Idle Media, Inc. - FORM 10-Q - February 22, 2011

Attached files

file	filename
EX-32 - Idle Media, Inc.	idlm_ex32.htm
EX-31 - Idle Media, Inc.	idlm_ex31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: December 31, 2010

Or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 333-156069

IDLE MEDIA, INC.
(Exact name of registrant as specified in its charter)

Nevada		26-2818699
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

216 Centre Avenue Leesport, PA		19533
(Address of principal executive offices)		(Zip Code)

(484) 671-2241
(Registrant's telephone number, including area code)


_______________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Common Stock, $0.001 par value	58,483,250 shares
(Class)	(Outstanding as at February 22, 2011)

IDLE MEDIA, INC.

Table of Contents

	Page

PART I – FINANCIAL INFORMATION	3
Unaudited Interim Condensed Financial Statements	3
CONSOLIDATED BALANCE SHEETS	4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7
Management's Discussion and Analysis of Financial Condition and Plan of Operation	13
Controls and Procedures	20
PART II – OTHER INFORMATION	22
Risk Factors	22
Recent Sales of Unregistered Securities	26
Exhibits and Reports on Form 8-K	27
SIGNATURES	28

PART I – FINANCIAL INFORMATION

Unaudited Interim Condensed Financial Statements

IDLE MEDIA, INC.

(FORMERLY NATIONAL GOLF EMPORIUM, INC.)

CONSOLIDATED BALANCE SHEETS

	December 31,			September 30,
	2010			2010
	(unaudited)			(audited)
ASSETS

Current assets:
Cash	$	707,571		$	381,494
Accounts receivable		205,587			266,087
Prepaid expenses		48,691			-
Total current assets		961,849			647,581

Other assets:
Software development costs, net		30,414			26,572
Software, net		6,210			6,555
Property and equipment, net		1,558			-
Website, net		60,735			66,568
Total other assets		98,917			99,965

Total assets	$	1,060,766		$	747,276

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	58,549		$	72,248
Deferred revenues		50,916			10,224
Income tax payable		274,095			185,765
Total current liabilities		383,560			268,237

Total liabilities		383,560			268,237

Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding
as of December 31, 2010 and September 30, 2010		-			-
Common stock, $0.001 par value, 100,000,000 shares
authorized, 58,483,250 shares issued and
outstanding as of December 31, 2010 and September 30, 2010		58,483			58,483
Additional paid-in capital		6,000			6,000
Note receivable – related party		(145,043	)		(222,045	)
Retained earnings		757,766			636,601
Total stockholders’ equity		677,206			479,039

Total liabilities and stockholders’ equity	$	1,060,766		$	747,276

See Accompanying Notes to Consolidated Financial Statements.

IDLE MEDIA, INC.

(FORMERLY NATIONAL GOLF EMPORIUM, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the
	three months ended
	December 31,
	2010			2009

Revenue
Advertising revenue	$	420,750		$	248,742
Subscription revenue		49,186			19,388
Sponsorship revenue		79,294			3,050
Online game revenue		74,045			-
Less: Returns and allowances		(254	)		(800	)
Net revenue		623,021			270,380

Operating expenses:
Server costs		121,852			93,905
Scanning software		19,372			17,122
Merchant fees		6,917			1,294
General and administrative		55,385			3,086
Consulting – related party		210,000			-
Total operating expenses		413,526			115,407

Net income before provision for income tax		209,495			154,973

Provision for income tax		88,330			-

Net income	$	121,165		$	154,973

Net income per share – basic and fully diluted	$	0.00		$	0.00

Weighted average number of common shares
outstanding – basic and fully diluted		58,483,250			40,000,000

See Accompanying Notes to Consolidated Financial Statements.

IDLE MEDIA, INC.

(FORMERLY NATIONAL GOLF EMPORIUM, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the
	three months ended
	December 31,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	121,165		$	154,973
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization		7,381			-
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		60,500			(66,302	)
Increase in prepaid expenses		(48,691	)		-
Increase in accounts payable		(13,699	)		(8,806	)
(Decrease) Increase in deferred revenue		40,692			(685	)
Increase in income tax payable		88,330			-

Net cash provided by operating activities		255,678			79,180

CASH FLOWS FROM INVESTING ACTIVITIES
Repayments on notes receivable - related party		77,002			-
Payments for software development costs		(5,000	)		-
Purchases of software and equipment		(1,603	)		-

Net cash provided by investing activities		70,399			-

CASH FLOWS FROM FINANCING ACTIVITIES
Distributions		-			(30,000	)

Net cash used in financing activities		-			(30,000	)

INCREASE IN CASH		326,077			49,180

CASH AT BEGINNING OF PERIOD		381,494			70,694

CASH AT END OF PERIOD	$	707,571		$	119,874

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

See Accompanying Notes to Consolidated Financial Statements.

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of American for interim financial information and with the instructions to Form 10-Q. They do not include all disclosure required by generally accepted accounting principles in the United States of America. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended September 30, 2010 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. During the current period the Company has determined that account payables was understated due to overages charges related to server costs and cash was improperly recorded as a note receivable due to related party. As of the date of this filing, management of the Company has not had sufficient time to determine the impact of these error corrections on financial condition, results of operations or cash flows reported in prior periods. Accordingly, financial condition and results of operations disclosed in prior periods can no longer be relied upon. Therefore, the interim unaudited financial statements should not be read in conjunction with the financial statements included in the Form 10-K for the year ended September 30, 2010. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended December 31, 2010 are not necessarily indicative of the results that may be expected for the quarter ending March 31, 2011.

Organization

The Company was incorporated under the laws of the State of Nevada on April 25, 2008 as National Golf Emporium, Inc (“NGLF”). The Company was organized to create an online retail golf equipment store focusing on golf equipment and related items. Activities during the development stage include developing the business plan and raising capital.

On February 23, 2010, the Company amended its articles of incorporation and changed its name from National Golf Emporium, Inc. to Idle Media, Inc.

On March 18, 2010, Idle Media, Inc. entered into a Stock Exchange Agreement and Plan of Reorganization with Idle Media, LLC to acquire 1,000 membership units, constituting all of the issued and outstanding membership units of Datpiff, LLC in consideration for the issuance of 40,000,000 restricted shares of common stock of Idle Media, Inc. In connection with the Stock Exchange Agreement, a principal shareholder agreed to cancel 63,000,000 shares upon the close of the transaction.

In connection with the Stock Exchange Agreement, Bryan Sawarynski, the Principal NGLF Shareholder, holding 69,000,000, or approximately 85%, of the 81,483,250 total issued and outstanding common stock of NGLF, agreed to cancel his ownership of 63,000,000 common shares of NGLF (“Cancellation”). Subsequent to the Cancellation, Mr. Sawarynski will hold 6,000,000 shares of common stock of NGLF.

On May 19, 2010, the transactions were completed and resulted in a change in control of NGLF, with LLC owning 40,000,000 shares of common stock of NGLF, out of a total of 58,483,250 issued and outstanding shares, after giving effect to the Exchange and Cancellation. Also, Marcus Frasier and Kyle Reilly were elected directors of NGLF and appointed as its executive officers. As a result of the Exchange Agreement, (i) DP became a wholly-owned subsidiary of NGLF and (ii) NGLF succeeded to the business of DP as its sole business. Accordingly, on February 23, 2010, NGLF amended its articles of incorporation in the State of Nevada to change its name from “National Golf Emporium, Inc.” to “Idle Media, Inc.”

For accounting purposes, the acquisition of Datpiff, LLC by Idle Media, Inc. has been recorded as a reverse acquisition of a public company and recapitalization of Datpiff, LLC based on the factors demonstrating that Datpiff, LLC represents the accounting acquirer. Idle Media, Inc. changed its business direction and now develops and manages a website of free mixtapes for consumers to download music from new and upcoming artists.

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation

The consolidated financial statements include the accounts of Idle Media, Inc. (Nevada corporation), and its wholly-owned subsidiary Datpiff, LLC (Pennsylvania limited liability corporation). All significant inter-company balances and transactions have been eliminated. Idle Media, Inc. and Datpiff, LLC will be collectively referred herein to as the “Company”.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value. At times such balances may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. As of December 31, 2010, the Company had $457,571 over the FDIC insurance limit.

Accounts receivable

The Company uses the allowance method to account for uncollectible accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts of $0 and $0 as of December 31, 2010 and September 30, 2010, respectively.

Revenue recognition

The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.

The Company recognizes revenue when it is realizable and earned, as evidenced by click-throughs occurring on advertisers’ sponsored listings, the display of a banner advertisement or the fulfillment of subscription listing obligations. The Company enters into contracts to distribute sponsored listings and banner advertisement with its direct and indirect advertisers. Most of these contracts are short-term, do not contain multiple elements and can be cancelled at anytime. The indirect advertisers provide the Company with sponsored listings with bid prices (what their advertisers are willing to pay for each click-through on those listings). The Company recognizes its portion of the bid price based upon the contractual agreement. Sponsored listings and banner advertisements are included as search results in response to keyword searches performed by consumers on its website. Revenue is recognized when earned based on click-through activity to the extent that collection is reasonably assured from credit worthy advertisers.

The Company generates subscription revenue from weekly, monthly and annual premium subscriptions for downloading music on its website. Revenue is recognized on a straight line basis over the subscription period. The Company receives payment from its customers at the start of the subscription period and the Company records deferred revenue for the unearned portion of the subscription period. For the monthly and annual subscriptions, the Company utilizes a mid-month method convention to record revenue.

The Company generates revenue from sponsorships on their website. The sponsorship revenue is recorded upon receipt of the payment and is generally for a short period of time and there is no guaranteed time period for the sponsorship. The sponsorships allow artists a prominent placement on the Company’s website to increase their chances of downloading their music.

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition (continued)

Online social gaming revenue is generated by purchasing digital content on the Company’s website and online gaming platforms for use in the Company’s online games and social media applications. The Company records revenue as the digital content is deposited into the user’s account upon which delivery has occurred and the user has taken possession of the digital content. Additionally, the Company records revenue for digital content provided over a specified period of time on a straight line basis over the time period (i.e. usually 30 to 90 days). The Company receives payment from its customers at the start of the time period and the Company records deferred revenue for the unearned portion of the time period. The Company utilizes a mid-month method convention to record revenue.

Concentrations

For the three months ended December 31, 2010, 3 customers accounted for 43% of sales. As of December 31, 2010, 4 customers accounted for 79% of the accounts receivable balance.

Earnings per share

The Company follows ASC Topic 260. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. As of December 31, 2010, the Company did not have any common stock equivalents.

Intangible assets

Software development costs for internal-use are recorded at cost and are capitalized during the application development stage. Expenditures for preliminary project activities and post implementation activities are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years of the related assets using the straight-line method for financial statement purposes. The Company will commence amortization once the economic benefits of the assets begin to be consumed and they plan to record amortization once the software is completed and is fully operational. The Company commenced amortization during the first quarter of the year ended September 30, 2011 once the economic benefits of the assets began to be consumed which occurred with the launch of a facebook application. Amortization expense for the three months ended December 31, 2010 totaled $1,158.

The Company capitalizes the costs related to the purchase of software to be used for operations. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes.

The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes.

The Company reviews the carrying value of intangible assets for impairment whenever events and circumstances indicate that the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the fair value. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as December 31, 2010.

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and equipment

Property and equipment is recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

Computer equipment 3 years

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as December 31, 2010. Depreciation expense for the three months ended December 31, 2010 totaled $45.

Recent pronouncements

The Company has evaluated the recent accounting pronouncements through ASU 2011-01 and believes that none of them will have a material effect on the company’s financial statements.

NOTE 2 – PREPAID EXPENSES

As of December 31, 2010, the Company had prepaid expenses totaling $48,691 which represent a prepayment of server costs to a vendor. A portion of this balance will be amortized over the next six months. The remaining portion will be analyzed as part of the potential restatement.

NOTE 3 – NOTES RECEIVABLE – RELATED PARTY

Notes receivable consists of the following at:

	December 31, 2010		September 30, 2010
Note receivable to an entity owned and controlled by officers and directors of the Company, unsecured, 0% interest, due upon demand	$	145,043	$	222,045

	$	145,043	$	222,045

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – SOFTWARE DEVELOPMENT COSTS

Software development costs consist of the following at:

	December 31, 2010			September 30, 2010
Software development costs	$	31,572		$	26,572
Accumulated amortization		(1,158	)		-
	$	30,414		$	-

Amortization for the three months ended December 31, 2010 and 2009 was $1,158 and $0, respectively.

NOTE 5 – SOFTWARE COSTS

Software costs consist of the following at:

	December 31, 2010			September 30, 2010
Software costs	$	6,900		$	6,900
Accumulated amortization		(690	)		(345	)
	$	6,210		$	6,555

Amortization for the three months ended December 31, 2010 and 2009 was $345 and $0, respectively.

NOTE 6 – WEBSITE COSTS

Website costs consist of the following at:

	December 31, 2010			September 30, 2010
Website costs	$	70,000		$	70,000
Accumulated amortization		(9,265	)		(3,432	)
	$	60,735		$	66,568

Amortization for the three months ended December 31, 2010 and 2009 was $5,833 and $0, respectively.

NOTE 7 – DEFERRED REVENUE

As of December 31, 2010 and September 30, 2010, the Company had deferred revenue of $50,916 and $10,224, respectively. Deferred revenue is mainly related to subscription revenue which is recognized by the Company over the life of the subscription.

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of its $0.001 par value preferred stock.

Common Stock

The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock.

During the three months ended December 31, 2010, there have been no other issuances of preferred and/or common stock.

IDLE MEDIA, INC. (FORMERLY NATIONAL GOLF EMPORIUM, INC.)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – WARRANTS AND OPTIONS

As of December 31, 2010, there were no warrants or options outstanding to acquire any additional shares of common stock.

NOTE 10 – AGREEMENTS

In November 2008, the Company entered into a service agreement with a vendor for a period of one year and shall automatically renew for additional one year periods. The agreement can be terminated by either party within 30 – 60 days prior to the anniversary of the date of the agreement. The minimum monthly payment was $3,800. On July 15, 2009, the Company upgraded its services agreement with an increased monthly volume and the current minimum monthly payment is $5,000. The minimum monthly payments do not include overage charges if the monthly volume is in excess of the specified amounts.

The following is a schedule by year of future minimum payments required under the service agreement:

Year		Amount
2010		$60,000

During the three months ended December 31, 2010 and 2009, the Company recorded $19,372 and $17,122 of scanning software costs, respectively.

In September 2008, the Company entered into a service agreement with a vendor for a period of two years and shall automatically renew for additional two year periods. The agreement can be terminated by either party if notice is provided more than 30 days prior to the anniversary of the date of the agreement. The minimum monthly payment was $14,110. The minimum monthly payments do not include overage charges if the monthly volume is in excess of the specified amounts.

The following is a schedule by year of future minimum payments required under the service agreement:

Year		Amount
2010		$169,320

During the nine months ended June 30, 2010 the Company has disputed billings totaling $54,307 from the vendor for lack of service. During April 2010, the Company replaced this vendor with a different vendor that provides similar services. As of December 31, 2010, the Company did not record these disputed bills to accounts payable because they feel it is probable that they will be able to settle this with the vendor at a minimum amount.

NOTE 11 – RELATED PARTY TRANSACTIONS

On October 1, 2010, the Company entered into a professional services agreement with an entity owned and controlled by an officer and director of the Company. The term is for 12 months, but can be terminated at any time with a notice of 30 days. The Company hired the related entity to provide various computer programming and website maintenance services. During the three months ended December 31, 2010, the Company had consulting fees totaling $210,000 due to an entity owned and controlled by an officer and director of the Company. The consulting fees were recorded as a reduction of the note receivable balance.

Management's Discussion and Analysis of Financial Condition and Plan of Operation

Forward-Looking Statements

Some of the statements contained in this quarterly report on Form 10-Q that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-Q, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

Our ability to generate customer demand for our services;

The intensity of competition; and

General economic conditions.

All written and oral forward-looking statements made in connection with this Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

During the current period we have determined that accounts payable was understated due to overage charges related to server costs and cash was improperly recorded as a note receivable due to related party. As of the date of this filing, our management has not had sufficient time to determine the impact of these factors on financial condition, results of operations or cash flows reported in prior periods. Also, management has not been able to determine whether there are other complex transactions that have not been accounted for correctly. Accordingly, financial condition and results of operations disclosed in prior periods can no longer be relied upon. Therefore, the interim unaudited financial statements should not be read in conjunction with the financial statements included in the Form 10-K for the year ended September 30, 2010. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended December 31, 2010 are not necessarily indicative of the results that may be expected for the quarter ending March 31, 2011.

Business Development and Summary

Idle Media is an online media and entertainment company focused on creating a complete music and entertainment resource for broadcasting, promotion, marketing, distribution, licensing, communication, and user generated content online. We deliver cutting-edge content and online gaming through our portfolio of websites, including: DatPiff.com, a leading provider of online mixtapes and user-generated content; HipHopEarly.com, an online music destination for the latest in Hip Hop single pre-releases; Chixr.us, a tween-focused girl gaming site; PrisonBlock.com, a multi-player social game with over 50,000 users; Backyard Buddies, a casual game designed for Facebook; and Tweetvibe.com, a site where users can purchase unique Twitter backgrounds.

In addition to our web properties, we have developed mobile applications for use across four major mobile operating systems: Apple® iOSTM, Google® Android®, Palm and Blackberry®. On June 16, 2010, we introduced our first application specifically for smartphone devices: DatPiff Mobile. The DatPiff Mobile application is free and offers DatPiff's complete collection of mixtapes, videos and aggregated news on various handheld devices. DatPiff Mobile also features streaming, view and search capabilities, comment, rate and favorite on the go. During August of 2010, we released a Hip Hop Early mobile application for use on Google® Android® smartphones. We are continuously working to improve the functionality and performance of our mobile applications, as well as developing additional applications to add to our product offerings.

Our management believes we are favorably positioned to continue to add value to our existing web properties and develop future applications and websites. We are continuously evaluating areas for improvement and markets that we can profitably serve.

Results of Operations for the three months ended December 31, 2010 and 2009

Revenues

We generate revenues from four sources:

Advertising from third party referral sources,

Paid Subscriptions by users to access premium privileges on our websites,

Advertising Sponsorships that we attract directly through our own internal efforts and

Purchases of premium deliverable content from our online games.

Advertising revenues are directly correlated with website traffic; the more visitors we have to our website, the more attractive it is for advertising companies to place various types of ads on it. The table below shows a comparison of website traffic information for the three months ended December 31, 2010 and 2009:

	For the three months ended December 31,
	2010		2009		Change (%)

Visits		40,345,009		23,420,287		72.3	%

Unique Visitors		12,140,570		6,978,376		74.0	%

Pageviews		251,244,044		193,259,110		30.0	%

During the three months ended December 31, 2010 and 2009, our revenues were distributed, as follows:

	For the three months
	ended December 31,						Change
Revenue Source	2010			2009			$		%

Advertising	$	420,750		$	248,742		$	172,008	69.2	%
Subscriptions		49,186			19,388			29,798	153.7	%
Sponsorships		79,294			3,050			76,244	2,499.8	%
Online games		74,045			-			74,045	*	%
Less: Returns and allowances		(254	)		(800	)		546	(68.3	)%


Total	$	623,021		$	270,380		$	352,641	130.4	%

* Not divisible by zero.

Revenue from all sources experienced increases in the three month period ended December 31, 2009 to the comparable period ended December 31, 2010. Management attributes the increases to the growth in visitor traffic, as well as the addition of web properties and mobile applications. Due to the increasing visibility and popularity of our sites, advertising sponsorships rose a dramatic 2,500%, from $3,050 in the three months ended December 31, 2009 to $79,294 in the comparable period ended December 31, 2010.

Most notably, our online gaming division began to generate material revenues during the most recent quarter ended December 31, 2010, as opposed to none in any prior period. These revenues are related principally to users purchasing in-game boosts and other items. Our management is hopeful that as the user bases of these games grow, we will see a corresponding increase in online gaming revenue. However, this revenue source is relatively new and has only recently begun to contribute materially to our operations and we are unable to forecast prospects for our online games.

We are continuously refining our products to maximize revenue, while providing a satisfying user experience. Blending the two disparate objectives is an art form that we are attempting to master and slight dips in revenue may occur in future periods, as a result.

The nature of our business dictates that we defer certain revenues streams. For example, in the Prison Block game, users are able to purchase “respect” in varying times frames, from 30 to 90 days. As a result, we defer revenue for any unearned portion of the unused time period. This holds true across the range of our web portfolio. Deferred revenue as of December 31, 2010 and September 30, 2009 were $50,916 and $10,224, respectively.

There can be no assurance that we will continue to experience similar revenue growth in future periods, sustain current revenue levels or that we will be able to replace revenues from our current advertisers with revenues from others.

Operating Expenses

In the course of our operations, we incur operating expenses composed primarily of server costs, software licenses, merchant fees and general and administrative costs. General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: business and operating licenses; taxes; general office expenses, such as postage, supplies and printing; utilities; bank charges; website costs; and other miscellaneous expenditures not otherwise classified.

For the three months ended December 31, 2010 and 2009, the components of our operating expenses were, as follows:

	Three months ended				Change
	December 31,				2009 to 2010
Expense	2010		2009		$		%

Server costs	$	121,852	$	93,905	$	27,947		29.8	%
Scanning software		19,372		17,122		2,250		13.1	%
Merchant fees		6,917		1,294		5,623		434.5	%
General and administrative		55,385		3,086		52,299		1,694.7	%
Consulting – related party		210,000		-		210,000		*	%

Total Operating Expenses	$	413,526	$	115,407	$	298,119		258.3	%

* Not divisible by zero.

Overall expenses increased by 258% from the three months ended December 31, 2009 to the comparable period ended December 31, 2010. The majority of the increase is attributable to an agreement we entered into as of October 1, 2010 for information technology consulting services to be provided by Idle Media, LLC, a related party entity, at a rate of $70,000 per month. The agreement may be cancelled at any time by either party with 30 days’ notice and without penalty. These services include, primarily, maintenance of existing websites and games and development and programming services for future potential properties. We believe changes implemented through this agreement have been beneficial, in that our websites and games receive ongoing improvements and back-end improvements, as well as providing for greater advertising and sponsorship capabilities.

We also experienced a substantial increase in general and administrative expenses, primarily related to professional fees paid to accountants and consultants to maintain our public reporting requirements, as well as marketing and advertising fees paid to generate greater awareness of our Internet sites and mobile applications. Our management believes the majority of these fees are inevitable and is a cost of being a public reporting company. Additionally, advertising is an important component in being able to attract higher visitor traffic, which in turn, should lead to increased revenue.

Another material component of expenses was merchant fees paid as a result of processing payment transactions. Merchant fees increased approximately 435% during the comparable three month periods ended December 31, 2010 and 2009. These fees are positively correlated to subscription, sponsorship and online gaming revenues, whereby any increase in sales processed through services such as Paypal or Google Checkout leads to a direct increase in merchant fees charged to process those transactions; thus our management views merchant fees as an essential part of doing business and expects to continue to see ongoing increases for the foreseeable future.

During the three months ended December 31, 2010, server costs increased nearly 30%. Server costs are directly related to the hosting of our websites and games, storage of content and archival of data. We pay a rate for a specific amount of server usage, and are charged overage fees for excess usage. These costs are integral to our business and are correlated with the number of users and amount of content available on our websites. We believe that server capacity is scalable, and server costs, as a result, has historically varied in accordance with increases and decreases in website traffic.

Similar to server costs, as usage of DatPiff.com increases, the cost to prevent violating copyrights through the use of music scanning software increases. Music scanning fees are paid to Audible Magic, a third-party audio fingerprinting technology service that scans all music uploaded to Datpiff.com for potential copyright infringement. Audio files identified as containing copyrighted material are automatically identified and prevented from being made available on our site. We experienced a slight increase in scanning software fees during the three months ended December 31, 2010 compared to the comparable period December 31, 2009, due primarily to the need to scan a greater library of audio files.

Income Taxes and Net Income

During the three months ended December 31, 2010, we realized net income before provision for income taxes of $209,495. In comparison, net income before provision for income taxes during the three months ended December 31, 2009 was $154,973. Net income before provision for income taxes was $54,522, or 35.2%, higher in the quarter ended December 31, 2010 than the comparable period in 2009.

As a result of generating income, we record an estimate of corporate income taxes we may owe. For the three months ended December 31, 2010, we recorded a provision for income taxes of $88,330. However, in the prior period ended December 31, 2009, we did not record any provision for income taxes because our material operations were owned in an LLC that had not been merged with our public reporting entity until May of 2010. Thus, our LLC income was passed through to the sole member of the LLC and no income taxes were provided for in the corporate entity.

In the three months ended December 31, 2010, we realized net income of $121,165, after deducting provision for income taxes. In the comparable three month period ended December 31, 2009, we recorded net income of $154,973.

Despite our reported profitability, we have only been operating for a relatively short period and there is significant uncertainty projecting future profitability.

Liquidity and Capital Resources

During the three months ended December 31, 2010, we generated cash from operating activities of $255,678, compared to generating cash from operating activities of $79,180 in the comparable three months ended December 31, 2009. Our ability to receive cash from operations is due, in part, to our ability to generate greater amounts of revenues from all sources quarter-over-quarter. Additionally, we typically collect a significant amount of our accounts receivable within a relatively short time frame of 30 to 60 days. Moreover, nearly all of our online gaming revenues, paid subscriptions and advertising sponsorships are collected in cash at the time of purchase and any lag in collection time is attributed primarily to delays by the payment processor.

Cash provided by investing activities was $70,399 for the three months ended December 31, 2010 compared to no cash used during the same period in 2009. The increase is attributable primarily to a repayment installment of a note receivable due from a related party entity in the amount of $77,002.

Cash used by financing activities was $0 for the three months ended December 31, 2010 compared to cash used of $30,000 in 2009. The distribution of $30,000 is attributable to distributions made to Idle Media, LLC, which was the sole equity member of DatPiff, LLC prior to the acquisition by us of DatPiff, LLC. We have not issued any common stock or debt securities in the three month periods ended December 31, 2010 and 2009.

During the three months ended December 31, 2010, we realized a net increase in cash of $326,077. In the three month period ended December 31, 2009, we had net cash inflows of $49,180. The increase in cash of $276,597, or 559.0%, is provided from organic operational cash flows, as opposed to financing arrangements. As of December 31, 2010, we had $707,571 of cash on hand compared to a December 31, 2009 cash balance of $119,874.

Given what we believe to be a competitive edge in the advertising sales market, we are confident our strengths will allow us to achieve our planned objectives, and to generate adequate levels of working capital throughout the fiscal year to end September 30, 2011. These assumptions, however, may not adequately encapsulate unforeseen economic or industry specific factors that may be beyond our control. These external forces may restrict growth and advertising spending by our clients, which could, in turn, adversely affect our operations.

Our management does not expect to incur research and development costs.

We do not have any off-balance sheet arrangements.

We currently do not own any significant plant or equipment that we would seek to sell in the near future.

We have not paid for expenses on behalf of any of our directors. Additionally, we believe that this fact shall not materially change.

Plan of Operation

Our management continues to focus on the following initiatives to expand our operations over the next 6-12 months of operations:

Pursue Strategic Partnerships. We have and will continue to seek to enter into strategic partnerships with the goal of delivering the best experience for users and increase opportunities for companies to advertise on our Internet properties. Strategic partnerships allow us to enhance, expand upon and complement our product offerings and increase our market penetration by joining with companies that have significantly greater resources and complementary expertise to ours.

On February 3, 2011, we debuted a new mixtape from Sean Kingston on DatPiff.com. We were the exclusive outlet for the release, Mr. Kingston’s first in five years. We have also worked with Sean Kingston to assist in the promotion of Tory Lanez, a solo artist signed by Mr. Kingston.

Subsequently, on February 14, 2011, we were the exclusive media outlet for world premieres of four mixtapes: (1) “Love Love vs Hate Love” by Diddy Dirty Money, which was founded by Sean “Diddy” Combs; (2) talented songwriter, rapper and producer Kevin McCall, most known for his hit “Deuces” featuring Chris Brown, premiered “Un-Invited Guest;” (3) Ace Hood (DJ Khaled's artist) released his new mixtape titled “Sex Chronicles;” and (4) Donnie Klang of MTV’s Makin the Band 4 released “Valentine’s Day Mixtape."

Our management hopes to continue to release exclusive content from established and up-and-coming new artists. We believe we provide a unique medium for artists and DJs to help them distribute their music to as large an audience as possible.

Host Additional Live Concert Series Events. We began to launch a series of live concerts throughout the United States and expect to continue to do so periodically. Our first DatPiff Live Concert was held on June 10, 2010 at the Brooklyn Masonic Temple and featured talent from the New York city area. We featured our most popular DJs and Artists, and brought them from the web to our fans, live and in person.

On September 8, 2010, we held another Live Concert Series event at S.O.B.’s in New York City. The event sold out, was webcast worldwide, via Ustream at http://www.datpiff.com/live, and was covered by over 25 media outlets, including MTV, Global Grind, Vibe and others. The show was professionally taped by Blastro using three cameras. DatPiff is compiling a DVD that it expects to release in the coming months.

Generate Awareness of Our Web Properties. We are a relatively small company competing with numerous other gaming, music and social media companies. To generate awareness of our smaller websites and continue to grow visitor traffic to DatPiff.com, our management believes we must advertise using new media marketing techniques, such as viral marketing, banner advertising and social media campaigns.

As part of this marketing effort, on January 21, 2011, we engaged the social media advertising firm AdParlor, Inc. to manage and deliver pay-per-click ads appearing on Facebook. This campaign is primarily being used to generate awareness of and encourage use of our PrisonBlock.com massive multiplayer online role playing game and our Backyard Buddies Facebook application.

In addition to advertising on Facebook, we have cross-marketed most of our websites. For instance, we have placed banners and other ads for Prison Block on the DatPiff website, hoping to steer users of DatPiff.com to the Prison Block website.

We are currently evaluating other methods of increasing traffic to our entire portfolio of sites, although we have not yet set in motion any further advertising campaigns.

Remain Innovative by Investing in New Services and Technologies. We plan to continue to innovate by investing in product development to improve our services, expand the breadth of our service offerings, and maintain compatibility with popular technology standards. We are actively tapping the mobile device market by bringing its website content to the Apple® iPhone® and iPod touch™, Palm Pre™ and Pixi™ and Android™ devices, allowing users to stream, view, search, comment and rate content on the go.

On June 16, 2010, we introduced our first application specifically for smartphone devices: DatPiff Mobile. The DatPiff Mobile application is free and offers DatPiff's complete collection of mixtapes, videos and aggregated news on various handheld devices. DatPiff Mobile also features streaming, view and search capabilities, comment, rate and favorite on the go. Currently, DatPiff Mobile is available for the Apple® iPhone® and iPod touch™, Android™, Blackberry®, as well as the Palm Pre™ and Pixi™. Development is also underway for Microsoft's upcoming Windows Phone 7 platform. Our Palm Pre™ and Pixi™ application has been honored by Palm in its Webos Hot Apps competition, winning an award for the Palm OS version of DatPiff Mobile.

Continue to expand through acquisitions of strategic technologies or properties. Our long term plan of operation calls for sustained organic growth. To date, the acquisitions we have made with cash have been fully and successfully integrated into our business model and we believe that these acquisitions have supported this objective.

Prior to becoming a public company, our focus was primarily on internal development of websites and services. During the year ended September 30, 2010, we have made a distinct effort to expand our business by strategically acquiring websites and source code that could provide us with technology and knowledge we can use to develop additional revenue generating properties.

To that end, on June 28, 2010, we acquired Backyard Buddies, a popular gaming application on the social media website Facebook. After the acquisition, we re-coded the game to improve performance and introduce new features, with the relaunch occurring on October 26, 2010. Via this foray into online gaming, management plans to incorporate both pay-to-play as well as free-to-play with in-app purchases. Furthermore, having the source code for Backyard Buddies will allow our development team to more easily and readily develop additional Facebook applications for that websites more than 400,000,000 registered members.

On July 20, 2010, we acquired three more websites: www.prisonblock.com, www.chixr.us, and www.tweetvibe.com. These websites provided instant access to markets we had previously not targeted. Prison Block is an online gaming application that provides access to a demographic of young male users, while Chix R Us taps into the female niche. Tweetvive provides access to 'themes' for Twitter user profiles.

Most recently, on August 17, 2010, the Company announced that it had acquired www.HipHopEarly.com, an online music destination for the latest in Hip Hop single pre-releases. This acquisition fits synergistically with DatPiff.com's current audience and customer base.

We believe that there exist additional opportunities for strategic acquisitions that we intend to evaluate and pursue during the fiscal year ended September 30, 2011. However, there can be no assurance that we will be able to identify a target and consummate an acquisition, or if we are able to so, that such acquisition will be on terms favorable to us and accretive to earnings.

We may hire independent web developers over the next 12 months to provide certain services or work on specific projects on our behalf. At this time, these developers are expected to be hired on a contracted basis, not as employees.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, recoverability of intangible assets, and contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that are believed to be 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. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily the valuation of intangible assets. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.

Basis of presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of American for interim financial information and with the instructions to Form 10-Q. They do not include all disclosure required by generally accepted accounting principles in the United States of America. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended September 30, 2010 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. During the current period the Company has determined that accounts payable was understated due to overages charges related to server costs and cash was improperly recorded as a note receivable due to related party. As of the date of this filing, management of the Company has not had sufficient time to determine the impact of these error corrections on financial condition, results of operations or cash flows reported in prior periods. Also, management has not been able to determine whether there are other complex transactions that have not been accounted for correctly. Accordingly, financial condition and results of operations disclosed in prior periods can no longer be relied upon. Therefore, the interim unaudited financial statements should not be read in conjunction with the financial statements included in the Form 10-K for the year ended September 30, 2010. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended December 31, 2010 are not necessarily indicative of the results that may be expected for the quarter ending March 31, 2011.

Principles of Consolidation

Cash and Cash Equivalents

Accounts receivable

Revenue recognition

Concentrations

For the three months ended December 31, 2010, 3 customers accounted for 43% of sales. As of December 31, 2010, 4 customers accounted for 79% of the accounts receivable balance.

Intangible assets

Recent Accounting Pronouncements

The Company has evaluated the recent accounting pronouncements through ASU 2011-01 and believes that none of them will have a material effect on the company’s financial statements.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information we are required to disclose in reports filed under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based upon their evaluation as of the end of the period covered by this report, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are ineffective in insuring that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Risk Factors

Failure by us to respond to changes in consumer preferences could result in lack of sales revenues and may force us out of business.

Our websites and online properties exist in an industry subject to:

rapid technological change;

the proliferation of new and changing media and games;

frequent new product introductions and updates; and

changes in customer demands.

Any of the above changes that we fail to anticipate could reduce the demand for our games and online properties, as well as any future products we may introduce in the future. Failure to anticipate and respond to changes in consumer preferences and demands could lead to, among other things, customer dissatisfaction, failure to attract demand for our products and lower profit margins.

A decline in the popularity of our websites and other online properties will negatively impact our business.

Our primary source of revenues is from advertising on our websites. These revenues are dependent upon our ability to attract new users and, as well as existing user activity on our sites, among other things. If we are unable to maintain or extend web traffic to, and use of, our sites, our advertising revenues may be adversely affected.

The success of our paid premium subscription service depends upon our ability to add new subscribers and retain existing subscribers.

We cannot assure you that we will be able to attract new subscribers or that existing subscribers will continue to subscribe. Users of our free services may choose not to become paid subscribers, and paid subscribers may decide to cancel their subscriptions, for many reasons including a perception that they do not use the services enough to justify the expense or that the service does not provide enough value or availability of content relative to our competition. In addition, any reduction in our current level of marketing and advertising expenditures may result in a reduction in the number of new trial and paid subscribers.

The early stages of subscription services such as ours are characterized by higher than normal churn rates. Existing paid subscribers may cancel their subscriptions to our service for many reasons, including those described above in this risk factor. We cannot guarantee that we will be able to maintain or further reduce subscriber cancellation levels. If we are unable to add new paid subscribers and retain customers we may be unable to achieve a profitable business model.

Intense competition in the internet social networking industry and in the music media industry may adversely affect our revenue and profitability.

We operate in a highly competitive environment and we compete for members, visitors and advertisers with numerous well established internet social networking sites, as well as many smaller and/or newer sites. As a music media company, we compete for consumers and advertisers with other companies in the music media business, including internet, television and print media companies. In addition to music, there are numerous entertainment products and services available to consumers and, as a result, we also compete with companies that operate in the television, movie and video game industries. If we are unable to differentiate our products and generate sufficient appeal in the marketplace, our ability to achieve our business plan may be adversely affected. The effect of such competition has been to put pressure on profit margins and to involve us in vigorous competition to obtain and retain consumers and advertisers.

As compared to us, many of our competitors have:

· significantly longer operating histories and greater brand recognition;

· greater financial, management and other resources.

If we are unable to compete effectively in our market, our revenue and profitability may be adversely affected.

We experience fluctuations in our quarterly operating results, which may cause our stock price to decline.

Our quarterly operating results may fluctuate from quarter to quarter. We cannot reliably predict future revenue and margin trends and such trends may cause us to adjust our operations. Other factors that could affect our quarterly operating results include:

timing of service introductions;

consumer adoption of new services;

changes in the mix of our revenues and our users represented by our various services;

fluctuations in traffic levels on our websites, which can be significant as a result of business, financial and other news events;

adverse changes in the level of economic activity in the United States or other major economies in which we do business, or in industries, such as the music industry, on which we are particularly dependent;

expenses incurred in connection with the development of our digital music distribution services;

expenses related to, and the financial impact of, possible acquisitions of other businesses;

fluctuating and unpredictable demand for advertising.

Our success depends on the scope of our intellectual property rights and not infringing the intellectual property rights of others.

Our success depends in part on our ability to:

obtain copyrights or trademarks or rights to copyrights or trademarks, where necessary, and to maintain their validity and enforceability;

operate without infringing upon the proprietary rights of others; and

prevent others from infringing on our proprietary rights.

We will be able to protect our proprietary intellectual property rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable copyrights or trademarks. Our inability to protect our proprietary rights could materially adversely affect our business prospects and profitability. In addition, if litigation were to take place in connection with the enforcement of our intellectual property rights (or to defend third party claims of infringement against us), there can be no assurance that we would prevail. Legal proceedings could result in substantial costs and diversion of management time and resources and could materially adversely affect our operations and our financial condition.

If a copyright or trademark infringement claim is brought against us for liabilities that are not covered or that exceed our insurance coverage, we could be forced to pay substantial damage awards, which could affect our profitability.

The marketing and webcasting of recorded music and video content, most of which have been created using the input of a number of creative personnel, including musicians, producers, mixers, film directors and others, may result in disputes over ownership of rights. If a dispute arises challenging our ownership or other rights, we may be exposed to copyright and/or trademark claims by third parties. We may not be able to maintain adequate insurance coverage at a commercially reasonable cost or in sufficient amounts or scope to protect us against potential losses.

In the event a copyright and/or trademark claim is brought against us:

we may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against us; or

such party could secure injunctive or other equitable relief, which could effectively block our ability to make, use, sell, distribute or market our products.

If we fail to obtain necessary licenses or other rights to proprietary rights held by third parties, it could preclude the sale, manufacture, distribution or exhibition of our products and could materially adversely affect our revenue and profitability. Defending any copyright and/or trademark claim or claims could require us to expend significant financial and managerial resources, which could have an adverse effect on our business operations and results of operations.

Our ability to increase our revenue will depend on our ability to increase market penetration of our current social networking and music media products and to evolve our product mix.

The social networking industry and the music industry are, by their nature, businesses that rely upon the acceptance of its creative product by the marketplace. Much of our ability to increase revenue will depend on:

expanding the market penetration of our current offerings to consumers; and

the successful evolution of our product mix.

While we are constantly evaluating the marketplace and evolving our offerings of content and internet features, we may not be able to anticipate shifting tastes of our customer base and the creative content offered by us may fall out of favor with our consumers. If we are unable to expand the market penetration of our current products or anticipate changes in consumer taste, our revenue could be reduced.

Our network is subject to security and stability risks that could harm our business and reputation and expose us to litigation or liability.

Online and mobile commerce and communications depend on the ability to transmit confidential information and licensed intellectual property securely over private and public networks. Any compromise of our ability to transmit such information and data securely or reliably, and any costs associated with preventing or eliminating such problems, could harm our business. Online transmissions are subject to a number of security and stability risks, including:

our encryption and authentication technology, and access and security procedures, may be compromised, breached or otherwise be insufficient to ensure the security of customer information or our music content;

we could experience unauthorized access, computer viruses, system interference or destruction, “denial of service” attacks and other disruptive problems, whether intentional or accidental, that may inhibit or prevent access to our websites or use of our products and services;

someone could circumvent our security measures and misappropriate our, our partners’ or our customers’ intellectual property, interrupt our operations, or jeopardize our licensing arrangements, which are contingent on our sustaining appropriate security protections;

our computer systems could fail and lead to service interruptions;

we may be unable to scale our infrastructure with increases in customer demand; or

our network of facilities may be affected by a natural disaster, terrorist attack or other catastrophic events.

The occurrence of any of these or similar events could damage our business, hurt our ability to distribute products and services and collect revenue, threaten the proprietary or confidential nature of our technology, harm our reputation and expose us to litigation or liability. We may be required to expend significant capital or other resources to protect against the threat of security breaches, hacker attacks or system malfunctions or to alleviate problems caused by such breaches, attacks or failures.

Our management team does not have extensive experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited public company management experience or responsibilities. This could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis. There can be no assurance that our management will be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

RISKS RELATED TO OUR COMMON STOCK

The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

·	announcements of new acquisitions, reserve discoveries or other business initiatives by our competitors;
·	our ability to take advantage of new acquisitions, reserve discoveries or other business initiatives;
·	fluctuations in revenue from our advertising sales business as new media competitors;
·	changes in the market for downloads of music videos and audio recordings;
·	changes in the market for online advertising;
·	quarterly variations in our revenues and operating expenses;
·	changes in the valuation of similarly situated companies, both in our industry and in other industries;
·	changes in analysts’ estimates affecting our Company, our competitors and/or our industry;
·	changes in the accounting methods used in or otherwise affecting our industry;
·	additions and departures of key personnel;
·	announcements of technological innovations or new products available to businesses in the online music media, entertainment, marketing and social networking businesses;
·	fluctuations in interest rates and the availability of capital in the capital markets; and

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial condition.

Applicable SEC rules governing the trading of “penny stocks” limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

Shares of common stock may be considered a “penny stock” and be subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASD's automated quotation system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). 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 that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also 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. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer 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 a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.

If we fail to remain current in our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Recent Sales of Unregistered Securities

In April 2008, 5,000,000 shares were issued to Bryan Sawarynski in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the shareholder had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

In September 2008, we completed a Regulation D Rule 506 offering in which we sold 542,750 shares of common stock to 34 investors, at a price per share of $0.10 per share for an aggregate offering price of $54,275. The Common Stock issued in our Regulation D, Rule 506 Offering was issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Rule 506 of Regulation D of the Securities Act of 1933. In accordance with Section 230.506 (b)(1) of the Securities Act of 1933, these shares qualified for exemption under the Rule 506 exemption for this offerings since it met the following requirements set forth in Reg. §§230.506:

(A)	No general solicitation or advertising was conducted by us in connection with the offering of any of the Shares.

(B)	At the time of the offering we were not: (1) subject to the reporting requirements of Section 13 or 15 (d) of the Exchange Act; or (2) an “investment company” within the meaning of the federal securities laws.

(C)	Neither we, nor any of our predecessors, nor any of our directors, nor any beneficial owner of 10% or more of any class of our equity securities, nor any promoter currently connected with us in any capacity has been convicted within the past ten years of any felony in connection with the purchase or sale of any security.

(D)	The offers and sales of securities by us pursuant to the offerings were not attempts to evade any registration or sale requirements of the securities laws of the United States or any of its states.

(E)	None of the investors are affiliated with any of our directors, officers or promoters or any beneficial owner of 10% or more of our securities.

Please note that pursuant to Rule 506, all shares purchased in the Regulation D Rule 506 offering completed in September 2008 were restricted in accordance with Rule 144 of the Securities Act of 1933. In addition, each of these shareholders were either accredited as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act or sophisticated as defined in Rule 506(b)(2)(ii) of Regulation D promulgated under the Securities Act.

On May 19, 2010, we issued 40,000,000 restricted shares of common stock to Idle Media LLC (IM), a Pennsylvania Limited Liability Corporation in consideration of all of the issued and outstanding membership units of Datpiff, LLC, a Pennsylvania Limited Liability Corporation. The shares of common stock were issued pursuant to Section 4(2) of the Securities Act of 1933. We believe that the issuance and sale of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares were sold directly by us and did not involve a public offering or general solicitation. The offering was not underwritten and no commissions or finders’ fees were paid. The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports. We reasonably believed that the recipients, immediately prior to the sale of the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.

Exhibits and Reports on Form 8-K

Exhibit Number	Name and/or Identification of Exhibit

2	Stock Exchange Agreement and Plan of Reorganization (1)

3	Articles of Incorporation & By-Laws

	(a) Articles of Incorporation (2)

	(b) By-Laws (2)

31	Rule 13a-14(a)/15d-14(a) Certifications

	(a) Marcus Frasier

32	Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)

NOTES:
(1) Incorporated by reference herein filed as exhibits to the Company’s Current Report on Form 8-K filed on March 23, 2010.
(2) Incorporated by reference herein filed as exhibits to the Company’s Registration Statement on Form S-1 filed on December 11, 2008.

8-K Filed Date	Item Number

December 10, 2010	Item 4.01 Changes in Registrant’s Certifying Accountant

SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Idle Media, Inc.
(Registrant)

Signature	Title	Date

/s/ Marcus Frasier	President, CEO and Director	February 22, 2011
Marcus Frasier

/s/ Marcus Frasier	Chief Financial Officer	February 22, 2011
Marcus Frasier

/s/ Marcus Frasier	Chief Accounting Officer	February 22, 2011
Marcus Frasier

Attached files

Idle Media, Inc. Reports

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