with our management’s assessment
or conclude that our internal control over financial reporting is operating
effectively. We will continue to consistently improve our internal control
over the financial reporting with our best efforts and we plan to engage
assistance from outside experts in doing so.
We
are subject to SEC reporting requirements and we do not have significant SEC
reporting experience.
We
currently do not have a clear process, schedule, segregation of duties or review
with respect to the SEC reporting process. In addition, we do not have
significant experience with or knowledge about the Sarbanes-Oxley Act. The
Company is committed to remedying this deficiency and weakness and plans to
implement certain remedial measures, including hiring a comptroller or other
finance personnel with SEC reporting experience, providing additional training
to our accounting personnel on the requirements of SEC reporting requirements to
increase their familiarity with those standards, and reassessing our existing
finance and accounting policies and procedures.
20
Risks
Related to an Investment in Our Securities
Our
stock is categorized as a penny stock. Trading of our stock may be restricted by
the SEC’s penny stock regulations which may limit a shareholder’s ability to buy
and sell our stock.
Our stock
is categorized as a “penny stock”. The SEC has adopted Rule 15g-9 which
generally defines “penny stock” to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these 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 agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
FINRA
sales practice requirements may also limit a shareholder’s ability to buy and
sell our stock.
In
addition to the “penny stock” rules described above, the Financial Industry
Regulatory Authority (“FINRA”) has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
We
expect to experience volatility in our stock price, which could negatively
affect shareholders’ investments.
While our
common stock is not currently traded, if and when there is an active trading
market, the market price for shares of our common stock may be volatile and may
fluctuate based upon a number of factors, including, without limitation,
business performance, news announcements or changes in general market
conditions.
Other
factors, in addition to the those risks included in this section, that may have
a significant impact on the market price of our common stock include, but are
not limited to:
|
·
|
receipt
of substantial orders or order cancellations of
products;
|
|
·
|
quality
deficiencies in services or
products;
|
|
·
|
international
developments, such as technology mandates, political developments or
changes in economic policies;
|
|
·
|
changes
in recommendations of securities
analysts;
|
|
·
|
shortfalls
in our backlog, revenues or earnings in any given period relative to the
levels expected by securities analysts or projected by
us;
|
|
·
|
government
regulations, including stock option accounting and tax
regulations;
|
21
|
·
|
energy
blackouts;
|
|
·
|
acts
of terrorism and war;
|
|
·
|
widespread
illness;
|
|
·
|
proprietary
rights or product or patent
litigation;
|
|
·
|
strategic
transactions, such as acquisitions and divestitures;
or
|
|
·
|
rumors
or allegations regarding our financial disclosures or
practices.
|
In the
past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its
securities. Due to the volatility of our common stock price, we may be the
target of securities litigation in the future. Securities litigation could
result in substantial costs and divert management’s attention and
resources.
Shareholders
should also be aware that, according to SEC Release No. 34-29093, the market for
“penny stock”, such as our common stock, has suffered in recent years from
patterns of fraud and abuse. Such patterns include (1) control of the
market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (2) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker-dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses.
Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to
dictate the behavior of the market or of broker-dealers who participate in the
market, management will strive within the confines of practical limitations to
prevent the described patterns from being established with respect to our
securities. The occurrence of these patterns or practices could increase the
future volatility of our share price.
To
date, we have not paid any cash dividends and no cash dividends will be paid in
the foreseeable future.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay dividends.
Even if the funds are legally available for distribution, we may nevertheless
decide not to pay any dividends. We presently intend to retain all
earnings for our operations.
Our
common stock is not currently publicly traded, and investors may be unable to
sell at or near ask prices or at all if they need to sell or liquidate their
shares.
We cannot
predict the extent to which an active public market for our common stock will
develop or be sustained. However, we do not rule out the possibility of
applying for listing on the NYSE Amex (formerly known as American Stock
Exchange), NASDAQ Capital Market or other markets.
Our
common stock is not currently traded. There is no assurance that an active
public trading market for our common stock will develop or be sustained, or that
trading levels will be sustained, which may result in you being unable to sell
any shares of our common stock at or near ask prices or at all.
22
Our
corporate actions are substantially controlled by our principal shareholders and
affiliated entities.
Following
the Closing of the Exchange Transaction, our principal shareholders, which
includes our officers and directors, and their affiliated entities, own
approximately 87% of our outstanding shares of common stock. These shareholders,
acting individually or as a group, could exert substantial influence over
matters such as electing directors and approving mergers or other business
combination transactions. In addition, because of the percentage of
ownership and voting concentration in these principal shareholders and their
affiliated entities, elections of our board of directors will generally be
within the control of these shareholders and their affiliated entities. While
all of our shareholders are entitled to vote on matters submitted to our
shareholders for approval, the concentration of shares and voting control
presently lies with these principal shareholders and their affiliated entities.
As such, it would be difficult for shareholders to propose and have approved
proposals not supported by management. There can be no assurances that matters
voted upon by our officers and directors in their capacity as shareholders will
be viewed favorably by all of our shareholders.
Our
Articles of Incorporation authorize the issuance of preferred stock, which could
have rights, preferences and privileges superior to those of our common
stock.
Our
Articles of Incorporation authorize the issuance of shares of preferred stock
with designations, rights and preferences determined from time to time by our
Board of Directors. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting, or other rights which could adversely affect the voting
power or other rights of the holders of the common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company.
The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by our company and
may discourage lawsuits against our directors, officers and
employees.
Our
Articles of Incorporation contain a provision permitting us to eliminate the
personal liability of our directors to our company and shareholders for damages
for breach of fiduciary duty as a director or officer to the extent provided by
Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification
obligations could result in the Company incurring substantial expenditures to
cover the cost of settlement or damage awards against directors and officers,
which we may be unable to recoup. These provisions and resultant costs may
also discourage our company from bringing a lawsuit against directors and
officers for breaches of their fiduciary duties, and may similarly discourage
the filing of derivative litigation by our shareholders against our directors
and officers even though such actions, if successful, might otherwise benefit
our company and shareholders.
23
SUMMARY
SELECTED CONSOLIDATED FINANCIAL DATA
The
following tables summarize selected consolidated financial data regarding the
business of Thwapr and should be read together with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the consolidated
pro forma financial statements of the Company and the related notes included
with those financial statements. The summary consolidated financial
information as of and for the nine months ended September 30, 2009 and 2008
(unaudited) and as of and for the fiscal year ended December 31, 2008 (audited)
and as of and for the period from March 14, 2007 (date of inception) to December
31, 2007 (audited) have been derived from the consolidated financial statements
for Thwapr. All monetary amounts are expressed in U.S. dollars unless
otherwise indicated.
Nine Months Ended September 30,
|
Year ended
December 31,
|
Period from
March 14,
2007 (date of
inception) to
December 31,
|
||||||||||||||
2009
|
2008
|
2008
|
2007
|
|||||||||||||
Income
Statement Data:
|
||||||||||||||||
Sales
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Cost
of sales
|
— | — | — | — | ||||||||||||
Gross
profit
|
— | — | — | — | ||||||||||||
Operating
expenses
|
1,646,160 | 656,917 | 891,552 | 454,014 | ||||||||||||
Net
loss
|
$ | (1,646,134 | ) | $ | (656,917 | ) | $ | (891,552 | ) | $ | (454,014 | ) | ||||
Loss
per share - basic and diluted
|
$ | (0.15 | ) | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.03 | ) | ||||
Shares
used in calculating basic and diluted
|
11,263,889 | 14,398,705 | 14,474,810 | 14,285,712 |
As of
|
As of December 31,
|
|||||||||||
September 30, 2009
|
2008
|
2007
|
||||||||||
Balance
Sheet Data:
|
||||||||||||
Cash
and cash equivalents
|
$ | 14,876 | $ | 356 | $ | 321,512 | ||||||
Working
capital (deficit)
|
(72,245 | ) | (125,990 | ) | 317,662 | |||||||
Total
assets
|
35,182 | 1,256 | 321,512 | |||||||||
Total
long-term debt
|
— | — | — | |||||||||
Total
stockholders’ equity (deficit)
|
(52,942 | ) | (125,090 | ) | 317,662 |
Nine Months Ended September 30,
|
Year ended
December 31,
|
Period from
March 14,
2007 (date of
inception) to
December 31,
|
||||||||||||||
2009
|
2008
|
2008
|
2007
|
|||||||||||||
Cash
Flow Data:
|
||||||||||||||||
Net
cash (used in) operating activities
|
$ | (1,261,313 | ) | $ | (621,553 | ) | $ | (769,956 | ) | $ | (450,164 | ) | ||||
Net
cash (used in) investing activities
|
(22,227 | ) | — | — | — | |||||||||||
Net
cash provided by (used in) financing activities
|
1,298,060 | 298,800 | 448,800 | 771,676 | ||||||||||||
Net
increase (decrease) in cash
|
$ | 14,520 | $ | (322,753 | ) | $ | (321,156 | ) | $ | 321,512 |
24
MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The
following discussion and analysis of the results of operations and financial
condition of Thwapr for the fiscal year ended December 31, 2008, the period from
March 14, 2007 (date of inception) to December 31, 2007 and nine months ended
September 30, 2009 and 2008 should be read in conjunction with the Summary
Selected Consolidated Financial Data, the Thwapr financial statements, and the
notes to those financial statements that are included elsewhere in this Form
8-K. Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors, Cautionary Notice Regarding Forward Looking Statements and
Business sections in this Form 8-K. We use words such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”
“intend,” “may,” “will,” “should,” “could,” and similar expressions to identify
forward-looking statements.
Overview
Seaospa,
Inc. was incorporated under the laws of the State of Nevada on November 2,
2007. On March 29, 2010 Seaospa closed a voluntary share exchange
transaction with Thwapr, Inc., a Delaware corporation that is a mobile to mobile
video and photo service provider, pursuant to the Exchange Agreement by and
among Seaospa, certain stockholders of Seaospa, Thwapr, and the stockholders of
Thwapr. Prior to the Exchange Transaction, we were a pre-development stage
company engaged in the marketing of skin care, hair care, and body treatment
products, and a public reporting “shell company,” as defined in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended. As a result of the
Exchange Transaction, the Thwapr stockholders acquired approximately 90% of our
issued and outstanding common stock, Thwapr became our wholly-owned subsidiary,
and we acquired the business and operations of Thwapr.
Thwapr,
Inc. was formed on March 14, 2007. The purpose of Thwapr is to develop
software and the corresponding user interface that will allow mobile phone users
to send videos and pictures captured on their phones to other mobile phone users
regardless of device, platform or carrier. Thwapr plans to derive revenues
from advertising on its website and imbedded into the videos as well as selling
premium services to its customers. Thwapr expects to launch the service in
a test market in late 2010 but does not expect to have revenues until such time
that a significant number of users have signed up for and are using the
service.
Our
management’s discussion and analysis of our financial condition and results of
operations are only based on Thwapr’s current mobile to mobile video and photo
services provider business. Our previous shell company’s results of
operations are immaterial and will not be included in the discussion
below. Key factors affecting our results of operations include revenues,
cost of revenues, operating expenses and income and taxation.
Critical
Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our
estimates and assumptions. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
25
While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements appearing at Exhibits 99.1 and 99.2, we
believe that the following accounting policies are the most critical to aid you
in fully understanding and evaluating this management discussion and
analysis:
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation of computer and equipment
and furniture and fixtures is computed on the straight-line basis over the
estimated useful lives of the assets as follows:
Computer
and equipment
|
3
years
|
Furniture
and fixtures
|
5
years
|
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Management uses its
historical records and knowledge of its business in making estimates.
Accordingly, actual results could differ from those estimates.
Fair
Value of Financial Instruments
The
carrying amount of certain financial instruments, including cash and cash
equivalents and accounts payable and accrued expenses, approximates fair value
due to the relatively short maturity of such instruments.
Technology
Development
Technology
development costs are charged to expense when incurred. These costs
primarily include the costs associated with the development and testing of video
and picture sharing technology. During the three months ended September
30, 2009 and 2008, technology development costs amounted to $216,107 and
$73,031, respectively. During the nine months ended September 30, 2009 and
2008, technology development costs amounted to $417,715 and $196,626,
respectively. From March 14, 2007 (inception) through September 30, 2009,
technology development costs amounted to $797,241.
Income
Taxes
The
Company accounts for income taxes under the liability method in accordance with
SFAS No. 109, “Accounting for Income Taxes.” Under this standard,
deferred income tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using the enacted tax rates expected to be in effect for the year in
which the differences are expected to reverse. Deferred income tax
assets are reduced by a valuation allowance when the Company is unable to make
the determination that it is more likely than not that some portion or all of
the deferred income tax asset will be realized.
26
Earnings
(Loss) per Share
Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding.
Diluted earnings per share is computed similar to basic earnings per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive.
Results
of Operations
Comparison
of Nine Months Ended September 30, 2009 and 2008
The
following table sets forth the results of our operations for the periods
indicated:
Nine months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Sales
|
$ | — | $ | — | ||||
Gross
profit
|
— | — | ||||||
Operating
expenses:
|
||||||||
Accounting
and legal services
|
102,929 | 18,262 | ||||||
Consulting
fees to Synthetica
|
444,000 | 307,800 | ||||||
Marketing
expenses
|
24,930 | 17,705 | ||||||
Other
consulting fees
|
545,589 | 84,390 | ||||||
Rent
|
35,000 | — | ||||||
Taxes
|
800 | 800 | ||||||
Technology
development
|
417,715 | 196,626 | ||||||
Website
development
|
5,970 | 16,573 | ||||||
Other
operating expenses
|
69,227 | 14,761 | ||||||
Loss
from operations
|
(1,646,160 | ) | (656,917 | ) | ||||
Net
loss
|
$ | (1,646,134 | ) | $ | (656,917 | ) |
Loss
from Operations
Thwapr,
Inc had a net loss of $1,646,134 for the nine months ended September 30, 2009,
compared to a net loss of $656,917 for nine months ended September 30, 2008.
All expenses incurred were operating expenses. Operating
expenses were $1,646,160 and $656,917 for the nine months ended September 30,
2009 and 2008, respectively. The increase of $989,243 was primarily due TO
increased activities related to technology development and general business
operations partially offset by a decrease in expenses related to the development
of our website.
Sales
and Gross Profit
Sales for
the nine months ended September 30, 2009 and 2008 were $0 and $0, respectively.
There were no sales or gross profits for either of the nine month periods
because we are still in the process of designing and developing our services and
have not conducted any revenue producing business operations.
27
Operating
Expenses
Accounting
and legal expenses for the nine months ended September 30, 2009 increased by
463.6% from $18,262 for the same period in 2008 to $102,929 in 2009. The
increase was mainly due to filing for patents and trademarks, contract
preparation and securities work related to the sale of common stock and mergers
during the nine months ended September 30, 2009.
Consulting
fees to Synthetica for the nine months ended September 30, 2009 was $444,000
compared to $307,800 for the comparable period in 2008, an increase of $136,200
or 44.2%. The increase was mainly attributable to increased work by
contract management.
Marketing
expenses increased by 40.8% from $17,705 for the nine months ended September 30,
2008 to $24,930 for the same period in 2009. The increase was mainly
attributable to marketing services related to the beta launch of the Thwapr
picture and video sharing service.
Other
consulting fees were $545,589 for the nine months ended September 30, 2009,
compared to $84,390 for the same period in 2008. The increase of 546.5% was
mainly attributable to non-cash charges related to the issuance of warrants to
independent contractors.
Rent
expense was $35,000 for the nine months ended September 30, 2009, compared to $0
for the nine months ended September 30, 2008. The increase in rent
expense was due to the renting of office space which commenced in March
2009.
Taxes for
the nine months ended September 30, 2009 and 2008 amounted to $800 and $800,
respectively,. The tax expense was attributable to California
Franchise Tax.
Technology
development expenses for the nine months ended September 30, 2009 were $417,715,
a 112.4% increase from $196,626 for the nine months ended September 30,
2008. The increase was primarily attributed to accelerated work on
developing the Thwapr mobile picture and video sharing service and the hiring of
additional independent contractors.
Website
development expenses for the nine months ended September 30, 2009 were $5,970,
compared to $16,573 for the nine months ended September 30,
2008. This 64.0% decrease was due to reduced website development
activity.
Other
operating expenses consist primarily of insurance, office supplies, public
relations, telephone, travel and entertainment and depreciation
expense. Other operating expenses for the nine months ended September
30, 2009 were $69,227, a 369.0% increase from $14,761 for the nine months ended
September 30, 2008. This increase was mainly attributable to
establishing an office in New York City and the related costs of operating that
office.
Net
Loss
Net loss
for the nine months ended September 30, 2009 was $1,646,134, an increase of
$989,217, or 150.1% from $656,917 for the same period in 2008. This
increase in net loss was attributable to the increases in the operating expenses
decreased above.
28
Comparison
of year ended December 31, 2008 and period from March 14, 2007 (date of
inception) to December 31, 2007
The
following table sets forth the results of our operations for the periods
indicated:
Year ended
December 31,
2008
|
Period from March 14,
2007 (date of inception)
to December 31,
2007
|
|||||||
Sales
|
$ | — | $ | — | ||||
Gross
profit
|
— | — | ||||||
Operating
expenses:
|
||||||||
Legal
services
|
18,942 | 30,174 | ||||||
Website
development
|
16,573 | 12,000 | ||||||
Technology
development
|
288,329 | 91,197 | ||||||
Marketing
expenses
|
32,055 | — | ||||||
Consulting
fees to Synthetica
|
428,600 | 284,400 | ||||||
Other
consulting fees
|
56,390 | 24,400 | ||||||
Taxes
|
936 | 750 | ||||||
Other
operating expenses
|
49,727 | 11,093 | ||||||
Loss
from operations
|
(891,552 | ) | (454,014 | ) | ||||
Net
loss
|
$ | (891,552 | ) | $ | (454,014 | ) |
Loss
from Operations
Thwapr, Inc. had a net loss of $891,552
for the year ended December 31, 2008, compared to a net loss of $454,014 for the
period from March 14, 2007, through December 31, 2007. All expenses
incurred were operating expenses. Operating expenses were $891,552
and $454,014 for the year ended December 31, 2008, and the period from March 14,
2007, through December 31, 2007, respectively. The increase of $437,538 was
primarily due to a full year of operating expenses for 2008, and increased
activities related to technology development and general business operations
partially offset by a decrease in legal expenses.
Sales
and Gross Profit
Sales for
the year ended December 31, 2008 were $0 compared to $0 for the period from
March 14, 2007 (date of inception) to December 31, 2007. There were
no sales or gross profits for both of the periods because we are still in the
process of designing and developing our services and have not yet conducted any
revenue producing operations.
Operating
Expenses
Legal
services expenses in 2008 decreased by $11,232, or 37.2% from $30,174 in 2007 to
$18,942 in 2008. The decrease in legal services expenses was
attributable to reduced securities-related activity compared to the prior
year.
Website
development expenses were $16,573 for the fiscal year ended December 31, 2008,
compared to $12,000 for the period from March 14, 2007 (date of inception) to
December 31, 2007. The 38.1% increase in website development expenses
was attributable to activity related to developing the corporate
website.
Technology
development expenses increased by $197,132, or 216.2%, from $91,197 in 2007 to
$288,329 in 2008. The increase in technology development expenses was
attributable to increased development work related to the Thwapr picture and
video sharing service and the hiring of additional independent
contractors.
29
Marketing
expenses were $32,055 in 2008 compared to $0 in 2007. The increase in
marketing expenses was attributable to creative and production fees paid to a
marketing agency.
Consulting
fees to Synthetica were $428,600 for the year ended December 31, 2008 compared
to $284,400 for the period ended December 31, 2007. The 50.7%
increase in consulting fees to Synthetica was attributable to increased
activities on the part of this consulting group.
Other
consulting fees, consisting of payments to independent contractors for various
services, for 2008 and 2007 amounted to $56,390 and $24,400, respectively. The
131.1% increase in other consulting fees was attributable to an increase in the
amount of the monthly retainer paid to one consultant.
Taxes for
2008 were $936 compared to $750 for 2007, an increase of 24.8%. The
increase in taxes was attributable to the payment of California
Franchise Tax partially offset by the amount paid to the State of
Delaware.
Other
operating expenses consist primarily of insurance, office supplies, public
relations, telephone, travel and entertainment and depreciation
expense. Other operating expenses for 2008 were $49,727,
an increase of 348.2% from $11,093 in 2007. The increase in other
operating expenses was attributable to a full year of operations in 2008
compared to a partial year for 2007, as well as an overall increase in operating
activities.
Net
Loss
Net loss
in 2008 was $891,335, an increase of $437,538 from $454,014 in 2007. The
increase in net loss was attributable to the net increases in operating expenses
described above.
Liquidity
and Capital Resources
Nine
Months Ended September 30, 2009
As of
September 30, 2009, we had cash and cash equivalents of $14,876 and current
liabilities of $88,124. As we are in the development stage of our
operations, we have been funded solely with the proceeds from equity and debt
financings. We anticipate that these sources will continue to be our
primary source of funds to finance our short-term cash needs. If we
require additional capital to expand or enhance our existing facilities, we will
consider other public or private debt or equity offerings or institutional
borrowing as potential means of financing.
Net cash
used in operating activities for the nine months ended September 30, 2009 was
$1,261,313 compared with net cash used in operating activities of $621,553 for
the same period in 2008. Net cash used in operating activities for the nine
months ended September 30, 2009 was mainly due to net loss of $1,646,134,
non-cash items not affecting cash flows of $423,146, a $103 increase in assets,
and a $38,222 decrease in liabilities. The net change in operating
assets and liabilities for the nine months ended September 30, 2009 was
primarily related to a decrease in accounts payable and accrued
expenses. Net cash used in operating activities for the same period
in 2008 was mainly due to a net loss of $656,917, a $900 increase in assets and
$36,264 increase in liabilities. The net changes in operating assets
and liabilities for the nine months ended September 30, 2008 was primarily
related to an increase in accounts payable and accrued expenses.
Net cash
used in investing activities was $22,227 for the nine months ended September 30,
2009, compared with $0 used in investing activities for the same period in 2008.
Cash was used in investing activities in 2009 to purchase property and
equipment.
30
Net cash
provided by financing activities was $1,298,060 for the nine months ended
September 30, 2009, compared with $298,800 net cash provided by financing
activities for the same period in 2008. Cash provided by financing
activities during the nine months ended September 30, 2009 and 2008 resulted
from the proceeds from sales of our common stock.
Year
Ended December 31, 2008
As of
December 31, 2008, we had cash and cash equivalents of $356 and current
liabilities of $126,346. As we are in the development stage of our
operations, we have been funded solely with the proceeds from equity and debt
financings. We anticipate that these sources will continue to be our
primary source of funds to finance our short-term cash needs. If we
require additional capital to expand or enhance our existing facilities, we will
consider other public or private debt or equity offerings or institutional
borrowing as potential means of financing.
Net cash
used in operating activities for the year ended December 31, 2008 was $769,956
compared with net cash used in operating activities of $450,164 for the period
from March 14, 2007 (date of inception) to December 31, 2007. Net cash used in
operating activities for the year ended December 31, 2008 was mainly due to net
loss of $891,552, and a $900 increase in assets and a $122,496 increase in
liabilities. The net change in operating assets and liabilities for
the year ended December 31, 2008 was primarily related to increases in accounts
payable and accrued expenses. Net cash used in operating activities
for the period from March 14, 2007 (date of inception) to December 31, 2007 was
mainly due to a net loss of $454,014 and a $3,850 increase in
liabilities. The change in liabilities for the period ended December
31, 2007 was primarily related to increases in accounts payable and accrued
expenses
Net cash
provided by financing activities was $448,800 for the year ended December 31,
2008, compared with $771,676 net cash provided by financing activities for the
period from March 14, 2007 (date of inception) to December 31,
2007. Cash provided by financing activities during 2008 and 2007
resulted from proceeds from sales of our common stock.
Contractual
Obligations and Off-Balance Sheet Arrangements
Contractual
Obligations
As of
September 30, 2009 the Company did not have any long-term debt, purchase or
lease obligations.
Off-Balance
Sheet Arrangements
We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder’s equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
Recent
Accounting Pronouncements
In June
2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which
establishes the FASB Accounting Standards Codification as the sole source of
authoritative generally accepted accounting principles. Pursuant to the provisions of FASB
ASC 105, we have updated references to GAAP in our financial statements. The
adoption of FASB ASC 105 did not impact the Company's financial position or
results of operations.
31
In June
2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167"),
codified as FASB ASC 810-10, which modifies how a company determines when an
entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. FASB ASC 810-10 clarifies that the
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity's purpose and design and a company's
ability to direct the activities of the entity that most significantly impact the
entity's economic performance. FASB ASC 810-10 requires an ongoing reassessment of
whether a company is the primary beneficiary of a variable interest entity.
FASB ASC 810-10 also requires additional disclosures about a company's
involvement in variable interest entities and any significant changes in risk exposure
due to that involvement. FASB ASC 810-10 is effective for fiscal years beginning
after November 15, 2009. The adoption of FASB ASC 810-10 did not have an
impact on the Company's financial condition, results of operations or cash
flows.
In June
2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets - an amendment
of FASB Statement No. 140" ("SFAS 166"), codified as FASB ASC 860, which
requires entities to provide more information regarding sales of securitized
financial assets and similar transactions, particularly if the entity has
continuing exposure to the risks related to transferred financial assets.
FASB ASC 860 eliminates the concept of a "qualifying special-purpose
entity," changes the requirements for derecognizing financial assets and requires
additional disclosures. FASB ASC 860 is effective for fiscal years beginning
after November 15, 2009. The adoption of FASB ASC 860 did not have an impact on the
Company's financial condition, results of operations or cash
flows.
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165") codified in
FASB ASC 855-10-05, which provides guidance to establish general standards of accounting
for and disclosures of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. FASB ASC
855-10-05 also requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected.
FASB ASC 855-10-05 is effective for interim and annual periods ending after June
15, 2009. FASB ASC 855-10-05 requires that public entities evaluate
subsequent events through the date that the financial statements are
issued.
In April
2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly" ("FSP FAS 157-4"), codified in FASB ASC
820-10-65, which provides additional guidance for estimating fair value in
accordance with ASC 820-10 when the volume and level of activity for an asset or
liability have significantly decreased. ASC 820-10-65 also includes guidance on
identifying circumstances that indicate a transaction is not orderly. The
adoption of ASC 820-10-65 did not have an impact on the Company's results of
operations or financial condition.
Quantitative
and Qualitative Disclosures About Market Risk
We do not
use derivative financial instruments in our investment portfolio and have no
foreign exchange contracts. Our financial instruments consist of cash, accounts
receivable, amount due from related parties, accounts payable, accrued expenses,
debt and long-term obligations. The objective of our policies is to mitigate
potential income statement, cash flow and fair value exposures resulting from
possible future adverse fluctuations in rates. We evaluate our exposure to
market risk by assessing the anticipated near-term and long-term fluctuations in
interest rates and foreign exchange rates. This evaluation includes the review
of leading market indicators, discussions with financial analysts and investment
bankers regarding current and future economic conditions and the review of
market projections as to expected future rates.
32
We did
not experience any material changes in interest rate exposures during 2008 and
2009. Hence, the effect of the fluctuations of the interest rates is
considered minimal to our business operations. Based upon economic conditions
and leading market indicators at December 31, 2009, we do not foresee a
significant adverse change in interest rates in the near future and do not use
interest rate derivatives to manage exposure to interest rate
changes.
PROPERTIES
Our
principal executive offices are located at 220 12th Avenue,
3rd Floor, New York, New York 10001. We rent this office space on a
month-to-month basis.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
Security
Ownership Prior To Change Of Control
The
Company has only one class of stock outstanding, its common
stock. The following table sets forth certain information as of March
29, 2010 prior to the closing of the transactions contemplated by the Exchange
Agreement, with respect to the beneficial ownership of our common stock for (i)
each director and officer, (ii) all of our directors and officers as a group,
and (iii) each person known to us to own beneficially five percent (5%) or more
of the outstanding shares of our common stock. As of March 29,
2010, there were 14,609,754 shares of common stock outstanding, after giving
effect to the Stock Split.
To our
knowledge, except as indicated in the footnotes to this table or pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to the shares of common stock
indicated.
Name and Address of
Beneficial Owner(1)
|
Shares Beneficially
Owned
|
Percentage Beneficially
Owned
|
||||||
Directors
and Executive Officers
|
||||||||
Yakov
Terner, Director, President, and Treasurer
|
4,500,000 | 30.8 | % | |||||
3
Ha ‘Hishtadrut St., Suite #6
|
||||||||
Kiryat
Yam, Israel 29056
|
||||||||
Yossi
Benitah, Director and Secretary
|
4,500,000 | 30.8 | % | |||||
3
Ha ‘Hishtadrut St., Suite #6
|
||||||||
Kiryat
Yam, Israel 29056
|
||||||||
All
Officers and Directors as a Group
|
9,000,000 | 61.6 | % | |||||
5%
Stockholders
|
||||||||
Yaron
Borenstein
|
755,400 | 5.2 | % | |||||
Hahagana
12
|
||||||||
Givataim
|
||||||||
Bronia
Fruhter
|
774,000 | 5.3 | % | |||||
Almagor
17/5
|
||||||||
Tel
Aviv
|
||||||||
Gideon
Reifman
|
836,601 | 5.7 | % | |||||
Ha’Tawas
11 Apt. 5
|
||||||||
Kadima
Zoran
|
33
(1)
|
Beneficial
ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act. Pursuant to the rules of the SEC, shares of
common stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be beneficially owned and
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
|
Security
Ownership After Change Of Control
The
following table sets forth certain information as of April 1, 2010, after giving
effect to the Closing of the Exchange Transaction, with respect to the
beneficial ownership of our common stock for (i) each director and officer, (ii)
all of our directors and officers as a group, and (iii) each person known to us
to own beneficially five percent (5%) or more of the outstanding shares of our
common stock. As of April 1, 2010, after giving effect to the Closing
of the Exchange Transaction, there were 157,286,262 shares of common stock
outstanding.
To our
knowledge, except as indicated in the footnotes to this table or pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to the shares of common stock
indicated.
Name and Address of
Beneficial Owner(1)
|
Shares Beneficially
Owned
|
Percentage Beneficially
Owned
|
||||||
Directors
and Executive Officers
|
||||||||
Bruce
Goldstein, Director, President, and Chief
|
11,571,426 | 7.4 | % | |||||
Executive
Officer
|
||||||||
220
12th
Avenue, 3rd
Floor
|
||||||||
New
York, New York 10001
|
||||||||
Maurizio
Vecchione, Chairman of the Board
|
11,571,417 | 7.4 | % | |||||
220
12th
Avenue, 3rd
Floor
|
||||||||
New
York, New York 10001
|
||||||||
Barry
Hall, Director and Chief Financial Officer
|
11,571,426 | 7.4 | % | |||||
220
12th
Avenue, 3rd
Floor
|
||||||||
New
York, New York 10001
|
||||||||
All
Officers and Directors as a Group
|
34,714,269 | 22.1 | % | |||||
5%
Stockholders
|
||||||||
SNK
Capital Trust
|
102,613,500 | 65.2 | % | |||||
2nd
Floor, International Bazaar
|
||||||||
PO
Box N-8198
|
||||||||
Bay
Street, Nassau
|
||||||||
Bahamas
|
34
(1)
|
Beneficial
ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act. Pursuant to the rules of the SEC, shares of
common stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be beneficially owned and
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
|
DIRECTORS
AND EXECUTIVE OFFICERS
Appointment
of New Directors and Officers
In
connection with the Exchange Transaction, we agreed to appoint Messrs. Bruce
Goldstein, Maurizio Vecchione and Barry Hall (the “New Directors”) to our board
of directors effective March 22, 2010. On March 10, 2010, we filed
with the Securities and Exchange Commission and transmitted to holders of record
of our securities the information required by Rule 14f-1 of the Securities
Exchange Act of 1934, and the ten-day period prior to the change in the majority
of the Company’s directors as required under Rule 14(f)-1 expired on March 20,
2010.
Furthermore,
concurrent with the Closing of the Exchange Transaction, Mr. Yakov Terner
resigned as our President, Secretary, and Director and Mr. Yossi Benitah
resigned as our Secretary and Director. Immediately following the
resignations of Messrs. Terner and Benitah, we appointed three new executive
officers. Descriptions of our newly appointed directors and officers can be
found below in the section titled “Current Management.”
Current
Management
The
following table sets forth certain information for each executive officer (the
“New Executive Officers”) and director of the Company after the Closing
Date.
Name
|
Age
|
Position
|
||
Bruce
Goldstein
|
61
|
Director,
President and Chief Executive Officer
|
||
Maurizio
Vecchione
|
48
|
Chairman
of the Board
|
||
Barry
Hall
|
61
|
Director
and Chief Financial Officer
|
Bruce Goldstein
Since
November 2008, Mr. Goldstein has served as the Chief Executive Officer of
Thwapr. Prior to becoming CEO, Mr. Goldstein served as the acting
President of Thwapr from March 2007 to November 2008. Mr. Goldstein
has been a director of Thwapr since March 2007. Mr. Goldstein was
appointed CEO pursuant to an agreement between Universal Management, Inc. and
Thwapr dated November 2008. Mr. Goldstein also presently serves as
managing partner of Synthetica Holdings, LLC
(“Synthetica”). Synthetica provides consulting and advisory
services. Mr. Goldstein concurrently serves as the President and CEO
of Universal Management, Inc., where he has served for the past five
years.
35
Maurizio
Vecchione
Since
March 2007, Mr. Vecchione has been a board member and the Chairman of the Board
of Thwapr. Mr. Vecchione currently serves as a board member and
Chairman pursuant to a shareholder’s agreement between Synthetica (America)
Ltd., a management consulting firm of which he is the Chairman, and Thwapr,
dated November 2008. Mr. Vecchione has been the President & CEO
of CompuMed, Inc. an eHealth and telemedicine company, since June
2007. He is also a member and the Chairman of the board of directors
of Synthetica (America) Ltd., a management consultant and California finance
lender, a position he has held since November 1998. Synthetica (America)
Ltd. has provided consulting services to Thwapr. He is
also a member of the Board of Directors and the Chairman of The IDEAS Studio,
Inc. an educational media company, a position he has held since March
2003. Mr. Vecchione was also a Managing Director of Synthetica
Holdings LLC, a consulting firm from July 2004, and from July 2004 through
September 2006, he was CEO of Trestle Holdings, Inc. a medical imaging device
company.
Barry
Hall
Since
November 2008, Mr. Hall has served as the Chief Financial Officer of
Thwapr. Mr. Hall had served as acting CFO of Thwapr from March 2007
to November 2008. Since March 2007, Mr. Hall has been a director of
Thwapr. Mr. Hall was appointed CFO pursuant to a shareholder’s
agreement between Carlaris, Inc. (“Carlaris”) and Thwapr, dated November
2008. Since January 2002, Mr. Hall has served as a managing director
of Synthetica Holdings LLC, a consulting firm. Mr. Hall concurrently
serves as the President of Carlaris, which provides consulting services to
Thwapr pursuant to a consulting agreement between Carlaris and Thwapr, dated
April 1, 2009. Since May 2007, Mr. Hall has served as the President
of Hall Manor, Inc., a California based management and financial consulting
firm. From July 2004 until September 2006, Mr. Hall was the President
and CFO of Trestle Holdings, Inc., a medical imaging device
company.
Terms
of Office
The
Company’s directors are appointed for a one-year term to hold office until the
next annual general meeting of the Company’s stockholders or until removed from
office in accordance with the Company’s bylaws and the provisions of the Nevada
Revised Statutes. The Company’s directors hold office after the
expiration of his or her term until his or her successor is elected and
qualified, or until he or she resigns or is removed in accordance with the
Company’s bylaws and the provisions of the Nevada Revised Statutes.
The
Company’s officers are appointed by the Company’s Board of Directors and hold
office until removed by the Board.
Involvement
in Certain Legal Proceedings
Our New
Directors and New Executive Officers have not been involved in any of the
following events during the past ten years:
1. any
bankruptcy petition filed by or against such person or any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
2. any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
3. being
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining him from or otherwise limiting his involvement in any type of
business, securities or banking activities or to be associated with any person
practicing in banking or securities activities;
36
4. being
found by a court of competent jurisdiction in a civil action, the Securities and
Exchange Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated;
5. being
subject of, or a party to, any federal or state judicial or administrative
order, judgment decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies, or any law or regulation prohibiting mail
or wire fraud or fraud in connection with any business entity; or
6. being
subject of or party to any sanction or order, not subsequently reversed,
suspended, or vacated, of any self-regulatory organization, any registered
entity or any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
Committees
of the Board
Our Board
of Directors held no formal meetings during the 12 month period ended December
31, 2009. All proceedings of the Board of Directors were conducted by
resolutions consented to in writing by the directors and filed with the minutes
of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the Nevada Revised Statutes and the bylaws of our
company, as valid and effective as if they had been passed at a meeting of the
directors duly called and held. We do not presently have a policy
regarding director attendance at meetings.
We do not
currently have standing audit, nominating or compensation committees, or
committees performing similar functions. Due to the size of our
board, our Board of Directors believes that it is not necessary to have standing
audit, nominating or compensation committees at this time because the functions
of such committees are adequately performed by our Board of
Directors. We do not have an audit, nominating or compensation
committee charter as we do not currently have such committees. We do
not have a policy for electing members to the board. Neither our
current nor proposed directors are independent directors as defined in the NASD
listing standards.
After the
change in the Board of Directors, it is anticipated that the Board of Directors
will form separate compensation, nominating and audit committees, with the audit
committee including an audit committee financial expert.
Audit
Committee
Our Board
of Directors has not established a separate audit committee within the meaning
of Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Instead, the entire Board of Directors acts as the audit
committee within the meaning of Section 3(a)(58)(B) of the Exchange Act and will
continue to do so upon the appointment of the proposed directors until such time
as a separate audit committee has been established. In addition, Barry Hall, a
New Director, currently meets the definition of an “audit committee financial
expert” within the meaning of Item 407(d)(5) of Regulation S-K. Mr. Hall is not
an independent director.
37
Section
16(a) Beneficial Ownership Reporting Compliance
Based
solely upon a review of Forms 3, 4 and 5 delivered to us as filed with the
Securities Exchange Commission, our executive officers and directors, and
persons who own more than 10% of our Common Stock timely filed all required
reports pursuant to Section 16(a) of the Securities Exchange Act.
Nominations
to the Board of Directors
Our
directors take a critical role in guiding our strategic direction and oversee
the management of the Company. Board candidates are considered based
upon various criteria, such as their broad-based business and professional
skills and experiences, a global business and social perspective, concern for
the long-term interests of the stockholders, diversity, and personal integrity
and judgment.
In
addition, directors must have time available to devote to Board activities and
to enhance their knowledge in the growing business. Accordingly, we
seek to attract and retain highly qualified directors who have sufficient time
to attend to their substantial duties and responsibilities to the
Company.
In
carrying out its responsibilities, the Board will consider candidates suggested
by stockholders. If a stockholder wishes to formally place a
candidate’s name in nomination, however, he or she must do so in accordance with
the provisions of the Company’s Bylaws. Suggestions for candidates to
be evaluated by the proposed directors must be sent to the Board of Directors,
c/o Thwapr, Inc., 220 12th Avenue,
3rd
Floor, New York, New York 10001.
Board
Leadership Structure and Role on Risk Oversight
Prior to
the Closing of the Exchange Transaction, Yakov Terner served as the Company’s
principal executive officer and a director. The Company determined
this leadership structure was appropriate for the Company due to our small size
and limited operations and resources. Subsequent to the change in
directors, it is anticipated that Bruce Goldstein will serve as our principal
executive officer and Maurizio Vecchione will serve as our Chairman of the
Board. The New Directors will continue to evaluate the Company’s
leadership structure and modify as appropriate based on the size, resources and
operations of the Company.
Prior to
the Closing of the Exchange Transaction, our directors were exclusively involved
in the general oversight of risks that could affect our Company as Messrs.
Terner and Benitah were the sole directors and executive officers of the
Company. Subsequent to the change in directors, it is anticipated
that the New Directors will establish procedures to determine an appropriate
role for the board of directors in the Company’s risk oversight
function.
Compensation
Committee Interlocks and Insider Participation
No
interlocking relationship exists between our board of directors and the board of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
EXECUTIVE
COMPENSATION
Board
Compensation
We have
no standard arrangement to compensate directors for their services in their
capacity as directors. Directors are not paid for meetings
attended. However, we intend to review and consider future proposals
regarding board compensation. All travel and lodging expenses
associated with corporate matters are reimbursed by us, if and when
incurred.
38
Executive
Compensation - Former Executive Officers
No
director, officer or employee received compensation during the last fiscal
year.
Executive
Compensation - New Executive Officers
The
following summary compensation table indicates the cash and non-cash
compensation earned from Thwapr during the fiscal year ended December 31, 2008
and the period from March 14, 2007 (date of inception) to December 31, 2007 by
the New Executive Officers and each of the other two highest paid executives or
directors, if any, whose total compensation exceeded $100,000 during those
periods.
Summary
Compensation Table
Name and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan
Compensation
|
All Other
Compensation (1)
|
Total(2)
|
||||||||||||||||||||||
Bruce
Goldstein
|
2008
|
-0- | -0- | -0- | -0- | -0- | $ | 140,400 | $ | 140,400 | ||||||||||||||||||||
Chief
Executive Officer
|
2007
|
$ | 93,600 | $ | 93,600 | |||||||||||||||||||||||||
Maurizio
Vecchione
|
2008
|
-0- | -0- | -0- | -0- | -0- | $ | 118,800 | $ | 118,800 | ||||||||||||||||||||
Chairman
|
2007
|
-0- | -0- | -0- | -0- | -0- | $ | 97,200 | $ | 97,200 | ||||||||||||||||||||
Barry
Hall
|
2008
|
-0- | -0- | -0- | -0- | -0- | $ | 91,200 | $ | 91,200 | ||||||||||||||||||||
Chief
Financial Officer
|
2007
|
-0- | -0- | -0- | -0- | -0- | $ | 61,200 | $ | 61,200 |
(1)
|
All
Other Compensation consists solely of payments made to executive officers
or directors for consulting work.
|
(2)
|
The
dollar value in this column for each named executive officer or director
represents the sum of all compensation reflected in the previous
columns.
|
None of
our executive officers or directors received, nor do we have any arrangements to
pay out, any bonus, stock awards, option awards, non-equity incentive plan
compensation, or non-qualified deferred compensation.
Potential
Payments Upon Termination or Change-in-Control
SEC
regulations state that we must disclose information regarding agreements, plans
or arrangements that provide for payments or benefits to our executive officers
in connection with any termination of employment or change in control of the
company. We currently have no employment agreements with any of our executive
officers, nor any compensatory plans or arrangements resulting from the
resignation, retirement or any other termination of any of our executive
officers, from a change-in-control, or from a change in any executive officer’s
responsibilities following a change-in-control. As a result, we have omitted
this table.
Employment
Agreements
Mr.
Goldstein was appointed President and Chief Executive Officer of Thwapr pursuant
to an agreement between Universal Management, Inc. and Thwapr, dated March 31,
2009. Under the agreement, Mr. Goldstein is to devote 100% of his
efforts to Thwapr for a monthly fee of $20,000. This agreement can be
terminated by either party with ninety days written notice.
39
Mr. Hall
was appointed Chief Financial Officer pursuant to an agreement between Carlaris,
Inc. and Thwapr dated March 31, 2009. Under the agreement, Mr. Hall
is to generally devote up to 60% of his efforts to Thwapr for a monthly fee of
$12,000. This agreement can be terminated by either party with ninety
days written notice.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
AND
DIRECTOR INDEPENDENCE
Certain
Relationships and Transactions
There are
no family relationships between any of our former directors or executive
officers and New Directors or New Executive Officers. To our
knowledge, the New Directors and Executive Officers were not directors of the
Company prior to the Closing of the Exchange Transaction, did not hold any
position with the Company prior to the Closing of the Exchange Transaction nor
have been involved in any material proceeding adverse to the Company or any
transactions with the Company or any of its directors, executive officers,
affiliates or associates that are required to be disclosed pursuant to the rules
and regulations of the SEC.
Mr.
Goldstein was appointed President and Chief Executive Officer of Thwapr pursuant
to an agreement between Universal Management, Inc. and Thwapr, dated March 31,
2009. Under the agreement, Mr. Goldstein is to devote 100% of his
efforts to Thwapr for a monthly fee of $20,000. This agreement can be
terminated by either party with ninety days written notice.
Mr. Hall
was appointed Chief Financial Officer pursuant to an agreement between Carlaris,
Inc. and Thwapr dated March 31, 2009. Under the agreement, Mr. Hall
is to generally devote up to 60% of his efforts to Thwapr for a monthly fee of
$12,000. This agreement can be terminated by either party with ninety
days written notice.
Although
we have not adopted a Code of Ethics, we rely on our board to review related
party transactions on an ongoing basis to prevent conflicts of interest. Our
board reviews a transaction in light of the affiliations of the director,
officer or employee and the affiliations of such person’s immediate family.
Transactions are presented to our board for approval before they are entered
into or, if this is not possible, for ratification after the transaction has
occurred. If our board finds that a conflict of interest exists, then it will
determine the appropriate remedial action, if any. Our board approves or
ratifies a transaction if it determines that the transaction is consistent with
the best interests of the Company. These policies and procedures are
not evidenced in writing.
Related
Party Transactions
Director
Independence
During
the year ended December 31, 2009, we did not have any independent directors on
our board. We evaluate independence by the standards for director
independence established by applicable laws, rules, and listing standards
including, without limitation, the standards for independent directors
established by The New York Stock Exchange, Inc., The NASDAQ National Market,
and the Securities and Exchange Commission.
40
Subject
to some exceptions, these standards generally provide that a director will not
be independent if (a) the director is, or in the past three years has been, an
employee of ours; (b) a member of the director's immediate family is, or in the
past three years has been, an executive officer of ours; (c) the director or a
member of the director's immediate family has received more than $120,000 per
year in direct compensation from us other than for service as a director (or for
a family member, as a non-executive employee); (d) the director or a member of
the director's immediate family is, or in the past three years has been,
employed in a professional capacity by our independent public accountants, or
has worked for such firm in any capacity on our audit; (e) the director or a
member of the director's immediate family is, or in the past three years has
been, employed as an executive officer of a company where one of our executive
officers serves on the compensation committee; or (f) the director or a member
of the director's immediate family is an executive officer of a company that
makes payments to, or receives payments from, us in an amount which, in any
twelve-month period during the past three years, exceeds the greater of
$1,000,000 or two percent of that other company's consolidated gross
revenues.
LEGAL
PROCEEDINGS
None.
MARKET
PRICE OF AND DIVIDENDS ON COMMON EQUITY
AND
RELATED SHAREHOLDER MATTERS
Market
Information
Our
common stock is not listed on any stock exchange. Although our common
stock is listed on the Over-the-Counter Bulletin Board (“OTCBB”) under the
symbol “SOPA,” there is no established public market for shares of our common
stock, and no trades of our common stock have taken place on the
OTCBB. There is not currently a price quotation for shares of our
common stock on the OTCBB.
Holders
Prior to
the Exchange Transaction, there were approximately 42 shareholders of record of
our common stock based upon the shareholders’ listing provided by our transfer
agent. Our transfer agent is Island Stock Transfer. The
transfer agent’s address is 100 Second Avenue South, Suite 7055, St. Petersburg,
Florida 33701 and its phone number is (727) 289-0010.
After the
Closing of the Exchange Transaction, there were approximately 61 shareholders of
record of our common stock.
Dividends
We have
never paid cash dividends on our common stock. We intend to keep
future earnings, if any, to finance the expansion of our business, and we do not
anticipate that any cash dividends will be paid in the foreseeable
future. Our future payment of dividends will depend on our earnings,
capital requirements, expansion plans, financial condition and other relevant
factors that our board of directors may deem relevant. Our retained
earnings deficit currently limits our ability to pay dividends.
RECENT
SALES OF UNREGISTERED SECURITIES
Reference
is made to Item 3.02 of this Form 8-K for a description of recent sales of
unregistered securities, which is hereby incorporated by reference.
DESCRIPTION
OF SECURITIES
The
following information describes our capital stock and provisions of our articles
of incorporation and our bylaws, all as in effect upon the Closing of the
Exchange Transaction. This description is only a
summary. You should also refer to our articles of incorporation,
bylaws and articles of amendment which have been incorporated by reference or
filed with the Securities and Exchange Commission as exhibits to this Form
8-K.
41
General
Our
authorized capital stock consists of 300,000,000 shares of common stock at a par
value of $0.0003 per share and 50,000,000 shares of preferred stock at a par
value of $0.0001 per share, of which no shares are issued and
outstanding.
Common
Stock
Holders
of common stock are entitled to one vote for each share on all matters submitted
to a shareholder vote. Holders of common stock do not have cumulative
voting rights. Subject to preferences that may be applicable to any
then-outstanding preferred stock, holders of common stock are entitled to share
in all dividends that the board of directors, in its discretion, declares from
legally available funds. In the event of our liquidation, dissolution
or winding up, subject to preferences that may be applicable to any
then-outstanding preferred stock, each outstanding share entitles its holder to
participate in all assets that remain after payment of liabilities and after
providing for each class of stock, if any, having preference over the common
stock.
Holders
of common stock have no conversion, preemptive or other subscription rights, and
there are no redemption or sinking fund provisions applicable to the common
stock. The rights of the holders of common stock are subject to any
rights that may be fixed for holders of preferred stock, when and if any
preferred stock is authorized and issued. All outstanding shares of
common stock are duly authorized, validly issued, fully paid and
non-assessable.
Preferred
Stock
The
preferred stock may be divided into and issued in series. The board
of directors is authorized to divide the authorized shares of preferred stock
into one or more series, each of which shall be so designated as to distinguish
the shares thereof from the shares of all other series and
classes. The board of directors is authorized, within any limitations
prescribed by law and the bylaws, to fix and determine the
designations, rights, qualifications, preferences, limitations and terms of the
shares of any series of preferred stock including but not limited to the
following.
|
(a)
|
The
rate of dividend, the time of payment of dividends, whether dividends are
cumulative, and the date from which any dividends shall
accrue;
|
|
(b)
|
Whether
shares may be redeemed, and, if so, the redemption price and the terms and
conditions of redemption;
|
|
(c)
|
The
amount payable upon shares in the event of voluntary or involuntary
liquidation;
|
|
(d)
|
Sinking
fund or other provisions, if any, for the redemption or purchase of
shares;
|
|
(e)
|
The
terms and conditions on which shares may be converted, if the shares of
any series are issued with the privilege of
conversion;
|
|
(f)
|
Voting
powers, if any, provided that if any of the preferred stock or series
thereof shall have voting rights, such preferred stock or series shall
vote only on a share for share basis with the common stock on any matter,
including but not limited to the election of directors, for which such
preferred stock or series has such rights;
and
|
42
|
(g)
|
Subject
to the foregoing, such other terms, qualifications, privileges,
limitations, options, restrictions, and special or relative rights
and preferences, if any, of shares or such series as
the board of directors may, at the time so acting, lawfully fix and
determine under the laws of the State of
Nevada.
|
The
Company may not declare, pay or set apart for payment any dividend or other
distribution (unless payable solely in shares of common stock or other class of
stock junior to the preferred stock as to dividends or upon liquidation) in
respect of common stock, or other class of stock junior to the preferred stock,
nor shall it redeem, purchase or otherwise acquire for consideration shares of
any of the foregoing, unless dividends, if any, payable to holders of preferred
stock for the current period (and in the case of cumulative dividends, if any,
payable to holders of preferred stock for the current period and in the case of
cumulative dividends, if any, for all past periods) have been paid, are being
paid or have been set aside for payment, in accordance with the terms of the
preferred stock, as fixed by the board of directors.
In the
event of the liquidation of the Company, holders of preferred stock shall be
entitled to receive, before any payment or distribution on the common stock or
any other class of stock junior to the preferred stock upon liquidation, a
distribution per share in the amount of the liquidation preference, if any,
fixed or determined in accordance with the terms of such preferred stock plus,
if so provided in such terms, an amount per share equal to accumulated and
unpaid dividends in respect of such preferred stock (whether or not earned or
declared) to the date of such distribution. Neither the sale, lease
or exchange of all or substantially all of the property and assets of the
Company, nor any consolidation or merger of the Company, shall be deemed to be a
liquidation for these purposes.
Warrants
The
Company has issued warrants to purchase an aggregate of 12,181,363 shares of its
common stock, with each warrant having an exercise price between $1.00 and $1.25
per share and being exercisable at any time indefinitely, or within
either five or ten years from the date of issuance. Currently, all of
such warrants are outstanding. The warrants vest either immediately
or over periods of one year, 18 months, or 3 years on a quarterly
basis.. In the event we split or subdivide our shares of common
stock, the exercise price will be proportionately reduced and conversely, if we
combine the outstanding shares of common stock into smaller number of share,
then the exercise price will be proportionately increased. Of the
warrants outstanding, 10,950,003 shares of the underlying securities cannot be
sold or traded (i) until June 9, 2012, if Thwapr has 10,000,000 registered users
on such date, or (ii) upon a change of control of Thwapr.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Nevada
Law
Section
78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding if he:
|
(a)
|
is
not liable pursuant to Nevada Revised Statute 78.138,
or
|
43
|
(b)
|
acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
|
In
addition, Section 78.7502 permits a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he:
|
(a)
|
is
not liable pursuant to Nevada Revised Statute 78.138;
or
|
|
(b)
|
acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the
corporation.
|
To the
extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter, the
corporation is required to indemnify him against expenses, including attorneys’
fees, actually and reasonably incurred by him in connection with the
defense.
Section
78.752 of the Nevada Revised Statutes allows a corporation to purchase and
maintain insurance or make other financial arrangements on behalf of any person
who is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or agent, or
arising out of his status as such, whether or not the corporation has the
authority to indemnify him against such liability and expenses.
Other
financial arrangements made by the corporation pursuant to Section 78.752 may
include the following:
|
(a)
|
the
creation of a trust fund;
|
|
(b)
|
the
establishment of a program of
self-insurance;
|
|
(c)
|
the
securing of its obligation of indemnification by granting a security
interest or other lien on any assets of the corporation;
and
|
|
(d)
|
the
establishment of a letter of credit, guaranty or
surety
|
No
financial arrangement made pursuant to Section 78.752 may provide protection for
a person adjudged by a court of competent jurisdiction, after exhaustion of all
appeals, to be liable for intentional misconduct, fraud or a knowing violation
of law, except with respect to the advancement of expenses or indemnification
ordered by a court.
Any
discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court
or advanced pursuant to an undertaking to repay the amount if it is determined
by a court that the indemnified party is not entitled to be indemnified by the
corporation, may be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be
made:
44
|
(a)
|
by
the stockholders;
|
|
(b)
|
by
the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or
proceeding;
|
|
(c)
|
if
a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel
in a written opinion, or
|
|
(d)
|
if
a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
|
Charter
Provisions and Other Arrangements of the Registrant
Pursuant
to the provisions of Nevada Revised Statutes, Seaospa has adopted the following
indemnification provisions in its Bylaws for its directors and
officers:
The
Company shall indemnify any person who was, or is threatened to be made, a party
to a proceeding by reason of the fact that he or she (i) is or was a director,
officer, employee or agent of the Company, or (ii) while a director,
officer, employee or agent of the Company is or was serving at the request of
the Company as a director, officer, employee, agent or similar functionary of
another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted under the Revised Statutes of the
State of Nevada, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such
shall run to the benefit of any director or officer who is elected
and accepts the position of director or officer of the Company or elects to
continue to serve as a director or officer of the Company while this Article is
in effect. The rights conferred above shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
bylaw, resolution of stockholders or directors, agreement or
otherwise.
As used
in the Article, the term “proceeding” means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, any appeal in such an action, suit or proceeding and any inquiry
or investigation that could lead to such an action, suit or
proceeding.
A
director or officer of the Company shall not be personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director or officer, except for liability (i) for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law; or (ii) for
the payment of distributions in violation of the Revised Statutes of the State
of Nevada. Any repeal or amendment of this Article by the
shareholders of the Company shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director or officer of the
Company arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a
director or officer of the Company is not personally liable as set
forth
In the
foregoing provisions of this Article, a director or officer shall not be liable
to the Company or its stockholders to such further extent as permitted by any
law hereafter enacted, including, without limitation, any subsequent
amendment to the Revised Statutes of the State of Nevada.
The board
of directors may cause the Company to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation, or is or
was serving at the request of the Company as a director or officer of another
corporation, or as its representative in a partnership, joint venture. trust or
other enterprise against any liability asserted against such person and incurred
in any such capacity or arising out of such status, whether or not the Company
would have the power to indemnify such person.
45
The Board
of Directors may from time to time adopt further Bylaws with respect to
indemnification and amend these and such Bylaws to provide at all times the
fullest indemnification permitted by the General Corporation Law of the State of
Nevada.
In
addition to the above, each of our directors has entered into an indemnification
agreement with us. The indemnification agreement provides that we shall
indemnify the director against expenses and liabilities in connection with any
proceeding associated with the director being our director to the fullest extent
permitted by applicable law, our Articles of Incorporation and our
Bylaws.
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Reference
is made to the financial statements and supplementary data included in Exhibit
99.1, which is incorporated herein by reference.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
None.
Item
3.02. Unregistered Sales of
Equity Securities.
As more
fully described in Items 1.01 and 2.01 above, in connection with the Exchange
Agreement, on the Closing Date, we issued 142,676,508 shares of our common stock
and warrants to acquire 12,181,363 shares of our common stock to the Thwapr
Stockholders in exchange for 100% of the capital stock of Thwapr. Reference is
made to the disclosures set forth under Items 1.01 and 2.01 of this Form 8-K,
which disclosures are incorporated herein by reference. The issuance
of the common stock to the Thwapr Stockholders pursuant to the Exchange
Agreement was exempt from registration under the Securities Act pursuant to
Section 4(2) and Regulation D thereof. We made this determination
based on the representations of the Thwapr Stockholders which included, in
pertinent part, that such shareholders, as applicable, were “accredited
investors” within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, and that such shareholders were acquiring our common stock, for
investment purposes for its own account and not as nominee or agent, and not
with a view to the resale or distribution thereof, and that such shareholders
understood that the shares of our common stock may not be sold or otherwise
disposed of without registration under the Securities Act or an applicable
exemption therefrom.
Item
5.01. Changes in Control of
Registrant.
As more
fully described in Items 1.01 and 2.01 above, on March 29, 2010, in a voluntary
share exchange transaction, we acquired a business engaged in providing mobile
to mobile video and photo sharing services, by executing the Exchange Agreement
by and among the Company, certain stockholders of the Company, Thwapr, and the
stockholders of Thwapr.
Under the
Exchange Agreement, on the Closing Date, we acquired all of the issued and
outstanding shares of Thwapr through the issuance of 142,676,508 shares of our
common stock to the Thwapr Stockholders. Immediately prior to the
Exchange Transaction and after giving effect to the Stock Split, we had
14,609,754 shares of common stock issued and outstanding. Immediately
after the issuance of the shares to the Thwapr Stockholders, we had 157,286,262
shares of common stock issued and outstanding. As a result of this
Exchange Transaction, the Thwapr Stockholders own approximately 90% of our
issued and outstanding common stock, and Thwapr became our wholly owned
subsidiary.
46
In
connection with this change in control, and as explained more fully in Item 5.02
below, effective March 29, 2010, Yakov Terner resigned as our President,
Treasurer and Director, Yossi Benitah resigned as our Secretary and Director,
and we appointed new officers. The appointments of the new officers and
directors shall be effective concurrently with the Closing of the Exchange
Transaction. On March 10, 2010, we filed with the Securities and
Exchange Commission and transmitted to holders of record of our securities the
information required by Rule 14(f)-1 of the Securities Exchange Act of 1934, and
effective March 22, 2010, we appointed new directors, as disclosed in our
Current Report on Form 8-K filed with the Securities and Exchange Commission on
March 22, 2010.
Item
5.02.
|
Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
|
As more
fully described in Items 1.01, 2.01 and 5.01 above, on March 29, 2010 in a
voluntary share exchange transaction, we acquired a business providing mobile to
mobile video and photo sharing services, by executing the Exchange Agreement by
and among the Company, certain stockholders of the Company, Thwapr, and the
stockholders of Thwapr. The Closing of this transaction occurred on
March 29, 2010. Reference is made to the disclosures set forth
under Items 1.01, 2.01 and 5.01 of this Form 8-K, which disclosures are
incorporated herein by reference.
Resignation
of Officers and Directors
Effective
March 29, 2010, Yakov Terner resigned as our President, Treasurer and Director,
and Yossi Benitah resigned as our Secretary and Director.
Appointment
of Officers
Effective
on the Closing Date, the following persons were appointed as our newly appointed
executive officers (individually, a “New Executive Officer” and collectively,
the “New Executive Officers”):
Name
|
Age
|
Position
|
||
Bruce
Goldstein
|
41
|
Director,
President and Chief Executive Officer
|
||
Barry
Hall
|
61
|
Director
and Chief Financial Officer
|
There are
no family relationships among any of our officers or directors. None
of the New Executive Officers currently has an employment agreement with the
Company. Other than the Exchange Transaction, there are no
transactions, since the beginning of our last fiscal year, or any currently
proposed transaction, in which the Company was or is to be a participant and the
amount involved exceeds the lesser of $120,000 or one percent of the average of
the Company’s total assets at year-end for the last three completed fiscal
years, and in which any of the New Executive Officers had or will have a direct
or indirect material interest. Other than the Exchange Transaction,
there is no material plan, contract or arrangement (whether or not written) to
which any of the New Executive Officers is a party or in which any New Executive
Officer participates that is entered into or material amendment in connection
with our appointment of the New Executive Officers, or any grant or award to any
New Executive Officer or modification thereto, under any such plan, contract or
arrangement in connection with our appointment of the New Executive
Officers.
Descriptions
of our newly appointed directors and officers can be found in Item 2.01 above,
in the section titled “Directors and Executive Officers - Current
Management.”
47
Item
5.03.
|
Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
|
Effective
March 25, 2010, in connection with the Stock Split described in Item 2.01 above,
we amended our Articles of Incorporation by filing a Certificate of Amendment
with the Secretary of State of the State of Nevada to increase our authorized
shares of common stock from 100,000,000 to 300,000,000. Our
authorized shares of preferred stock remain unchanged at
50,000,000.
The full text of our Articles of
Incorporation, including all amendments thereto, is filed herewith as
Exhibit 3.1 and incorporated herein by reference.
Item
5.06. Change in Shell
Company Status.
Reference
is made to the voluntary share exchange transaction under the Exchange
Agreement, as described in Item 1.01, which is incorporated herein by
reference. From and after the Closing of the transactions under these
agreements, our primary operations consist of the business and operations of
Thwapr, Inc. Accordingly, we are disclosing information about Thwapr,
Inc.’s business, financial condition, and management in this Form
8-K.
Item
8.01.
|
Other
Events.
|
In
connection with the Stock Split described in Item 2.01 above, FINRA has assigned
the Company a new stock symbol, “SOPAD.” This new symbol took effect
at the open of business on March 29, 2010, and the symbol will revert to “SOPA”
20 business days from March 29, 1010.
Item
9.01. Financial Statement
and Exhibits.
Reference
is made to the voluntary share exchange transaction under the Exchange
Agreement, as described in Item 1.01, which is incorporated herein by
reference. As a result of the closing of the voluntary share exchange
transaction, our primary operations consist of the business and operations of
Thwapr, Inc. In the voluntary share exchange transaction or reverse
acquisition, Seaospa is the accounting acquiree and Thwapr is the accounting
acquirer. Accordingly, we are presenting the financial statements of
Thwapr and its consolidated entities.
|
(a)
|
Financial
Statements of the Business Acquired
|
The
audited consolidated financial statements of Thwapr for the years ended December
31, 2008 and 2007, and the unaudited consolidated financial statements for the
nine months ended September 30, 2009, including the notes to such financial
statements, are incorporated herein by reference to Exhibit 99.1 of this Form
8-K.
|
(b)
|
Pro
Forma Financial Information
|
Incorporated
by reference to Exhibit 99.2 attached hereto.
|
(c)
|
Shell
Company Transactions
|
Reference
is made to Items 9.01(a) and 9.01(b) above and the exhibits referred to therein,
which are incorporated herein by reference.
48
|
(d)
|
Exhibits
|
Exhibit
|
||
Number
|
Description
|
|
2.1
|
Share
Exchange Agreement, dated March 5, 2010 (incorporated by reference to
Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on March
9, 2010).
|
|
3.1*
|
Articles
of Incorporation of the Registrant, dated November 2, 2007, including all
amendments to date.
|
|
3.2
|
By-laws
of the Registrant, dated November 2, 2007 (incorporated by reference to
Exhibit 3.2 of Registrant’s Registration Statement on Form S-1 filed on
February 9, 2009).
|
|
4.1
|
Form
of Stock Specimen (incorporated by reference to Exhibit 4.1 of
Registrant’s Registration Statement on Form S-1 filed on February 9,
2009).
|
|
10.1
|
Subscription
Agreement, dated November 2, 2007, by and between the Registrant and Yakov
Terner (incorporated by reference to Exhibit 10.1 of Registrant’s
Registration Statement on Form S-1 filed on February 9,
2009).
|
|
10.2
|
Subscription
Agreement, dated November 2, 2007, by and between Registrant and Yossi
Benitah (incorporated by reference to Exhibit 10.2 of Registrant’s
Registration Statement on Form S-1 filed on February 9,
2009).
|
|
10.3
|
Form
of Regulation S Subscription Agreement, (incorporated by reference to
Exhibit 10.3 of Registrant’s Registration Statement on Form S-1 filed on
February 9, 2009).
|
|
10.4*
|
Exchange
Offer Agreement, dated July 20, 2009, by and among Mobile Video
Development, Inc. and the stockholders listed therein.
|
|
10.4(a)*
|
Addendum
No. 1 to Exchange Offer Agreement, dated February 2010, by and among
Thwapr, Inc. and the stockholders listed therein.
|
|
10.5*
|
Form
of Warrant to Purchase Common Stock of Thwapr, Inc.
|
|
10.6*
|
Letter
Agreement, dated March 31, 2009, by and between Mobile Video Development,
Inc. and Bruce Goldstein, on behalf of Universal Management,
Inc.
|
|
10.7*
|
Letter
Agreement, dated March 31, 2009, by and between Mobile Video Development,
Inc. and Barry Hall, on behalf of Carlaris, Inc.
|
|
10.8*
|
Form
of Indemnification Agreement for the officers and directors of Seaospa,
Inc.
|
|
10.9*
|
Registration
Rights Agreement, dated March 29, 2010, by and among Seaospa, Inc. and the
stockholders listed therein.
|
|
99.1*
|
Thwapr
Audited and Unaudited Financial Statements
|
|
99.2*
|
Pro
Forma Financial
Statements
|
49
99.3*
|
Consent
of Rose Snyder &
Jacobs
|
* - Filed
Herewith
50
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April
2, 2010
|
SEAOSPA,
INC.
|
|
By:
|
/s/ Barry Hall
|
|
Barry
Hall,
|
||
Chief
Financial Officer
|
51