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EX-32.1 - CERTIFICATION - ONLINE DISRUPTIVE TECHNOLOGIES, INC. | exhibit32-1.htm |
EX-31.1 - CERTIFICATION - ONLINE DISRUPTIVE TECHNOLOGIES, INC. | exhibit31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,
2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from _________to
________
Commission File No. 333-168698
Online Disruptive Technologies, Inc.
(Exact name of
registrant as specified in its charter)
Nevada | 27-1404923 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3120 S. Durango Drive, Suite 305, Las Vegas, Nevada
89117
(Address of principal executive offices) (zip
code)
702-579-7900
(Registrants telephone number,
including area code)
N/A
(Former name, former address
and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes[X] No[ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes[ ] No[ ] (Not Applicable)
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 definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [ ] | Smaller reporting company | [X] |
(Do not check if a smaller reporting company) |
2
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes[ ] No[X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1933 subsequent to the distribution of securities under a plan confirmed by a court.
Yes[ ] No[ ] N/A
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity as of the latest practicable date: As of May 10, 2011, there were 24,000,100 shares of common stock, par value $0.001, outstanding.
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
ONLINE DISTRUPTIVE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2011
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Consolidated Balance Sheets |
March 31, 2011 | December 31, 2010 | |||||
$ | $ | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash and Cash Equivalents | 58,649 | 13,658 | ||||
Total Current Assets | 58,649 | 13,658 | ||||
Website Development Costs (Note 4) | 8,325 | 8,325 | ||||
Total Assets | 66,974 | 21,983 | ||||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts Payable and Accrued Liabilities | 17,788 | 19,948 | ||||
Loans Payable - Related Parties (Note 5) | 56,862 | 56,862 | ||||
Total Current Liabilities | 74,650 | 76,810 | ||||
SHAREHOLDERS' DEFICIENCY | ||||||
Authorized: 20,000,000 Preferred Shares, par value $0.001 500,000,000 Common Shares, par value $0.001 |
||||||
Issued and outstanding: | ||||||
Nil Preferred Shares 24,000,100 Common Shares (December 31, 2010 18,000,100) |
8,400 |
2,400 |
||||
Additional Paid-in Capital | 65,634 | 10,008 | ||||
(Deficit) Accumulated During the Development Stage | (81,710 | ) | (67,235 | ) | ||
Total Shareholders Deficiency | (7,676 | ) | (54,827 | ) | ||
Total Liabilities and Shareholders' Deficiency | 66,974 | 21,983 |
The accompanying notes are an integral part of these consolidated financial statements.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Consolidated Statements of Operations and Comprehensive Income (Loss) |
For the period | ||||||||
from November | ||||||||
Three months | Three months | 16, 2009 | ||||||
ended March 31, | ended March 31, | (inception) to | ||||||
2011 | 2010 | March 31, 2011 | ||||||
General and Administrative Expenses | $ | $ | $ | |||||
Audit and Accounting Fees | 9,350 | - | 39,172 | |||||
Bank Fees | (194 | ) | (3 | ) | 400 | |||
Consulting Fees | - | - | 1,500 | |||||
Filing and Transfer Agent Fees | 1,503 | - | 7,594 | |||||
License and Permit Fees | - | - | 1,057 | |||||
Legal Fees | 2,190 | - | 27,332 | |||||
Web Domain Expense | - | - | 20 | |||||
12,849 | (3 | ) | 77,075 | |||||
Income (Loss) Before Other Expense | (12,849 | ) | 3 | (77,075 | ) | |||
Other Expense | ||||||||
Interest Expense | 1,626 | - | 4,635 | |||||
Net Income (Loss) and Comprehensive Income
(Loss) for the Period |
(14,475 | ) | 3 | (81,710 | ) | |||
Basic and Diluted Net Income (Loss) per Common Share |
(0.00 | ) | 0.00 | |||||
Weighted Average Number of Common Shares
Outstanding Basic and Diluted |
20,333,433 | 16,038,358 |
The accompanying notes are an integral part of these consolidated financial statements.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Consolidated Statements of Stockholders Deficiency |
For the period from November 16, 2009 to March 31, 2011 |
(Deficit) | |||||||||||||||||||
Accumulated | |||||||||||||||||||
Additional | During the | ||||||||||||||||||
Preferred Stock | Common Stock | Paid In | Development | ||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stage | Total | |||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||
Shares issued for cash at $0.0001 per share on November 16, 2009 | - | - | 1,000 | - | - | - | - | ||||||||||||
Shares issued for cash at $0.000025 per share on December 5, 2009 | - | - | 15,999,000 | 400 | - | - | 400 | ||||||||||||
Net loss for the period | - | - | - | - | - | (1,179 | ) | (1,179 | ) | ||||||||||
Balance December 31, 2009 | - | - | 16,000,000 | 400 | - | (1,179 | ) | (779 | ) | ||||||||||
Recapitalization - ODT | - | - | 2,000,100 | 2,000 | 6,999 | - | 8,999 | ||||||||||||
Imputed interest from shareholders | - | - | - | - | 3,009 | - | 3,009 | ||||||||||||
Net loss for the year | - | - | - | - | - | (66,056 | ) | (66,056 | ) | ||||||||||
Balance December 31, 2010 | - | - | 18,000,100 | 2,400 | 10,008 | (67,235 | ) | (54,827 | ) | ||||||||||
Shares issued for cash at $0.01 per share on February 24, 2011 | - | - | 6,000,000 | 6,000 | 54,000 | - | 60,000 | ||||||||||||
Imputed Interest from shareholders | - | - | - | - | 1,626 | - | 1,626 | ||||||||||||
Net loss for the period | - | - | - | - | - | (14,475 | ) | (14,475 | ) | ||||||||||
Balance March 31, 2011 | - | - | 24,000,100 | 8,400 | 65,634 | (81,710 | ) | (7,676 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Consolidated Statements of Cash Flows |
For the period | |||||||||
from | |||||||||
November 16, | |||||||||
2009 | |||||||||
Three months | Three months | (inception) to | |||||||
ended March | ended March | March 31, | |||||||
31, 2011 | 31, 2010 | 2011 | |||||||
Cash flow from Operating Activities | $ | $ | $ | ||||||
Net income (loss) for the period | (14,475 | ) | 3 | (81,710 | ) | ||||
Adjustment for items not involving cash: | |||||||||
Imputed interest | 1,626 | - | 4,635 | ||||||
Changes in non-cash working capital items: | |||||||||
Increase in accounts payable and accrued liabilities | (2,160 | ) | (400 | ) | 7,327 | ||||
Net Cash (Used in) Operating Activities | (15,009 | ) | (397 | ) | (69,748 | ) | |||
Cash flow from Financing Activities | |||||||||
Common shares issued, net of issuance costs | 60,000 | - | 60,400 | ||||||
Increase in loan payable related parties | - | 400 | 56,862 | ||||||
Net Cash Provided by Financing Activities | 60,000 | 400 | 117,262 | ||||||
Cash flow from Investing Activities | |||||||||
Cash acquired on acquisition of subsidiary | - | 14,910 | 14,910 | ||||||
Website development costs | - | - | (3,775 | ) | |||||
Net Cash Provided by Investing Activities | - | 14,910 | 11,135 | ||||||
Net Increase in Cash and Cash equivalents | 44,991 | 14,913 | 58,649 | ||||||
Cash and Cash equivalents, Beginning of | |||||||||
Period | 13,658 | 8 | - | ||||||
Cash and Cash equivalents, End of Period | 58,649 | 14,921 | 58,649 | ||||||
Supplementary Information | |||||||||
Interest Paid | - | - | - | ||||||
Income Taxes Paid | - | - | - |
The accompanying notes are an integral part of these consolidated financial statements.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 1 - Nature of Operations
Online Disruptive Technologies, Inc. (ODT or the Company) was incorporated on November 16, 2009 in the State of Nevada, U.S.A. The Company is in the business of operating websites with advertising revenue platforms. The Company has limited operations and in accordance with ASC 915, is considered a development stage company that has had no revenues from inception to date. The Company has a December 31 year-end.
Effective March 24, 2010, the Company acquired 100% of the issued and outstanding shares of RelationshipScoreboard.com Entertainment Inc. (RS or RelationshipScoreboard.com), a company incorporated on November 16, 2009 in the state of Nevada, U.S.A. in exchange for 16,000,000 shares of the Companys common stock. Upon the completion of the acquisition, the former sole shareholder of RS held 89% of the Companys issued and outstanding common stock. As a result, the transaction was accounted for as a reverse takeover transaction (RTO) for accounting purpose, as RS was deemed to be the acquirer, and these consolidated financial statements are a continuation of the financial statements of RS.
These financial statements have been prepared with the ongoing assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company suffered a recurring loss and had a working capital deficit of $16,001 as at March 31, 2011 (2010 a working capital deficit of $63,152) which raises substantial doubt about the Companys ability to continue as a going concern. These financial statements do no include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The operations of the Company have primarily been funded by the sale of common shares and loans received. Continued operations of the Company are dependent on the Companys ability to complete equity financings or generate profitable operations in the future. Managements plan in this regard is to secure additional funds through future equity financings. Such financings may not be available or may not be available on reasonable terms to the Company.
Note 2 Acquisition - ODT
In connection with the RTO described above and prior to the acquisition, ODT had no business and did not meet the definition of a business under ASC 805, Accounting for Business Combinations. Accordingly, the reverse takeover of ODT by RS has been accounted for as a capital transaction, in respect of which the net assets of ODT on March 24, 2010 were accounted for as a recapitalization of RS. A breakdown of ODTs net assets as at March 24, 2010 is as follows:
March 24, 2010 | |||
Total assets cash only | $ | 14,910 | |
Total liabilities | (5,911 | ) | |
Net assets acquired | $ | 8,999 |
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 3 - Significant Accounting Policies
a) Basis of Presentation
These financial statements
have been prepared in conformity with generally accepted accounting principles
in the United States of America (US GAAP). All adjustments considered
necessary for a fair presentation of financial position, results of operations
and cash flows as at March 31, 2011 have been included.
b) Accounting Method
The Companys financial
statements are prepared using the accrual method of accounting.
c) Use of Estimates
The preparation of financial
statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Significant areas require use of estimates include valuation
allowance for deferred income tax assets. Actual results could differ from those
estimates.
d) Foreign Currency Translation
The Companys
functional currency is U.S. dollars. Transactions in other currencies are
recorded in U.S. dollars at the rates of exchange prevailing when the
transactions occur. Monetary assets and liabilities denominated in other
currencies are translated into U.S. dollars at rates of exchange in effect at
the balance sheet dates. Exchange gains and losses are recorded in the
statements of operations.
e) Cash and Cash Equivalents
Cash and cash
equivalents consist entirely of readily available cash balances. There were no
cash equivalents as of March 31, 2011 and December 31, 2010.
f) Stock-based Compensation
The Company accounts its
stock options and similar equity instruments issued in accordance with ASC 718,
Share-Based Payment. Accordingly, compensation costs attributable to stock
options or similar equity instruments granted are measured at the fair value at
the grant date, and expensed over the expected vesting period. ASC 718 requires
excess tax benefits be reported as a financing cash inflow rather than as a
reduction of taxes paid.
As at March 31, 2011 the Company had no stock options issued and outstanding.
g) Revenue Recognition
Operating revenue consist of
advertising revenue. The point in time at which revenues are recognized is
determined in accordance with ASC 605-10 (formerly Staff Accounting Bulletin No.
104, Revenue Recognition). Revenues are recorded when the Company delivers
services to its customers and collection is reasonably estimated.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 3 - Significant Accounting Policies (contd)
h) Income Taxes
Income taxes are accounted for under
the liability method of accounting for income taxes. Under the liability method,
deferred tax liabilities and assets are recognized for the estimated future tax
consequences attributable to differences between the amounts reported in the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted or substantially enacted income tax rates expected to apply when
the asset is realized or the liability is settled. The effect of a change in
income tax rates on deferred income tax liabilities and assets is recognized in
income in the period that the change occurs. Deferred income tax assets are
recognized to the extent that they are considered more likely than not to be
realized.
The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The implementation of this standard had no impact on the Companys financial statements.
i) Comprehensive Income (Loss)
The Company accounts
for comprehensive income under the provisions of ASC Topic 220-10,
Comprehensive Income - Overall, which establishes standards for reporting
and display of comprehensive income, its components and accumulated balances.
The Company is disclosing this information on its Statements of Operations and
Comprehensive Loss.
j) Earnings (Loss) Per Share
The Company adopted
Financial Accounting Standards ASC subtopic 260-10, Earnings Per Share, which
simplifies the computation of earning per share requiring the restatement of all
prior periods.
Basic loss per share is computed on the basis of the weighted average number of common shares outstanding during each period.
Diluted loss per share is computed on the basis of the weighted average number of common shares and dilutive securities outstanding. For the three month period ended March 31, 2011, the basic loss per share is equal to the diluted loss per share as there are no potential dilutive securities.
k) Financial Instruments and Fair Value of Financial
Instruments
Fair Value of Financial Instruments the Company adopted
SFAS ASC 820-10-50, Fair Value Measurements. This guidance defines fair value,
establishes a three-level valuation hierarchy for disclosures of fair value
measurement and enhances disclosure requirements for fair value measures. The
three levels are defined as follows:
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 3 - Significant Accounting Policies (contd)
k) Financial Instruments and Fair Value of Financial Instruments (contd)
-
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
-
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
-
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
As at March 31, 2011, the fair value of cash and cash equivalents was measured using Level 1 inputs.
The carrying amounts reported in the balance sheets for the cash and cash equivalents, accounts payable and accrued liabilities and loan payable each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization.
l) Website Development Costs
Website development costs relate to the development of the Company's internet website. These costs have been capitalized as incurred and installed and are being amortized over the estimated useful life of three years on a straight line basis. The Company accounts for these costs in accordance with ASC 350, Intangibles, which specifies the appropriate accounting for costs incurred in connection with the development and maintenance of websites.
m) Recently Adopted Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2009-13 did not have a material effect on the financial position, results of operations or cash flows of the Company.
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2009-14 did not have an effect on the financial position, results of operations or cash flows of the Company.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 3 - Significant Accounting Policies (contd)
m) Recently Adopted Accounting Pronouncements (contd)
In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2010-06 did nothave a material impact on our financial statements.
In February 2010, the FASB issued ASC No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements, which eliminates the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events. ASC No. 2010-09 is effective for its fiscal quarter beginning after December 15, 2010. The adoption of ASC No. 2010-09 is not expected to have a material impact on the Companys financial statements ASU No. 2010-13 was issued in April 2010, and clarified the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades. This ASU will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted. The Company adopted this standard on January 1, 2011 and the adoption of ASU No. 2010-13 did not have a material impact on the Companys financial statements.
In April 2010, the FASB codified the consensus reached in Emerging Issues Task Force Issue No. 08-09, Milestone Method of Revenue Recognition. FASB ASU No. 2010-17 Revenue Recognition Milestone Method (Topic 605) provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. FASB ASU No. 2010 17 is effective for fiscal years beginning on or after June 15, 2010, and is effective on a prospective basis for milestones achieved after the adoption date. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2010-17 did not have a material impact on its financial position or results of operations.
On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives and Hedging Topic 815 Scope Exception Related to Embedded Credit Derivatives. This ASU clarifies the guidance within the derivative literature that exempts certain credit related features from analysis as potential embedded derivatives requiring separate accounting. The ASU specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract under ASC 815-15-25, Derivatives and Hedging Embedded Derivatives Recognition. All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are clearly and closely related to the economic characteristics and risks of the host contract and whether bifurcation is required. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2010-11 did not have a material impact on the Companys financial statements.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 3 - Significant Accounting Policies (contd)
m) Recently Adopted Accounting Pronouncements (contd)
In April 2010, the FASB issued ASU 2010-13, CompensationStock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades, or ASU 2010-13. This ASU provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in currency of a market in which a substantial portion of the entitys equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company adopted this standard on January 1, 2011 and the adoption of ASU 2010-13 did not have a significant impact on its financial statements.
n) Recently Issued Accounting Pronouncements
In April 2011, the FASB issued authoritative guidance to clarify when a restructuring constitutes a troubled debt restructuring. In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that two conditions exist: (1) the restructuring constitutes a concession and (2) the debtor is experiencing financial difficulties. The guidance will be effective for interim and annual reporting periods beginning after June 15, 2011 and will be applied retrospectively to the beginning of the annual period of adoption. The Company does not anticipate that the guidance will have an impact on the Companys financial statements.
Other accounting pronouncements that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Companys financial statements upon adoption.
Note 4 Website Development Costs
The Company incurred and capitalized $8,325 related to its ongoing website development. Upon the completion of the website, the capitalized website costs will be amortized over the estimated useful life of 3 years. As at March 31, 2011, the website has not yet been completed.
Note 5 Loans Payable Related Parties
As at March 31, 2011, the loans payable included followings:
- $56,462 payable to a shareholder of the Company. The amount is unsecured, non-interest bearing and due on demand.
- $400 payable to a director and principal shareholder of the Company. The amount is unsecured, non-interest bearing and due on demand.
During the three month period ended March 31, 2011, the Company recorded imputed interest on the loans payable from related parties at a market rate of 11.68% thereby leading to the recognition of interest expense of $1,626. A corresponding amount was classified as additional paid-in capital.
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Online Disruptive Technologies, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
March 31, 2011 |
Note 6 Related Party Transactions
See Note 5.
Note 7 Stockholders Equity
On March 24, 2010, the Company issued 16,000,000 common shares to the sole shareholder of RS to effect the acquisition and RTO. Prior to the acquisition and RTO (Note 1 and 2), RS engaged in the following equity transactions which have been restated using the exchange ratio established in the acquisition agreement to reflect 16,000,000 common shares issued in the reverse acquisition:
- On November 16, 2009, RS issued 1,000 common shares at $0.0001 per share for total proceeds of $0.10.
- On December 5, 2009, RS issued 15,999,000 common shares at $0.000025 per share for total proceeds of $400.
Prior to the acquisition and RTO (Note 1 and 2), the Company engaged in the followings equity transactions:
- On November 16, 2009, the Company issued 100 common shares at $0.001 per share for total proceeds of $0.10.
- On December 2, 2009, the Company issued 200,000 common shares at $0.01 per share for total proceeds of $2,000.
- On January 7, 2010, the Company issued 1,800,000 common shares at $0.01 per share for total proceeds of $18,000.
Upon the acquisition and RTO, 2,000,100 common shares issued by the Company prior to the acquisition were considered as a recapitalization to RS.
On February 24, 2011, the Company issued 6,000,000 common shares at $0.01 per share for total proceeds of $60,000.
Note 8 Commitments and Guarantees
The Company did not enter into any commitments nor did it become a guarantor to any parties as at March 31, 2011.
Note 9 Comparative Figures
Certain comparative figures have been reclassified in order to conform to the current periods financial statement presentation.
16
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or managements plans and objectives for future operations. In some cases, you can identify forward-looking statements by the use of terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this quarterly report on Form 10-Q include statements about:
-
Our business plans,
-
Our ability to raise additional finances,
-
Our anticipated users for the website,
-
Our design of our website, and
-
Our future investments and allocation of capital resources.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:
-
General economic and business conditions,
-
Our ability to complete our website,
-
Our ability to attract users to our website,
-
Our lack of operating history,
-
Our reliance on our sole director and officer, and
-
The risks in the section of this quarterly report entitled Risk Factors,
any of which may cause our or our industrys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results
As used in this report, the terms we, us and our mean Online Disruptive Technologies, Inc. and our wholly-owned subsidiary Relaitonshipscoreboard.com Entertainment, Inc. In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to common shares refer to the common shares in our capital stock.
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Our Current Business
We are a start-up development stage company. We own the domain name RelationshipScoreboard.com and have commenced the development of our flagship social networking website. The premise behind RelationshipScoreboard.com (RS.com) is that we as human beings are curious about relationships and their inner workings. Everyone wants to know what defines a good relationship, what elements make a relationship work, and how much each partner should invest and contribute into the relationship in order to make it function on a balanced basis. We believe this website will provide objective perspectives on what people value most in a relationship and it will help people ease their concerns about their own interactions.
To learn about celebrity relationships, we read gossip magazines such as US Weekly, Star, and The Enquirer. We peruse gossip websites such as TMZ.com and perezhilton.com and we watch shows like Entertainment Tonight to delve into the lives of others. We want to know who is dating who, who is getting married, who is cheating, who is breaking up and who is getting divorced. We debate amongst ourselves whether we think a specific couple is a good fit for one another, and how long we think the relationship will last. This curiosity applies not only to celebrity relationships but within our own social networks as well.
Social networking websites are designed to keep people connected and essentially to build an online community. We believe that RS.com will serve as an interactive website where people can socialize, share relationship advice and score others relationships based on a series of questionnaires. While the evaluation of others and their interpersonal relationships tends to be a serious topic of discussion, the purpose of this website is to add a comedic or anecdotal edge to the relationship subject matter. We believe that the entertainment value of rating relationships of others will keep people coming back for more and therefore continually enhance the traffic of the website.
While people are prone to subjectively judging the relationships of others, the unique feature of RS.com is that it will provide a series of mathematical algorithms to provide for much more scientific means of achieving a relationship score. Using its array of formulas and algorithms, RS.com will allow its users to (a) evaluate whether a given relationship is functional or not; (b) determine which partner is winning the relationship battle (the definition of winning being getting more out of the relationship than the other party); (c) guesstimate how long the relationship will last; and (d) consider with whom the relationship partners would be better off aligning themselves. Users will have the ability to answer a series of questions regarding any specific relationship, which will in turn help score the relationship. The scoring options will include friends relationships, relationships of strangers, and celebrity relationships as well, depending on which sections of the website they choose to enter. With such a broad base of social media users, the opportunity to attract people to the website will be within arms reach. We believe that RS.coms unique attributes will allow it to succeed in attracting attention and traffic amongst the vast array of social networking websites.
Plan of Operation
We are a start-up development stage company. There exists substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated any revenues and no material revenues are anticipated until we further develop our business. There is no assurance we will reach this point.
If we are unable to attract enough users to our website and obtain revenue from advertising, will need to find alternative sources of capital, such as a public offering, a private placement of securities, or loans from our officer or others in order for us to maintain our operations past that 12 month period. At the present time, we have not made any arrangements to raise additional cash other than this offering. If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash, or cease operations entirely.
Milestones for Development
The following is a detailed description of the actions and timing of our planned operations over the next 12 months:
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Milestone |
Actions Required |
Completion Date |
Approximate
Costs | |
Launch Website |
|
Hire
IT professionals to complete back end of website including final version of mathematical algorithms used to score relationships. Finish graphic designs. |
May 31, 2011 |
$10,000 |
Focus on Advertisement of Website |
|
Perform search engine optimization. Use guerrilla marketing techniques to promote site. Begin working on social marketing integration with sites such as facebook and twitter. |
Q3, 2011 |
$5,000 |
Launch Improved Website |
|
Complete code for online store, forum, and advice section of website. Continue working on advertisement of website, including, if feasible, mainstream advertising. |
Q4 of 2011 |
$15,000 |
Expansion of Advertisement of Website |
|
If revenues support expansion, hire employees to
provide advice and feedback to users. Implementation of bulletin-board chatroom. Add integration with social media sites such as Facebook and Twitter. |
Q1 of 2012 |
$10,000
|
We anticipate the costs for the development of our website will be substantially reduced due to the uncompensated time and effort of our sole director and officer. We anticipate that upon the launch of the website will we begin to earn minimal revenue. As traffic to the website increases, we anticipate that our revenues will increase.
Results of Operations
Revenues
We have not earned any revenue from operations since our inception and further losses are anticipated in the development of our business. We are currently in the development stage of our business and we can provide no assurances that we will generate revenue in the foreseeable future.
Expenses
For the three month period ended March 31, 2011, we incurred expenses of $14,475 including $9,350 in audit and accounting fees, $2,190 in legal fees, $1,503 in filing and transfer agent fees, $1,626 in interest expense and a recovery of bank charges of $194. These expenses relate primarily to the ongoing maintenance of the Company and the filing of necessary registration statements and annual report. For the period three month period ended March 31, 2010, we incurred no operating expenses but recovered $3 of previously expensed bank charges. The increase in expenses in the three month period ended March 31, 2011 as compared to the three month period ended March 31, 2010 was primary due to enhanced corporate activity as we moved forward with the development of our flagship website as well as becoming a reporting issuer.
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Liquidity And Capital Resources
Working Capital
As at | Percentage | ||||||||
As at | December 31, | Increase / | |||||||
March 31, 2011 | 2010 | (Decrease) | |||||||
Current Assets | $ | 58,649 | $ | 13,658 | 329.4% | ||||
Current Liabilities | $ | 74,650 | $ | 76,810 | (2.8%) | ||||
Working Capital (Deficiency) | $ | (16,001 | ) | $ | (63,152 | ) | (74.7%) |
Cash Flows
Three Month | Three Month | |||||
Period Ended | Period Ended | |||||
March 31, 2011 | March 31, 2010 | |||||
Cash used in Operating Activities | $ | 15,009 | $ | 397 | ||
Cash provided by Investing Activities | $ | 0 | $ | 14,910 | ||
Cash provided by Financing Activities | $ | 60,000 | $ | 400 | ||
Net Increase (Decrease) in Cash | $ | 44,991 | $ | 14,913 |
We anticipate that we will incur approximately $50,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. These outflows are in addition to the minimum $40,000 of addition development costs to be incurred relative to our website as detailed above. As of the date of this report we had cash of $58,649, accordingly, we will need to obtain additional financing in order to complete our business plan.
Cash Used In Operating Activities
We used cash in operating activities in the amount of $15,009 during the three month period ended March 31, 2011 and $397 during the three month period ended March 31, 2010. Cash used in operating activities was funded primarily by cash from financing activities.
Cash From Investing Activities
No cash was used or provided in investing activities during the three month period ended March 31, 2011. Cash provided by investing activities during the three month period ended March 31, 2010 was a result of the cash that we acquired when we completed the reverse takeover transaction on March 24, 2010.
Cash from Financing Activities
We generated cash of $60,000 from financing activities during the three month period ended March 31, 2011 from our initial public offering compared to cash of $400 generated from financing activities during the three month period ended March 31, 2010.
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Going Concern
The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at March 31, 2011, our company has accumulated losses of $81,710 since inception. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended December 31, 2010, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Future Financings
We anticipate continuing to rely on equity sales of our shares of common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, these disclosure controls and procedures were ineffective.
Because of the inherent limitations in all control systems, our management believes that no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
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Managements Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, our management, with the participation of our principal executive officer and principal financial officer has conducted an assessment, including testing, using the criteria in Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Our Management, including our principal executive officer and our principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of March 31, 2011 based on the criteria set forth in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at March 31, 2011 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and ineffective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2011: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) is largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely effected in a material manner.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2011 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
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ITEM 1A. RISK FACTORS.
Risks And Uncertainties
Risks Associated With Our Financial Condition
The fact that we have not generated any significant revenues since our inception raises substantial doubt about our ability to continue as a going concern.
We have not generated any revenues since our inception on November 16, 2009. Since we are still in the early stages of operating company and because of the lack of operating history, we will, in all likelihood, continue to incur operating expenses without significant revenues for the foreseeable future. Our primary source of funds has been the sale of our common stock. We cannot assure that we will be able to generate enough interest in our website. If we cannot attract a significant customer base, we will not be able to generate any significant revenues or income. In addition, if we are unable to establish and generate significant revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our common stock.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
We incurred a net loss of $81,710 for the period from November 16, 2009 (date of inception) to March 31, 2011 and have not generated any revenues since our inception. Because we have incurred losses from operations since inception, have not attained profitable operations and are dependent upon obtaining adequate financing to fulfill our business operations, in their report on our financial statements for the period from November 16, 2009 (date of inception) to December 31, 2010, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is depending upon our ability to generate future profitable operations and to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We have not generated any revenues since our inception on November 16, 2009. We will continue to incur operating expenses without significant revenues for the foreseeable future. We cannot assure that we will be able to generate enough interest in our website to obtain significant revenues. If we cannot attract a significant user base, we will not be able to generate any significant revenues or income. In addition, if we are unable to establish and generate significant revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our commons stock.
If we are unable to obtain financing in the amounts and on terms and dates acceptable to us, we may not be able to expand or continue our operations and developments and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.
During the fiscal year ended December 31, 2010, we procured additional loan financing of approximately $57,000 in order to provide for certain working capital requirements. On February 24, 2011, we closed a primary offering for gross proceeds of $60,000. However, we do not currently have any arrangement for additional financing. For the foreseeable future, we intend to fund our operations and capital expenditures from our cash on hand and additional financings. We estimate that we will not be able to initiate our planned operations using currently available capital resources. Our capital resources are insufficient to fund our planned operations for the next 12 month period, as we estimate that we require a total of $90,000 in addition to our existing working capital deficiency of $16,001. We will have to raise additional funds for the continued development of our business and the marketing of our products. Such additional funds may be raised through the sale of additional stock, stockholder and director advances and/or commercial borrowing. There can be no assurance that a financing will continue to be available if necessary to meet these continuing development costs or, if the financing is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand or continue our operations and developments and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.
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Risk Associated with our Business
To date we have not developed our website and do not have any customers.
Our website is not complete and we are currently working on its development. There is no guarantee that we will be able to develop our website. If we cannot develop our website, we would be unable to implement our plan and our business might ultimately fail.
We cannot guarantee that we will ever have any customers. Even if we obtain customers, there is no guarantee that we will generate a profit. If we cannot generate a profit, we will have to suspend or cease operations.
We will be dependent on third parties to develop and maintain our website, network infrastructure, and transaction processing systems as well as to design and fulfill a number of customer service and other retail functions. If such parties are unwilling or unable to continue providing these services, our business could be severely harmed. To date, other than with respect to the commissioning of the design of the website and the development of the core functionality, we have not entered into any formal relationship with any third parties to provide these services. Our success will depend on our ability to build and maintain relationships with such third party service providers on commercially reasonable terms. If we are unable to build and maintain such relationships on commercially reasonable terms, we will have to suspend or cease operations. If our customers become dissatisfied with the services provided by these third parties, our reputation could suffer.
We may face risks related to activities of registered users.
Our registered users upload their own content onto our website. We will create a terms of use for such content in the terms and conditions of our website and our users must agree to our submission agreement when they upload their content. Disputes or negative publicity about the use of such content could make members more reluctant to upload personal content or harm our reputation. Our steps to monitor and review the content provided by our users and to reduce our liability for such content may be inadequate and we could face claims arising from or liability for making any such content available on our website. Litigation to defend these claims or efforts to counter any negative publicity could be costly and any other liabilities we incur in connection with any such claims may harm our business, financial condition and results of operations.
Government regulations and legal uncertainties concerning the Internet could hinder our business operations.
Laws applicable to the Internet and online privacy generally are becoming more prevalent. New laws and regulations may be adopted regarding the Internet or other online services in the United States and foreign countries that could limit our business flexibility or cause us to incur higher compliance costs. The adoption of additional laws or regulations, either domestically or abroad, may decrease the popularity or impede the expansion of Internet marketing, restrict our present business practices, require us to implement costly compliance procedures or expose us and/or our customers to potential liability, which, in turn, could adversely affect our business. Furthermore, the applicability of existing laws to the Internet is unsettled with regard to many important issues, including intellectual property rights, export of encryption technology, personal privacy, libel and taxation. It may take years to determine whether and how such existing and future laws and regulations apply to us. If we are required to comply with new regulations or new interpretations of existing regulations, or if we are unable to comply with these regulations, our business could be harmed.
The business of providing services over the internet is difficult to evaluate and our business model is unproven.
Because we only recently began operations, it is difficult to evaluate our business and prospects. Our revenue and income potential is unproven and our business model is emerging. Further, our business plan is derived from our sole director and officers experience. We may never achieve favorable operating results or profitability.
We may be unable to generate significant advertising or sponsorship revenues.
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We plan to derive a significant portion of our revenues from advertising and sponsorship on our website. We may not, however, be able to generate adequate advertising or sponsorship revenues. There are no widely accepted standards that measure the effectiveness of web advertising. Advertisers and sponsors that have traditionally relied on other advertising media may be reluctant to advertise on the web. Advertisers that already have invested substantial resources in other advertising or sponsor methods may be reluctant to adopt a new strategy and our business would be adversely affected.
Different pricing models are used to sell advertising on the internet. It is difficult to predict which, if any, will emerge as the industry standard. The proliferation of websites across the internet may cause advertising and sponsor pricing levels to exist or evolve to levels that are below those originally anticipated in our business plan. This makes it difficult to project future advertising and sponsor revenues. Moreover, certain security, filtering and proprietary software programs that limit or prevent certain types of advertising from being delivered to a web users computer are available and prevalent. Widespread adoption of these types of software could adversely affect the commercial viability of web advertising.
Changing consumer preferences will require periodic product introduction.
As a result of changing consumer preferences, many websites are successfully marketed for only a limited period of time. There can be no assurance that any of our sites will continue to be popular for a prolonged period of time. Our success will be dependent upon our ability to develop new and improved content for our websites and product lines. Our failure to introduce new content and product lines and to achieve and sustain market acceptance and to produce acceptable margins could have a material adverse effect on our financial condition and results of operations.
Our market is characterized by rapid technological change, and if we fail to develop and market new technologies rapidly, we may not become profitable in the future.
The Internet is characterized by rapid technological change that could render our website prematurely obsolete. The development of our website entails significant technical and business risks. We can give no assurance that we will successfully use new technologies effectively or adapt our website to customer requirements or needs. If our management is unable, for technical, legal, financial, or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, we may never become profitable which may result in the loss of all or part of your investment.
If we do not attract customers to our website on cost-effective terms, we will not generate a profit, which ultimately will result in a cessation of operations.
Our success depends on our ability to attract retail customers to our website on cost-effective terms. Our strategy to attract customers to our website, which has not been formalized or implemented, includes viral marketing, the practice of generating a buzz among Internet users in our products through the developing and maintaining of weblogs or blogs, online journals that are updated frequently and available to the public, postings on online communities such as Yahoo!(R) Groups and amateur websites such as YouTube.com, and other methods of getting Internet users to refer others to our website by e-mail or word of mouth; search engine optimization, marketing our website via search engines by purchasing sponsored placement in search results; and entering into affiliate marketing relationships with website providers to increase our visibility to Internet consumers. We plan to rely on viral marketing as the primary source of traffic to our website, with search engine optimization and affiliate marketing as secondary sources. Our marketing strategy may not be enough to attract sufficient traffic to our website. If we are unsuccessful at attracting a sufficient amount of traffic to our website, our ability to obtain customers and our resulting financial performance will be harmed.
If we are unable to successfully manage growth, our operations could be adversely affected, and our business may fail.
Our ability to manage growth effectively will depend on our ability to improve and expand operations and to recruit operational, financial and administrative personnel. There can be no assurance that management will be able to manage growth effectively.
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Risks Associated with Our Management
Our executive officer devotes only part time efforts to our business which may not be sufficient to successfully develop our business.
The amount of time which our sole executive officer will devote to our business is limited. Benjamin Cherniak, our president, secretary and treasurer, currently devotes approximately 30% of his working time to our company. Further, he has other business interests. While we expect him to increase the percentage of his working time he devotes to our company if our operations increase, the amount of time which he devotes to our business may not be sufficient to fully develop our business. In addition, there exist potential conflicts of interest including, among other things, time, effort, and corporate opportunity involved with participating in other business entities. We have no agreements with him as to how he allocates either his time to our company or how he handles corporate opportunities. As a result, we may be unable to implement our plan and our business might ultimately fail.
The loss of the services of our executive officer would disrupt our operations and interfere with our ability to compete.
We depend upon the continued contributions of our sole executive officer Benjamin Cherniak. He handles all of the responsibilities in the area of corporate administration and business development. We do not carry key person life insurance for him and the loss of his services would likely lead to us being unable to implement our business plan and our business might ultimately fail.
Because our sole officer and director is a national of Canada, you may have no effective recourse against him for misconduct and you may not be able to enforce judgment and civil liabilities against him or our company.
Our sole officer and director is a national of Canada. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against him or our company, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
Risks Associated with Our Common Stock
Because we do not intend to pay any dividends on our common stock, investors seeking dividend income or liquidity should not purchase shares of our common stock in this offering.
We do not currently anticipate declaring and paying dividends to our stockholders in the foreseeable future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase our common stock. We currently have no revenues and a history of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of shares of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, which currently do not intend to pay any dividends on shares of our common stock for the foreseeable future.
Our common stock has never been traded and, if a market ever develops for our common stock, the price of our common stock is likely to be highly volatile and may decline after the offering. If this happens, investors may have difficulty selling their shares and may not be able to sell their shares at all.
There is no public market for our common stock and we cannot assure you that a market will develop or that any stockholder will be able to liquidate his or her investment without considerable delay, if at all. A trading market may not develop in the future, and if one does develop, it may not be sustained. If an active trading market does develop, the market price of our common stock is likely to be highly volatile. The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
-
variations in our quarterly operating results;
-
changes in market valuations of similar companies;
26
-
announcements by us or our competitors of significant new products; and
-
the loss of key management or personnel.
The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies securities that have been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
Because we can issue additional shares of our common stock or preferred stock, purchasers of our common stock may experience dilution in their ownership of our company in the future.
We are authorized to issue up to 500,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of May 10, 2011, there were 24,000,100 shares of our common stock issued and outstanding and no shares of our preferred stock issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock or preferred stock without the consent of any of our stockholders. Consequently, our stockholders may experience dilution in their ownership of our company in the future.
Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commissions penny stock regulations which may limit a stockholders ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines a 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 term accredited investor refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. 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 Securities and Exchange Commission 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 customers 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 customers 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 purchasers 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.
The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholders ability to buy and sell our stock.
In addition to the penny stock rules described above, the Financial Industry Regulatory Authority, which we refer to as 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 customers financial status, tax status, investment objectives and other information. Under interpretations of these rules, the 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 common stock and have an adverse effect on the market for shares of our common stock.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (REMOVED AND RESERVED)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS.
Exhibit Number |
Description |
3.1(1) | Articles of Incorporation |
3.2(1) | Bylaws |
10.1(1) | Share Purchase Agreement dated March 24, 2010 between Benjamin Cherniak and Online Disruptive Technologies, Inc. |
10.2(1) | Subscription Agreement between our company and Robbie Manis |
10.3(1) | Subscription Agreement between our company and Brian Hough |
10.4(1) | Subscription Agreement between our company and Peter Hough |
21.1 | Subsidiary of Online Disruptive Technologies, Inc.: Relationshipscoreboard.com Entertainment, Inc., a Nevada corporation |
31.1* | Section 302 of the Sarbanes-Oxley Act of 2002 of Benjamin Cherniak |
32.1* | Section 906 Certifications under Sarbanes-Oxley Act of 2002 of Benjamin Cherniak |
*Filed herewith.
(1) Incorporated by reference from our Registration Statement on Form S-1 filed on August 10, 2010
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ONLINE DISRUPTIVE TECHNOLOGIES, INC.
By | ||
/s/ Benjamin Chernaik | ||
Benjamin Chernaik | ||
President and Director | ||
(Principal Executive Officer, Principal Financial | ||
Officer and Principal Accounting Officer) | ||
Date: May 11, 2011 |