Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - LIFESTYLE MEDICAL NETWORK, INC. | Financial_Report.xls |
| EX-32 - EXHIBIT 32 - LIFESTYLE MEDICAL NETWORK, INC. | ex32.htm |
| EX-31 - EXHIBIT 31 - LIFESTYLE MEDICAL NETWORK, INC. | 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 September 30, 2011
o 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: 0-52408
EMERGING MEDIA HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
NEVADA
|
13-1026995
|
|
|
(State of other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
121 SOUTH ORANGE AVE., SUITE 1500, ORLANDO, FLORIDA
|
32801
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
(011) 373 2 22 37 979
(Registrant's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o
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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (Check One):
|
Large accelerated filer o
|
Accelerated filer o
|
|
Non-accelerated filer o
|
Smaller reporting company x
|
(Do not check if a 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 o No x
As of November 18, 2011, there were 1,445,098 shares of Common Stock, $0.001 par value, issued.
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Part 1
|
Financial Information
|
Page
|
|||
|
Item 1.
|
Financial Statements
|
1
|
|||
|
Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010 (Unaudited)
|
2
|
||||
|
|
|||||
|
Consolidated Statements of Operations for the Nine and Three
|
|||||
|
Months Ended September 30, 2011 and 2010 (Unaudited)
|
3
|
||||
|
Consolidated Statements of Comprehensive Income (Unaudited)
|
4
|
||||
|
Consolidated Statement of Stockholders' Equity for the
|
|
||||
|
Nine Months Ended September 30, 2011 (Unaudited)
|
5
|
||||
|
Consolidated Statements of Cash Flows for the Nine
|
|||||
|
Months Ended September 30, 2011 and 2010 (Unaudited)
|
6-7
|
||||
|
Notes to Unaudited Consolidated Financial Statements
|
8-15
|
||||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ending December 31, 2010.
The results of operations for the nine and three months ended September 30, 2011 and 2010 are not necessarily indicative of the results for the entire fiscal year or for any other period.
-1-
|
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
September 30,
|
December 31,
|
|||||||
|
2011
|
2010
|
|||||||
|
CURRENT ASSETS:
|
||||||||
|
Cash and cash equivalents
|
$ | 19,319 | $ | 37,458 | ||||
|
Accounts receivable - net of allowance for doubtful accounts of $-0-
|
||||||||
|
and $5,000
|
442,093 | 294,288 | ||||||
|
Inventories
|
6,655 | 876 | ||||||
|
Employee receivables and other current assets
|
73,167 | 96,322 | ||||||
|
Net assets of subsidiaries sold
|
- | 977,647 | ||||||
|
Total Current Assets
|
541,234 | 1,406,591 | ||||||
|
Property, plant and equipment, net
|
26,966 | 10,827 | ||||||
|
Intangible assets - net
|
158,613 | 201,225 | ||||||
|
Goodwill
|
- | 3,639,645 | ||||||
|
TOTAL ASSETS
|
$ | 726,813 | $ | 5,258,288 | ||||
|
LIABILITIES AND EQUITY
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Short-term debt
|
$ | 21,362 | $ | - | ||||
|
Accounts payable
|
74,655 | 17,348 | ||||||
|
Accrued expenses
|
14,875 | 9,136 | ||||||
|
Customer deposits
|
38,781 | - | ||||||
|
Total Current Liabilities
|
149,673 | 26,484 | ||||||
|
Commitments and Contingencies
|
- | - | ||||||
|
EQUITY:
|
||||||||
|
Emerging Media Holdings Inc. and Subsidiaries Stockholders' Equity:
|
||||||||
|
Common stock, $.001 par value, 200,000,000 shares
|
||||||||
|
authorized; 1,225,092 and 1,225,092 shares issued and 745,092 and
|
||||||||
|
745,092 oustanding at September 30, 2011 and December 31, 2010, respectively
|
1,225 | 1,225 | ||||||
|
Additional paid-in-capital
|
5,784,881 | 5,681,592 | ||||||
|
Deficit
|
(3,395,105 | ) | (596,191 | ) | ||||
|
Accumulated other comprehensive income (loss)
|
(4,624 | ) | 51,126 | |||||
|
Less: Cost of common stock in treasury, 481,176 and 1,176 shares
|
||||||||
|
at September 30, 2011 and December 31, 2010, respectively
|
(1,809,237 | ) | (9,237 | ) | ||||
|
Total Emerging Media Holdings Inc. and Subsidiaries Stockholders' Equity
|
577,140 | 5,128,515 | ||||||
|
Noncontrolling interest
|
- | 103,289 | ||||||
|
Total Equity
|
577,140 | 5,231,804 | ||||||
|
TOTAL LIABILITIES AND EQUITY
|
$ | 726,813 | $ | 5,258,288 | ||||
See notes to unaudited consolidated financial statements
-2-
|
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
|
||||||||||||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
For The Three Months Ended
|
For The Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Revenues
|
$ | 282,219 | $ | 784,685 | $ | 1,039,254 | $ | 2,223,779 | ||||||||
|
Costs and expenses:
|
||||||||||||||||
|
Cost of sales
|
150,725 | 508,318 | 575,287 | 1,520,750 | ||||||||||||
|
Selling, general and administrative expenses
|
101,676 | 258,755 | 392,576 | 772,970 | ||||||||||||
| 252,401 | 767,073 | 967,863 | 2,293,720 | |||||||||||||
|
Income (loss) from continuing operations
|
29,818 | 17,612 | 71,391 | (69,941 | ) | |||||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest expense
|
(500 | ) | (275 | ) | (500 | ) | (850 | ) | ||||||||
|
Loss on disposition of subsidiaries
|
- | - | (2,870,845 | ) | - | |||||||||||
|
Other income (principally interest income)
|
- | 3,163 | 1,040 | 11,760 | ||||||||||||
| (500 | ) | 2,888 | (2,870,305 | ) | 10,910 | |||||||||||
|
Income (loss) from continuing operations before
|
29,318 | 20,500 | (2,798,914 | ) | (59,031 | ) | ||||||||||
|
provision for income taxes
|
||||||||||||||||
|
Provision for income taxes
|
- | - | - | - | ||||||||||||
|
Earnings (loss) from continuing operations
|
29,318 | 20,500 | (2,798,914 | ) | (59,031 | ) | ||||||||||
|
Discontinued operations (Note 18):
|
||||||||||||||||
|
Gain on sale of SC Genesis
|
||||||||||||||||
|
International S.A.
|
109,016 | 109,016 | ||||||||||||||
|
Earnings (loss) from operations of SC Genesis
|
||||||||||||||||
|
International S.A.
|
- | (467,788 | ) | - | (1,945,670 | ) | ||||||||||
| - | (358,772 | ) | - | (1,836,654 | ) | |||||||||||
|
Net earnings (loss)
|
29,318 | (338,272 | ) | (2,798,914 | ) | (1,895,685 | ) | |||||||||
|
Less: Net loss attributable to the
|
||||||||||||||||
|
noncontrolling interest
|
- | (68,038 | ) | - | (346,494 | ) | ||||||||||
|
Net earnings (loss) attributable to Emerging Media
|
||||||||||||||||
|
Holdings, Inc. and Subsidiaries
|
$ | 29,318 | $ | (270,234 | ) | $ | (2,798,914 | ) | $ | (1,549,191 | ) | |||||
|
Earnings (loss) per common share:
|
||||||||||||||||
|
Earnings (loss) per common share attributable to
|
||||||||||||||||
|
Emerging Media Inc. and Subsidiaries
|
||||||||||||||||
|
common shareholders from continuing
|
||||||||||||||||
|
operations - basic and diluted
|
$ | 0.04 | $ | 0.01 | $ | (3.76 | ) | $ | (0.03 | ) | ||||||
|
Earnings (loss) per common share attributable to
|
||||||||||||||||
|
Emerging Media Inc. and Subsidiaries
|
||||||||||||||||
|
common shareholders from discontinued
|
||||||||||||||||
|
operations - basic and diluted
|
$ | 0.00 | $ | (0.17 | ) | $ | 0.00 | $ | (0.84 | ) | ||||||
|
Weighted average common shares outstanding
|
||||||||||||||||
|
- basic and diluted
|
798,421 | 1,704,156 | 743,916 | 1,781,471 | ||||||||||||
See notes to unaudited consolidated financial statements
-3-
|
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||
|
(Unaudited)
|
||||||||
|
For the Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
2011
|
2010
|
|||||||
|
Net loss
|
$ | (2,798,914 | ) | $ | (1,895,685 | ) | ||
|
Other comprehensive income (loss) - net of tax:
|
||||||||
|
Currency translation adjustment
|
(55,750 | ) | 216,184 | |||||
|
Comprehensive income (loss)
|
(2,854,664 | ) | (1,679,501 | ) | ||||
|
Less:
|
||||||||
|
Comprehensive income (loss) attributable to noncontrolling
|
||||||||
|
interest
|
- | (346,494 | ) | |||||
|
Comprehensive income (loss) attributable to Emerging
|
||||||||
|
Media Inc. and Subsidiaries
|
$ | (2,854,664 | ) | $ | (1,333,007 | ) | ||
See notes to unaudited consolidated financial statements
-4-
|
CONSOLIDATED STATEMENT OF EQUITY
|
||||||||||||||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
|
Common Stock
|
Retained
|
Other
|
||||||||||||||||||||||||||||||||||
|
Comprehensive
|
Number of
|
Additional Paid
|
Earnings
|
Comprehensive
|
Treasury
|
Noncontrolling
|
||||||||||||||||||||||||||||||
|
Total
|
Income
|
Shares
|
Amount
|
In Capital
|
(Deficit)
|
Income (Loss)
|
Stock
|
Interest
|
||||||||||||||||||||||||||||
|
Balance, January 1, 2010
|
$ | 9,984,611 | 1,730,300 | $ | 1,730 | $ | 9,041,576 | $ | 721,510 | $ | (406,856 | ) | $ | (9,237 | ) | $ | 635,888 | |||||||||||||||||||
|
Issuance of common stock
|
||||||||||||||||||||||||||||||||||||
|
for acquisition
|
125,000 | 125 | 347,274 | (29,455 | ) | (317,944 | ) | |||||||||||||||||||||||||||||
|
Sale of SC Genesis
|
||||||||||||||||||||||||||||||||||||
|
International S.A.
|
(3,377,560 | ) | (844,390 | ) | (844 | ) | (3,376,716 | ) | ||||||||||||||||||||||||||||
|
Non-cash based compensation
|
17,000 | 10,000 | 10 | 16,990 | ||||||||||||||||||||||||||||||||
|
1:5 Forward split adjustment
|
204,182 | 204 | (204 | ) | ||||||||||||||||||||||||||||||||
|
Adjustment to noncontrolling interest
|
||||||||||||||||||||||||||||||||||||
|
for sale of SC Genesis
|
||||||||||||||||||||||||||||||||||||
|
International S.A.
|
- | (347,328 | ) | 276,138 | 71,190 | |||||||||||||||||||||||||||||||
|
Net loss year ended
|
||||||||||||||||||||||||||||||||||||
|
December 31, 2010
|
(1,603,546 | ) | $ | (1,603,546 | ) | (1,317,701 | ) | (285,845 | ) | |||||||||||||||||||||||||||
|
Currency translation
|
211,299 | 211,299 | 211,299 | |||||||||||||||||||||||||||||||||
|
Comprehensive loss
|
$ | (1,392,247 | ) | |||||||||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
5,231,804 | 1,225,092 | 1,225 | 5,681,592 | (596,191 | ) | 51,126 | (9,237 | ) | 103,289 | ||||||||||||||||||||||||||
|
Common stock received for
|
||||||||||||||||||||||||||||||||||||
|
disposition of subsidiaries
|
(1,800,000 | ) | - | - | - | - | (1,800,000 | ) | - | |||||||||||||||||||||||||||
|
Adjustment to noncontrolling interest
|
||||||||||||||||||||||||||||||||||||
|
for sale of Alkasar Media Services S.R.L.
|
- | 103,289 | - | (103,289 | ) | |||||||||||||||||||||||||||||||
|
Net loss for the nine months ended
|
||||||||||||||||||||||||||||||||||||
|
September 30, 2011
|
(2,798,914 | ) | $ | (2,798,914 | ) | (2,798,914 | ) | - | ||||||||||||||||||||||||||||
|
Currency translation
|
(55,750 | ) | (55,750 | ) | (55,750 | ) | ||||||||||||||||||||||||||||||
|
Comprehensive loss
|
$ | (2,854,664 | ) | |||||||||||||||||||||||||||||||||
|
Balance, September 30, 2011
|
$ | 577,140 | 1,225,092 | $ | 1,225 | $ | 5,784,881 | $ | (3,395,105 | ) | $ | (4,624 | ) | $ | (1,809,237 | ) | $ | - | ||||||||||||||||||
See notes to unaudited consolidated financial statements
-5-
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
(Unaudited)
|
||||||||
|
For The Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
2011
|
2010
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$ | (2,798,914 | ) | $ | (1,895,685 | ) | ||
|
Adjustments to reconcile net loss to net cash
|
||||||||
|
provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
44,953 | 574,514 | ||||||
|
Non-cash compensation
|
- | 5,667 | ||||||
|
Loss on disposition of subsidiaries
|
2,870,645 | (109,016 | ) | |||||
|
Changes in operating assets and liabilities:
|
||||||||
|
(Increase) decrease in trade receivables
|
(257,115 | ) | 2,931,046 | |||||
|
(Increase) in inventories
|
(5,779 | ) | (396 | ) | ||||
|
(Increase) decrease in employee receivables and other
|
||||||||
|
current assets
|
23,155 | (138,703 | ) | |||||
|
Decrease in restricted cash
|
- | 286,979 | ||||||
|
Increase (decrease) in accounts payable,
|
||||||||
|
accrued liabilities and income taxes payable
|
63,046 | (1,663,742 | ) | |||||
|
Increase (decrease) in customer deposits
|
38,781 | (395,818 | ) | |||||
|
Net Cash Used In Operating Activities
|
(21,228 | ) | (405,154 | ) | ||||
|
|
||||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of property, plant and equipment
|
(18,480 | ) | (37,179 | ) | ||||
|
Cash given upon sale of Genesis
|
(33,909 | ) | ||||||
|
Proceeds from sale of fixed assets
|
- | |||||||
|
Proceeds from sale of marketable securities
|
- | 78,101 | ||||||
|
Net Cash Provided by (Used In) Investing Activities
|
(18,480 | ) | 7,013 | |||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from loans
|
21,362 | 1,215,465 | ||||||
|
Repayment of debt
|
- | (1,206,078 | ) | |||||
|
Net Cash Provided by Financing Activities
|
21,362 | 9,387 | ||||||
|
Effect of exchange rate changes on cash
|
207 | 4,871 | ||||||
|
Net decrease in cash
|
(18,139 | ) | (383,883 | ) | ||||
|
Cash and cash equivalents - Beginning of period
|
37,458 | 647,861 | ||||||
|
Cash and cash equivalents - End of period
|
$ | 19,319 | $ | 263,978 | ||||
See notes to unaudited consolidated financial statements
-6-
|
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
|
||||||||
|
(Unaudited)
|
||||||||
|
For The Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
2011
|
2010
|
|||||||
|
Supplemental disclosure cash flow information:
|
||||||||
|
Cash paid for interest
|
$ | 500 | $ | 167,965 | ||||
|
Cash paid for income taxes
|
$ | - | $ | - | ||||
|
Supplementary information:
|
||||||||
|
Non-cash transactions during the period for:
|
||||||||
|
Common stock received in connection
|
||||||||
|
with disposition of subsidiaries
|
$ | 1,800,000 | ||||||
|
Adjustment of noncontrolling interest in
|
||||||||
|
connection with disposition of
|
||||||||
|
subsidiaries
|
$ | 103,289 | ||||||
See notes to unaudited consolidated financial statements
-7-
EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011
|
1.
|
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Emerging Media Holdings, Inc. (the "Company" or "EMH") was incorporated in the State of Nevada on September 3, 2003. Through its Moldovan subsidiaries, the Company's primary activities are in radio and television broadcasting. The Company was granted a broadcasting license in 2005 which extends through 2011 and earns revenue primarily through advertisement sales.
The consolidated balance sheet as of September 30, 2011 and the consolidated statements of operations, stockholders' equity and cash flows for the periods presented have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of December 31, 2010 were derived from audited financial statements.
Recent Developments
On August 3, 2010, the Company entered into a Purchase Agreement with Stipula Financial Inc., a British Virgin Islands corporation, (“Stipula Financial”), pursuant to which Stipula Financial agreed to purchase from the Company eighty (80%) percent of the outstanding shares of SC Genesis International S.A. owned by the Company. The consideration for the sale of the Company’s 80% interest in Genesis under the Purchase Agreement was the assignment and transfer to the Company by certain of the Company’s shareholders of 844,390 shares of the Company’s common stock. The closing was consummated on September 10, 2010. As of this date, the Company had no remaining ownership interest in Genesis.
On February 2, 2011, the Company entered into an Asset Purchase Agreement ("Agreement") with the Company's major shareholder. The Agreement provided for the sale of the common stock of the Company's following subsidiaries: IM Media Alianta SRL, SA Analytic Media Group and ICS Alkazar Media Services SRL, which included the Company's TV7 television channel. The Company received 480,000 common shares of Emerging Media Holdings, valued at $1,800,000 in exchange for the sale of these subsidiaries. The Company will continue to operate its other media subsidiaries consisting of the "TNT" television channel.
On February 10, 2011, the Company entered into a Share Exchange Agreement with Men's Medical Corporation, Inc., a Florida Corporation, ("MMC"). The Company agreed to issue to the former shareholder of MMC, Saddleworth Ventures, LLC, whose sole member is Chris Smith ("Smith"), a total of 1,000 Class A Preferred Shares (the "Series A Preferred Stock") of a class of Preferred Stock to be authorized by the Company's stockholders. The Series A Preferred Stock would have been convertible into and voted as 2,500,000 shares of common stock, which would have effectively given control of the Company to Chris Smith. In connection with the Share Exchange Agreement, Chris Smith was elected the Company's President and Chief Executive Officer.
On May 31, 2011, the Company's Board of Directors agreed with Chris Smith and MMC, effective immediately, to terminate the Exchange Agreement, and to void any rights of the stockholders of MMC to the 1,000 shares of Series A Preferred Stock which were to have been authorized and issued in the exchange.
In connection with the termination of the Exchange Agreement, Mr. Smith also resigned as Chief Executive Officer and a Director of the Company, effective immediately, and Iurie Bordian, the sole remaining director, was elected the Chief Executive Officer of the Company.
On September 30, 2011, the Company entered into an Asset Purchase Agreement (the "Purchase Agreement") with bNET Communications, Inc., a Nevada corporation ("bNET"), pursuant to which the Company agreed to purchase bNET's digital media library in exchange for shares of the Company's common stock. The total number of shares issued to bNET will be 45 million shares. The closing is subject to a number of conditions which require the Company to have received all approvals and clearance from all regulatory authorities with respect to the reverse split of the Company's common stock and the appointment of Gerald Sklar, bNET's Chief Executive Officer, to the Company's board of directors.
-8-
Upon satisfaction of the conditions to closing, bNET will own a controlling interest and become the Company's controlling shareholder.
On November 7, 2011, the Company terminated the Asset Purchase Agreement, dated as of September 30, 2011, between bNET and the Company, due to the failure of bNET to satisfy closing conditions agreed to by the parties.
On June 21, 2011, the Company's board of directors unanimously approved amendments to the Company's Articles of Incorporation (1) to increase the authorized number of common shares of common stock from 100 million shares, par value $.001 per share, to 200 million shares, par value $.001 per share, and (2) to effect a 1:10 reverse split of the Company's common stock. The 1:10 reverse split was approved by FINRA and was effective for trading purposes on October 12, 2011.
All common share references have been restated to reflect the stock split.
Basis of Presentation
Reporting and Functional Currency
The Company has determined that the United States dollar (“USD") is the reporting currency for the purposes of financial reporting under US GAAP.
The local currency and the functional currency of the subsidiaries of the Company is the Moldovan Lei ("MOL").
Any conversion of MOL amounts to USD should not be construed as a representation that such MOL amounts have been, could be, or will in the future be converted into USD at the current exchange rate or at any other exchange rate.
Recent Accounting Pronouncements
The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There were no significant changes to these accounting policies during the nine months ended September 30, 2011 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
Reclassifications
Certain assets and liabilities as of December 31, 2010 have been reclassified to net assets of subsidiaries sold.
|
2.
|
ACQUISITIONS
|
a) On October 1, 2009, the Company consummated an acquisition of 60% of the outstanding shares of SC Genesis International S.A. ("Genesis") owned by IPA International Project Establishment. The consideration paid by the Company for the acquisition of Genesis was approximately $4,800,000.
Genesis, a joint stock company incorporated under the laws of Romania, has as its principal business, the construction of roads and highways. Other secondary activities include surface and underground railway construction, other special construction projects, relocation services and merchandise transportation.
b) On February 20, 2010, the Company acquired 20% of the outstanding common stock of Genesis held by the noncontrolling interests in exchange for 125,000 shares of common stock of Emerging Media Holdings, Inc., valued at $500,000, the fair value of the common stock at the date of issuance. The purchase has been accounted for as an equity transaction in accordance with ASC 840-10-45-23, "Business Combinations". The noncontrolling interest and other comprehensive income has been reduced by $347,399 and credited to the equity of EMH.
-9-
c) On August 3, 2010, the Company entered into an agreement to sell its 80% interest in Genesis. The consideration for the sale was the assignment and transfer to the Company by certain of the Company’s shareholders of 844,390 shares of the Company’s common stock valued at approximately $3.4 million. The Company recorded a gain on the sale of Genesis of approximately $109,000 which is included in discontinued operations in the Company’s consolidated statement of operations for the year ended December 31, 2010.
The acquisition has been accounted for using the purchase method of accounting, and accordingly, the results of operations of Genesis are included in discontinued operations from the date of acquisition.
3. FAIR VALUE MEASUREMENTS
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Level 1 - Observable inputs such as quoted market prices in active markets
Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
As of September 30, 2011, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents, investments in marketable securities and restricted cash. The fair values of the cash and cash equivalents and restricted cash is determined based on quoted market prices in public markets and is categorized as Level 1. The investment in marketable securities is determined by the Company based on market prices other than quoted prices in active markets and is categorized as Level 2. These are also categorized as held-to-maturity securities. The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2011 and 2010 except for the restricted cash which was transferred out in connection with the sale of Genesis.
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of September 30, 2011 and December 31, 2010.
|
Assets at Fair Value as of September 30, 2011 and December 31, 2010 Using
|
||||||||||||||||
|
Quoted Prices in
|
Significant
|
|||||||||||||||
|
Active Markets
|
Other
|
Significant
|
||||||||||||||
|
for Identical
|
Observable
|
Observable
|
||||||||||||||
|
Assets
|
Inputs
|
Inputs
|
||||||||||||||
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
|
September 30, 2011
|
||||||||||||||||
|
Cash and cash equivalents
|
$ | 19,319 | $ | 19,319 | $ | - | $ | - | ||||||||
|
Held-to-maturity securities
|
- | - | - | - | ||||||||||||
|
Total
|
$ | 19,319 | $ | 19,319 | $ | - | $ | - | ||||||||
|
December 31, 2010
|
||||||||||||||||
|
Cash and cash equivalents
|
$ | 401,656 | $ | 401,656 | $ | - | $ | - | ||||||||
|
Held-to-maturity securities
|
250,000 | - | - | 250,000 | ||||||||||||
|
Total
|
$ | 651,656 | $ | 401,656 | $ | - | $ | 250,000 | ||||||||
-10-
As of December 31, 2010, cash in the amount of $364,198 and marketable securities of $250,000 are included in net assets of subsidiaries sold on the Company's consolidated balance sheet.
The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of September 30, 2011.
Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis.
4. GOODWILL AND INTANGIBLES
Goodwill represents the excess of the purchase price and related acquisition costs over the value assigned to the net intangible and other intangible assets with finite lives acquired in a business acquisition.
Other intangibles are the value assigned to the license purchased as part of the acquisition of Media Top Prim. Amounts assigned to these intangibles were determined by management. Management considered a number of factors in determining the allocations, including valuations and independent appraisals. Other intangibles are being amortized over 7 years, the life of the license. Amortization expense was $42,612 and $42,612, for the nine months ended September 30, 2011 and 2010, respectively.
The changes in the carrying value of goodwill for the nine months ended September 30, 2011 is as follows:
|
Total
|
||||
|
Balance, December 31, 2010
|
$ | 3,639,645 | ||
|
Sale of subsidiaries
|
(3,639,645 | ) | ||
|
Balance, September 30, 2011
|
$ | - | ||
The components of intangible assets other than goodwill are as follows:
|
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
|
Gross Carrying
|
Accumulated
|
Gross Carrying
|
Accumulated
|
|||||||||||||
|
Amount
|
Amortization
|
Amount
|
Amortization
|
|||||||||||||
|
License agreements
|
$ | 348,000 | $ | 189,387 | $ | 348,000 | $ | 146,775 | ||||||||
Estimated amortization expense for intangible assets for the next five years is as follows:
|
Year Ending
|
Amortization
|
|||
|
December 31,
|
Expense
|
|||
|
2011
|
$ | 10,653 | ||
|
2012
|
49,714 | |||
|
2013
|
49,714 | |||
|
2014
|
52,083 | |||
-11-
5. DISPOSITION OF SUBSIDIARIES
On February 2, 2011, the Company entered into an Asset Purchase Agreement ("Agreement") with the Company's major shareholder. The Agreement provides for the sale of the common stock of the Company's following subsidiaries: IM Media Alianta SRL, SA Analytic Media Group and ICS Alkazar Media Services SRL, which included the Company's TV7 television channel. The Company received 480,000 common shares of Emerging Media Holdings, Inc., valued at $1,800,000.
The Company recorded a loss of approximately $2.9 million in connection with the sales of the subsidiaries which is included in other income (expense) in the Company's consolidated statement of operations for the nine months ended September 30, 2011.
6. MARKETABLE SECURITIES
At September 30, 2011 and December 31, 2010, marketable securities have a cost and estimated fair value of $-0- and $250,000, respectively. The market value of the marketable securities did not change as the securities were fixed yield bonds with a fixed price and fixed interest rate. The investments are held-to-maturity and are recorded at cost, which approximates market value. As of December 31, 2010, the marketable securities were included in net assets of subsidiaries sold.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, which includes amounts recorded under capital leases, consisted of the following:
|
September 30,
|
December 31,
|
|||||||
|
2011
|
2010
|
|||||||
|
Machinery and equipment
|
$ | 36,129 | $ | 17,649 | ||||
|
Less: accumulated depreciation
|
9,163 | 6,822 | ||||||
| $ | 26,966 | $ | 10,827 | |||||
Depreciation expense from continuing operations for the nine months ended September 30, 2011 and 2010 totalled $2,341 and $43,372, respectively.
8. SHORT-TERM DEBT
During the nine months ended September 30, 2011, the Company borrowed $21,362. The loan is due on demand and bears interest @5% per annum. Interest expense for the nine months ended September 30, 2011 amounted to $500.
-12-
9. NONCONTROLLING INTEREST
The following table sets forth the noncontrolling interest balance and the changes to this balance attributable to the third-party interests in Alkasar Media Services S.R.L. and SC Genesis International S.A. As of December 31, 2010, the balance of the noncontrolling interest relates only to the third party interests in Alkasar Media Services S.R.L.
|
September 30,
|
December 31,
|
|||||||
|
2011
|
2010
|
|||||||
|
Balance at beginning of period
|
$ | 103,289 | $ | 635,888 | ||||
|
Adjustment for sale of Alkasar Media Services
|
||||||||
|
S.R.L. 11 2011
|
(103,289 | ) | - | |||||
|
Adjustment of noncontrolling interest in connection
|
||||||||
|
with the acquisition of 20% of Genesis
|
||||||||
|
International S.A. in 2010
|
- | (317,944 | ) | |||||
|
Adjustment for sale of 80% of Genesis
|
- | 71,190 | ||||||
|
Noncontrolling interest share of income (loss)
|
- | (285,845 | ) | |||||
|
Balance at end of period
|
$ | - | $ | 103,289 | ||||
10. INCOME TAXES
The Company adopted the provisions of ASC 740, "Income Taxes", ("ASC 740"). As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits. The Company believes there are no potential uncertain tax positions and all tax returns are correct as filed. Should the Company recognize a liability for uncertain tax positions, the Company will separately recognize the liability for uncertain tax positions on its balance sheet. Included in any liability for uncertain tax positions, the Company will also setup a liability for interest and penalties. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes.
The nominal statutory corporate rate in the Republic of Moldova is 0% for 2011 and 2010. Taxes are calculated in accordance with Moldovan regulations and are paid annually. Taxes are calculated on a separate entity basis since consolidation for tax purposes is not permitted in Moldova. There is no U.S. tax provision due to losses from U.S. operations during both 2011 and 2010. Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities. The principal item giving rise to deferred taxes is the net operating loss carryforward in the U.S. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has set up a valuation allowance for losses for certain carryforwards that it believes may not be realized.
11. STOCKHOLDERS' EQUITY
Common Stock
On September 15, 2010, the Company approved a 1:5 forward split adjustment for the holders of common stock consisting of one share for each of five shares held of record or the September 15, 2010 record date.
On June 21, 2011, the Company approved a 1:10 reverse split of the Company's common stock. The reverse split was effective on October 12, 2011.
-13-
Preferred Stock
The Company authorized 1,000,000 shares of preferred stock to be designated for issuance in connection with the acquisition of Media Top Prim. The preferred shares were convertible into common shares on a 1:1 basis. In 2009, the 1,000,000 preferred shares were converted into 1,000,000 common shares. As of September 30, 2011, no preferred shares were outstanding.
Treasury Stock
On September 22, 2008, the Board of Directors authorized the Company to purchase shares of the Company's common stock in the open market. As of September 30, 2011, the Company repurchased 980 shares in the amount of $9,237. No shares have been repurchased subsequent to September 30, 2011 except as described below. In September 2010, treasury shares increased to 1,176 shares due to the 1:5 forward split adjustment.
On February 2, 2011, the Company entered into an Asset Purchase Agreement with the Company's major shareholder. See Note 5 for further information. The Company received 480,000 shares of Emerging Media Holdings, Inc., valued at $1,800,000. As of September 30, 2011 and December 31, 2010, there were 481,176 and 1,176 shares held as treasury shares, respectively.
12. NET LOSS PER COMMON SHARE
Net loss per common share for the nine and three months ended September 30, 2010 has been revised. The amounts previously reported were as follows:
|
Nine Months Ended
|
Three Months Ended
|
|||||||
|
September 30, 2011
|
September 30, 2011
|
|||||||
|
Loss per common share from
|
||||||||
|
continuing operations - basic
|
||||||||
|
and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
|
Loss per share from discontinued
|
||||||||
|
operations - basic and diluted
|
$ | (0.10 | ) | $ | (0.10 | ) | ||
|
Weighted average common shares
|
||||||||
|
outstanding - basic and diluted
|
17,814,711 | 17,041,557 | ||||||
13. DISCONTINUED OPERATIONS
On September 10, 2010, the Company consummated the sale of its 80% owned subsidiary, Genesis. The Company received 844,390 shares of its common stock, valued at $3,377,560, from certain of its shareholders as proceeds in connection with the sale. A gain of approximately $109,000 was recognized in connection with the sale.
-14-
The operating results of Genesis have been classified as discontinued operations and are summarized as follows:
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Sales
|
$ | - | $ | 569,698 | $ | - | $ | 286,365 | ||||||||
|
Loss before income tax benefit
|
- | 1,945,670 | - | (467,788 | ) | |||||||||||
|
Loss from discontinued operations
|
- | 1,945,670 | - | (467,788 | ) | |||||||||||
14. BUSINESS SEGMENT INFORMATION
FASB ASC 280-10-10, "Segment Reporting" ("ASC 280-10-10"), established standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available is evaluated regularly by management. The Company is organized by two geographical area segments. The Company has only one remaining operating segment. The Company's road construction segment was sold in September 2010 and the information for the nine months ended September 30, 2011 and 2010 is included in discontinued operations.
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net Revenue by Geographic Areas:
|
||||||||||||||||
|
United States
|
$ | - | $ | - | $ | 282,219 | $ | - | ||||||||
|
Europe
|
1,039,254 | 2,223,779 | - | 784,685 | ||||||||||||
| $ | 1,039,254 | $ | 2,223,779 | $ | 282,219 | $ | 784,685 | |||||||||
|
September 30,
|
December 31,
|
|||||||||||||||
|
Total Assets:
|
2011 | 2010 | ||||||||||||||
|
United States
|
$ | 4,261 | $ | 249,297 | ||||||||||||
|
Europe
|
722,552 | 5,252,179 | ||||||||||||||
| $ | 726,813 | $ | 5,501,476 | |||||||||||||
15. COMMITMENTS AND CONTINGENCIES
Contracts
The Company entered into a retransmission rights agreement with Russian Broadcasting Channel JSC “TNT-Teleset” owned by Gazprom Media, a wholly-owned subsidiary of GazProm Corporation (a related party to Alkasar Region LLC, a 50% investor in Alkasar Media Services S.R.L.) to retransmit programs from this television network. The contract is on a long term basis through 2012 and the Company will pay approximately $200,000 in 2011. For the nine months ended September 30, 2011 and 2010, the Company expensed $197,945 and $207,764, respectively.
-15-
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report. Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.
Overview
Organization
Emerging Media Holdings, Inc. was incorporated in the State of Nevada on September 3, 2003. The Company directs its operations through its subsidiary, ICS “Media Top Prim SRL” which owns the TNT Channel in Chisinau, Moldova. Following the sale of the Company’s interest in SC Genesis International S.A. in September 2010, and of its media subsidiaries in Moldova, IM “Media Alianta” SRL (formerly SC “Cabavarum” SRL), SA “Analytic Media Group”, ("AMG"), and ICS “Alkasar Media Services SRL, the Company’s primary activities are in radio and television broadcasting through the TNT Channel.
Termination of Agreement with bNET Communications, Inc. and 1-for-10 Reverse Split of Our Common Stock
On September 30, 2011, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with bNET Communications, Inc., a Nevada corporation (“bNET”), pursuant to which the Company agreed to purchase bNET’s digital media library in exchange for shares of the Company’s common stock. The total number of shares of the Company’s Common Stock to be issued to bNET under the Purchase Agreement was Forty Five Million (45,000,000) shares (the “Purchase Price”) after giving effect to a 1-for-10 reverse split (the “Reverse Split”) contemplated under the Schedule 14C Information Statement, as amended, filed with the U.S. Securities and Exchange Commission on August 17, 2011). The 1:10 reverse split was approved by FINRA and was effective for trading purposes on October 12, 2011. Immediately following the Reverse Split, the Company had 745,095 shares of common stock outstanding. The closing under the Purchase Agreement was subject to a number of conditions, and on November 7, 2011, the Company terminated the Purchase Agreement due to the failure of bNET to satisfy closing conditions agreed to by the parties.
Sale of IM “Media Alianta” SRL, SA “Analytic Media Group” and ICS “Alkasar Media Services SRL
On February 2, 2011, the Company entered into an Asset Purchase Agreement with the Company's major shareholder. The Agreement provided for the sale of the Company's following subsidiaries: IM Media Alianta SRL, SA Analytic Media Group and ICS Alkazar Media Services SRL, which included the Company's TV7 television channel. The Company received 4,800,000 shares of its common stock, valued at approximately $1,800,000, in exchange for the sale of these subsidiaries.
-16-
Termination of Exchange Agreement with Men’s Medical Corporation
On February 10, 2011, we entered into an Exchange Agreement (the “Exchange Agreement”), dated as of January 1, 2011, between the Company and Men’s Medical Corporation, a Florida corporation (“MMC”). In exchange for all of the outstanding shares of capital stock of MMC which were owned by Saddleworth Ventures, LLC, in turn owned by Chris Smith, we had agreed to issue to Mr. Smith 1,000 shares of a Series A Convertible Preferred Stock (the “Series A Preferred Stock”) of a class of preferred stock to be to be authorized. The Series A Preferred Stock would have been convertible into and voted as 25,000,000 shares of common stock, which would have effectively given control of our company to Chris Smith. On February 16, 2011, we filed an Information Statement on Schedule 14C with the Securities and Exchange Commission for the authorization of the class of Preferred Stock and for a 1-for-10 reverse split of our outstanding common stock. In connection with the Exchange Agreement, Chris Smith was appointed as a director and as our President and Chief Executive Officer. On May 31, 2011, our Board of Directors agreed with Chris Smith and MMC, effective immediately, to terminate the Exchange Agreement and to void any rights of the stockholders of MMC to the 1,000 shares of Series A Preferred Stock which were to have been issued in the exchange.
Both parties to the MMC transaction had concluded it was not in their best interests to proceed with closing the transaction, one primary reason being that MMC was unable to provide audited financial statements reflecting the acquisition of a minimum of three men’s health clinics, as agreed by the parties and required by the Exchange Agreement. In that it was terminated prior to completion of closing, the transaction between the Company and MMC is not reflected in the Company’s financial statements for the period ended September 30, 2011 included in this report, and had no effect on the Company’s results of operation or financial position for or as of the end of that period.
Sale of SC Genesis International S.A.
We had acquired in the fourth quarter of 2009 and the first quarter of 2010 eighty (80%) of the outstanding shares of SC Genesis International S.A., a joint stock company incorporated under the laws of Romania (“Genesis”), for $4,800,000, and the issuance of 1,250,000 shares of our common stock. Genesis has, as its principal business, the construction of roads and highways. On August 3, 2010, we entered into an agreement with Stipula Financial Inc., a British Virgin Islands corporation (“Stipula Financial”), pursuant to which the Stipula Financial agreed to purchase from us the eighty (80%) percent of the outstanding shares of Genesis that we owned. The closing of the sale of our interest in Genesis took place on September 10, 2010, in exchange for the assignment and transfer to us of 8,443,900 shares of our common stock by existing shareholders of our company. Following the return of the 8,443,900 shares of common stock to our treasury, we had 10,209,100 shares of common stock outstanding as of the date of this report.
Basis of Presentation
Throughout this Form 10-Q, the terms "we," "us," "our," "EMH" and "Company" refer to Emerging Media Holdings, Inc., a Nevada corporation, and, unless the context indicates otherwise, includes our subsidiaries.
Significant Accounting Policies
The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There were no significant changes to these accounting policies during the six months ended September 30, 2011 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
Trends Affecting our Business
The Company believes the key factors affecting the Company's first quarter 2011 and/or future results include the following:
-17-
|
|
·
|
The Company's media business revenues decreased during the first nine months of 2011 due to the sale of three of the Company's media subsidiaries which included TV channel TV 7. The Company continues its operations through its subsidiary, ICS Media Top Prim SRL which owns the TNT channel in Chisnau, Moldova.
|
|
|
·
|
The Company's media business operations were impacted during the first nine months due to increased costs at its TNT channel as the media business increased focus on the production of high quality broadcasting, which required purchases of more expensive services.
|
|
|
·
|
The Company's media business experienced increased competition from new TV channels during the first nine months of 2011 that may affect future operations throughout 2011.
|
Results of Operations
Nine Months ended September 30, 2011 compared to the Nine Months ended September 30, 2010.
REVENUES. Revenues from continuing operations for the nine month period ended September 30, 2011, decreased by $1,184,525 or 46% to $1,039,254 as compared to $2,223,779 during the comparable period of 2010. The Company attributes the decrease primarily to the sale of three of the Company's media subsidiaries in February 2011 offset, in part, to increases in advertising with the TV channel TNT during 2011.
COST OF SALES. Cost of sales from continuing operations for our continuing media business decreased by approximately $945,463 or 70% to $575,287 for the nine month period ending September 30, 2011, from $1,520,750 for the comparable period in 2010.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for our media businesses decreased by $360,394 or 40% to $392,576 for the nine month period ending September 30, 2011 from $772,970 for the comparable period in 2010. The Company attributes the decrease primarily to the sale of three of the Company's media subsidiaries.
LOSS FROM OPERATIONS. We had losses from continuing media operations of $2,718,914 (which included a loss of $2,870,845 on the disposition of subsidiaries) for the nine months ended September 30, 2011 as compared to a loss of $59,031 for the comparable period in 2010.
OTHER ITEMS. Other income (expense) increased from $10,910 in the nine months ended September 30, 2010 to an expense of $2,870,305 in the current period due to loss in the current period of $2,870,845 on disposition of three of the Company's media subsidiaries.
INCOME TAXES. Income taxes were not provided for the periods ended September 30, 2011 and September 30, 2010 as the Moldovan tax rate was 0% for 2010 and the Company incurred losses during both periods.
Three Months ended September 30, 2011 compared to the Three Months ended September 30, 2010.
REVENUES. Revenues from continuing operations for the three month period ended September 30, 2011, decreased by $502,466 or 64% to $282,219 as compared to $784,665 during the comparable period of 2010. The Company attributes the decrease primarily to the sale of three of the Company's media subsidiaries in February 2011 offset, in part, to increases in advertising with the TV channel TNT during 2011.
COST OF SALES. Cost of sales from continuing operations for our continuing media business decreased by approximately $357,593 or 70% to $150,725 for the three month period ending September 30, 2011, from $508,318 for the comparable period in 2010.
-18-
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for our media businesses decreased by $157,079 or 60% to $101,676 for the three month period ending September 30, 2011 from $458,755 for the comparable period in 2010. The Company attributes the decrease primarily to the sale of three of the Company's media subsidiaries.
INCOME FROM OPERATIONS. We had net earnings from continuing media operations of $29,318 for the three months ended September 30, 2011 as compared to income of $20,500 for the comparable period in 2010.
OTHER ITEMS. Other income (expense) decreased from $2,888 in the three months ended September 30, 2010 to an expense of $(500) in the current.
INCOME TAXES. Income taxes were not provided for the periods ended September 30, 2011 and September 30, 2010 as the Moldovan tax rate was 0% for 2010 and the Company incurred losses during both periods.
LIQUIDITY AND CAPITAL RESOURCES
In October 2009, the Company consummated an acquisition of 60% of the outstanding shares of SC Genesis International S.A. owned by IPA International Project Establishment. The consideration paid by the Company for the acquisition of Genesis was approximately $4,800,000. The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations of Genesis were included in the consolidated financial statements from October 1, 2009. In February 2010, the Company acquired an additional 20% of the outstanding common stock of SC Genesis International S.A. held by the noncontrolling interests in exchange for 1,250,000 shares of common stock of the Company, valued at $500,000, the fair value of the common stock at the date of issuance. On August 3, 2010, the Company entered into an agreement for the purchase by a third party of the eighty (80%) percent of the outstanding shares of SC Genesis International S.A. owned by the Company. The consideration for the sale was the assignment and transfer to the Company by certain of the Company’s shareholders of 8,443,900 shares of the Company’s common stock. The closing was consummated on September 10, 2009. The Company recorded a gain on the sale of Genesis of approximately $109,000 which is included in discontinued operations in the Company’s consolidated statement of operations for the year ended December 31, 2010.
On February 2, 2011, the Company entered into an Asset Purchase Agreement ("Agreement") with the Company's major shareholder. The Agreement provides for the sale of the common stock of the Company's following subsidiaries: IM Media Alianta SRL, SA Analytic Media Group and ICS Alkazar Media Services SRL, which included the Company's TV7 television channel. The Company received 4,800,000 common shares of Emerging Media Holdings, valued at approximately $1,800,000. The shares are held as treasury shares. The Company will continue to operate its other media subsidiaries consisting of the "TNT" television channel.
During the first nine months of 2011, the Company has funded its capital requirements primarily through operating activities. As of September 30, 2011 the Company had a cash balance of $19,319. This compares with a cash balance of $37,458 at December 31, 2010. The Company expects cash flow from operations to fund the Company’s media operating activities for the next twelve months.
The Company had a working capital surplus of approximately $391,561 and a stockholders’ equity of approximately $577,140 as of September 30, 2011. Cash and cash equivalents decreased approximately $8,000 for the nine months ended September 30, 2011. The decrease is primarily attributable to net cash used in operations of $21,228 and net cash used in investing activities of $(18,480), net of cash provided by financing activities of $21,362.
-19-
Accounts receivable, net of allowances, were approximately $153,937 at September 30, 2011.
Off Balance Sheet Arrangements
We do not currently have any off balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K.
Inflation
To date inflation has not had a material impact on our operations.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Risk - Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because our revenue is reported in U.S. dollars, fluctuating exchange rates of the local currencies, when converted into U.S. dollars, may have an adverse impact on our revenue and income. We have not hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. We do not engage in financial transactions for trading or speculative purposes.
Credit Risk - Our accounts receivables are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.
ITEM 4T. Controls and Procedures.
As of September 30, 2011, the end of the period covered by this quarterly report, the Chief Executive and Chief Financial Officer of the Company (the “Certifying Officer”) conducted an evaluation of the Company’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated there under.
Further, there were no changes in the Company’s internal control over financial reporting during the third fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
-20-
PART II
Other Information
Item 6. Exhibits.
|
31
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
pursuant to Rule 13a-14(a)
|
|
|
32
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
|
pursuant to 18 U.S.C. Section 1350
|
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
|
SEC Ref. No.
|
Title of Document
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EMERGING MEDIA HOLDINGS, INC.
(Registrant)
|
EMERGING MEDIA HOLDINGS, INC
|
|||||
|
Date: November 21, 2011
|
By:
|
/s/ Iurie Bordian
|
|||
|
Iurie Bordian, Chief Executive Officer and Chief Financial Officer
|
|||||
-21-