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EX-31.1 - CERTIFICATION - Noble Medical Technologies, Inc.v241195_ex31-1.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
 
OR
 
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 333-150483
 
NOBLE MEDICAL TECHNOLOGIES, INC.
(Exact name of Registrant as Specified in its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
20-0587718
(I.R.S. Employer
Identification Number)
 
4751 Wilshire Blvd., 3rd Floor
Los Angeles, California  90010
Canada
Telephone (438) 8701351
(Address of Principal Executive Offices including Zip Code)
 
(310) 601-2500
(Registrant’s Telephone Number, Including Area Code)
 
N/A
(Former address and telephone number, if changed since last report)
 
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
 
Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Website, 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, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x
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
 
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  4,188,000 shares of common stock, par value $0.0001 per share, as of November 21, 2011.

 
 

 
 
TABLE OF CONTENTS
 
TO QUARTERLY REPORT ON FORM 10-Q
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011

 
Page
 
PART 1. FINANCIAL INFORMATION
2
   
Item 1. Financial Statements (unaudited)
2
   
BALANCE SHEETS
2
   
STATEMENTS OF OPERATIONS
3
   
STATEMENT OF STOCKHOLDERS’ (EQUITY) DEFICIT
4
   
STATEMENTS OF CASH FLOWS
5
   
NOTES TO THE FINANCIAL STATEMENTS
6
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk
24
   
Item 4. Controls and Procedures
24
   
PART II. OTHER INFORMATION
26
   
Item 1 – Legal Proceedings
26
   
Item 1A – Risk Factors
26
   
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
26
   
Item 3 – Defaults Upon Senior Securities
26
   
Item 4 – (Reserved)
26
   
Item 5 – Other Information
26
   
Item 6 – Exhibits
26

 
 
 

 

Noble Medical Technologies, Inc.
 
September 30, 2011 and 2010
 
Index to Financial Statements
 

Contents
Page(s)
Balance Sheets at September 30, 2011 (Unaudited) and December 31, 2010
2
Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)
3
Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2011 (Unaudited)
3
Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)
4
Notes to the Financial Statements (Unaudited)
4


 
 

 

PART 1. FINANCIAL INFORMATION
 
Item 1.  Financial Statements (unaudited)

 
 NOBLE MEDICAL TECHNOLOGIES, INC.
 
 BALANCE SHEETS

   
September 30, 2011
   
December 31, 2010
 
   
(Unaudited)
       
ASSETS
           
CURRENT ASSETS:
           
Cash
  $ 264,066     $ 527,993  
Travel advances
    3,500       -  
                 
Total Current Assets
    267,566       527,993  
                 
OFFICE EQUIPMENT:
               
Office equipment
    11,458       11,458  
Accumulated depreciation
    (2,278 )     (559 )
                 
Office Equipment, net
    9,180       10,899  
                 
Total Assets
  $ 276,746     $ 538,892  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
CURRENT LIABILITIES:
               
Accounts payable
  $ 60,015     $ -  
Accrued expenses
    16,821       28,714  
Accrued expenses - related party
    11,261       65,007  
Notes payable, net of discount
    860,319       187,500  
Note payable - director, net of discount
    271,875       187,500  
                 
Total Current Liabilities
    1,220,291       468,721  
                 
LONG-TERM SERVICE ARRANGEMENT - STOCKHOLDER
    249,999       -  
                 
Total Liabilities
    1,470,290       468,721  
                 
STOCKHOLDERS' EQUITY (DEFICIT):
               
Preferred stock at $0.0001 par value: 1,000,000 shares authorized,
               
none issued or outstanding
    -       -  
Common stock at $0.0001 par value: 20,000,000 shares authorized,
               
4,188,000 shares issued and outstanding
    419       419  
Additional paid-in capital
    663,466       319,090  
Accumulated deficit
    (1,857,429 )     (249,338 )
                 
Total Stockholders' Equity (Deficit)
    (1,193,544 )     70,171  
                 
Total Liabilities and Stockholders' Equity (Deficit)
  $ 276,746     $ 538,892  
 
See accompanying notes to the financial statements.
 
2

 

 NOBLE MEDICAL TECHNOLOGIES, INC.
 
 STATEMENTS OF OPERATIONS

 
For the Three Months
   
For the Three Months
   
For the Nine Months
   
For the Nine Months
 
 
Ended
   
Ended
   
Ended
   
Ended
 
 
September 30, 2011
   
September 30, 2010
   
September 30, 2011
   
September 30, 2010
 
 
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                         
NET REVENUES
  $ -     $ -     $ -     $ -  
                                 
OPERATING EXPENSES:
                               
Consulting fees
    57,820       -       176,450       -  
Management service - stockholder
    203,333       -       609,999       -  
Professional fees
    64,535       7,500       158,212       22,286  
Officer's compensation
    1,042       -       3,126       -  
General and administrative expenses
    15,346       -       72,895       -  
                                 
Total operating expenses
    342,076       7,500       1,020,682       22,286  
                                 
LOSS FROM OPERATIONS
    (342,076 )     (7,500 )     (1,020,682 )     (22,286 )
                                 
OTHER (INCOME) EXPENSE:
                               
Provision for loan loss
    -       -       250,000       -  
Amortization of notes payable discount
    90,940       -       254,069       -  
Amortization of notes payable discount - director
    28,125       -       84,375       -  
Interest income
    (227 )     -       (1,035 )     -  
                                 
Other (income) expense, net
    118,838       -       587,409       -  
                                 
LOSS BEFORE INCOME TAXES
    (460,914 )     (7,500 )     (1,608,091 )     (22,286 )
                                 
INCOME TAX PROVISION
    -       -       -       -  
                                 
NET LOSS
  $ (460,914 )   $ (7,500 )   $ (1,608,091 )   $ (22,286 )
                                 
NET LOSS PER COMMON SHARE:
                               
- BASIC AND DILUTED
  $ (0.11 )   $ (0.00 )   $ (0.38 )   $ (0.01 )
                                 
Weighted average common shares outstanding
                         
- basic and diluted
    4,188,000       4,188,000       4,188,000       4,188,000  

 See accompanying notes to the financial statements.

 
3

 

NOBLE MEDICAL TECHNOLOGIES, INC.
 
STATEMENT OF STOCKHOLDERS' (EQUITY) DEFICIT
For the Interim Period Ended September 30, 2011
 

   
Common Stock, $0.0001 Par Value
   
Additional
         
Total
 
   
Number of
         
Paid-in
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity (Deficit)
 
                               
Balance, December 31, 2009
    4,188,000     $ 419     $ 79,090     $ (89,044 )   $ (9,535 )
                                         
Contributed capital
                    15,000               15,000  
                                         
Issuance of warrants in connection with
                                       
notes payable issued in the first quarter of 2010
              225,000               225,000  
                                         
Net loss
                            (160,294 )     (160,294 )
                                         
Balance, December 31, 2010
    4,188,000       419       319,090       (249,338 )     70,171  
                                         
Issuance of warrants in connection with
                                       
notes payable issued in 2011
                    251,250               251,250  
                                         
Issuance of warrants to COO for future services
              12,500               12,500  
                                         
Issuance of warrants to COO for future services
              (12,500 )             (12,500 )
                                         
Issuance of warrants to Trinad Management, LLC
                                 
for future services
                    360,000               360,000  
                                         
Issuance of warrants to Trinad Management, LLC
                                 
for future services
                    (360,000 )             (360,000 )
                                         
Amortization of warrants issued to officer and stockholder
                                 
for future services received
                    93,126               93,126  
                                         
Net loss
                            (1,608,091 )     (1,608,091 )
                                         
Balance, September 30, 2011
    4,188,000     $ 419     $ 663,466     $ (1,857,429 )   $ (1,193,544 )

See accompanying notes to the financial statements.
 
4

 
NOBLE MEDICAL TECHNOLOGIES, INC.
 
STATEMENTS OF CASH FLOWS

   
For the Nine Months
   
For the Nine Months
 
   
Ended
   
Ended
 
   
September 30, 2011
   
September 30, 2010
 
   
(Unaudited)
   
(Unaudited)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (1,608,091 )   $ (22,286 )
Adjustments to reconcile net loss to net cash used in operating activities
               
Depreciation expense
    1,719       -  
Provision for loan loss
    250,000       -  
Amortization of discount on notes payable
    254,069       -  
Amortization of discount on notes payable - related party
    84,375       -  
Equity instruments based compensation
    93,126       -  
Changes in operating assets and liabilities:
               
Travel advances
    (3,500 )        
Accounts payable
    60,015       -  
Accrued expenses
    (11,893 )     7,286  
Accrued expenses - related party
    (53,746 )     -  
Accrued stockholder services
    249,999       -  
                 
NET CASH USED IN OPERATING ACTIVITIES
    (683,927 )     (15,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Loan receivable - related party
    (250,000 )     -  
Proceeds from notes payable
    670,000       -  
Contribution to capital
    -       15,000  
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    420,000       15,000  
                 
NET CHANGE IN CASH
    (263,927 )     -  
                 
Cash at beginning of period
    527,993       -  
                 
Cash at end of period
  $ 264,066     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  
 
See accompanying notes to the financial statements.
 
5

 
Noble Medical Technologies, Inc.
September 30, 2011 and 2010
Notes to the Financial Statements
(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

Noble Medical Technologies, Inc. (the “Company”) was incorporated on July 25, 2007 under the laws of the State of Delaware.  A substantial portion of the Company’s activities has involved developing a business plan and establishing contacts and visibility in the marketplace.  Due to the recent economic downturn, the Company was unable to receive sufficient funds to commence operations and the Company has not generated any revenue to date. Therefore, the Company has abandoned its plan to engage in developing and marketing enhancements to electrocardiogram (“EKG”) equipment and is currently inactive and is seeking a suitable candidate for a business combination.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation - unaudited interim financial information

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2010 and notes thereto contained in the Company’s Annual Report Form 10-K as filed with the SEC on April 15, 2011.

Use of estimates and assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company’s significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful lives of office equipment; underlying assumptions to estimate the fair value of warrants and options; income tax rate, income tax provision and valuation allowance of deferred tax assets; and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
 
 
6

 

 
Fair value of financial instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.   The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.  
 
Level 2
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly
observable as of the reporting date.    
 
Level 3
Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, travel advances, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.

The Company’s notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at September 30, 2011 and December 31, 2010.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

It is not however, practical to determine the fair value of advances from stockholders due to their related party nature.

Carrying value, recoverability and impairment of long-lived assets

The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which includes office equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.  Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

Cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 Office equipment
 
Office equipment is recorded at cost. Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred. Depreciation of office equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of five (5) years.  Upon sale or retirement of office equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
 
 
7

 

 
Discount on notes payable
 
The Company follows subtopic 470-20 of the FASB Accounting Standards Codification (“Subtopic 470-20”) “Debt with Conversion and Other Options,” when accounting for notes payable. The Company allocates the proceeds received between notes payable and warrants, if any. The resulting warrants discount from the face amount of the notes payable is amortized using the effective interest method over the lives of the debt instruments.
 
The fair value of warrants is estimated on the date of issuance using a Black-Scholes Option-Pricing Model.  The ranges of assumptions for inputs are as follows:
 
·
The Company uses historical data to estimate notes holder exercise behavior.  The expected life of warrants granted is derived from paragraph 718-10-S99-1 of the FASB Accounting Standards Codification and represents the period of time the warrants are expected to be outstanding.
 
·
The expected volatility is based on a combination of the historical volatility of the comparable companies’ stock over the contractual life of the options.
 
·
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option.
 
·
The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

 
Related parties
 
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
 
Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b.  Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c.  trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e.  management of the Company; f.  other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g.  Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
 
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include:  a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
 
 
8

 
 
Commitments and contingencies
 
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Stock-based compensation for obtaining employee services
 
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
 
The fair value of each option award is estimated on the date of grant using a Black-Scholes Option-Pricing Model.  The ranges of assumptions for inputs are as follows:
 
·
The Company uses historical data to estimate employee termination behavior.  The expected life of options granted is derived from paragraph 718-10-S99-1 of the FASB Accounting Standards Codification and represents the period of time the options are expected to be outstanding.
 
·
The expected volatility is based on a combination of the historical volatility of the comparable companies’ stock over the contractual life of the options.
 
 
9

 
 
·
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option.
 
·
The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

 
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
 
Equity instruments issued to parties other than employees for acquiring goods or services
 
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (“Section 505-50-30”).
 
Pursuant to Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
 
Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.
 
Income taxes

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income and comprehensive income in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
 
 
10

 

 
The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

Net income (loss) per common share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through warrants.
 
The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation for the interim period ended September 30, 2011 and 2010 as they were anti-dilutive:
 
   
Potentially outstanding dilutive common shares
 
   
For the Interim
Period ended
September 30, 2011
   
For the Interim
Period ended
September 30, 2010
 
             
Warrants issued on December 29, 2010 in connection with the issuance of notes payable to purchase 1,000,000 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    1,000,000       -  
                 
Warrants issued on January 18, 2011 in connection with the issuance of notes payable to purchase 333,333 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    333,333       -  
                 
Warrants issued on January 24, 2011 in connection with the issuance of notes payable to purchase 166,666 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    166,666       -  
                 
Warrants issued on February 4, 2011 in connection with the issuance of notes payable to purchase 833,333 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    833,333       -  
                 
Warrants issued on February 4, 2011 in connection with the issuance of notes payable to purchase 166,666 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    166,666       -  
 
 
11

 
 
 
 
                 
Warrants issued on February 7, 2011 in connection with the issuance of notes payable to purchase 66,667 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    66,667       -  
                 
Warrants issued on April 15, 2011 in connection with the issuance of notes payable to purchase 333,333 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    333,333       -  
                 
Warrants issued on April 13, 2011 in connection with the issuance of notes payable to purchase 166,667 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    166,667       -  
                 
Warrants issued on April 13, 2011 in connection with the issuance of notes payable to purchase 166,667 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
    166,667       -  
                 
Sub-total - warrants issued with Notes payable
    3,233,332       -  
                 
Warrants issued on December 17, 2010 in connection with the issuance of notes payable – director to purchase 1,000,000 shares of the Company’s common shares with an exercise price of $0.10 per share expiring ten (10) years from date of issuance
      1,000,000       -  
                 
Sub-total - warrants issued with Notes payable - director
    1,000,000       -  
                 
Warrants issued to COO on February 22, 2011 as compensation to purchase 250,000 shares of the Company’s common shares with an exercise price of $1.00 per share expiring three (3) years from date of issuance
    250,000       -  
                 
Warrants issued to Trinad Management LLC as compensation to purchase 2,000,000 shares of the Company’s common shares with an exercise price of $0.10 per shares expiring ten (10) years from date of issuance
    2,000,000       -  
                 
Sub-total - warrants issued for services
    2,250,000       -  
                 
Total potentially outstanding dilutive common shares
    6,483,332       -  

Cash flows reporting
 
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
 
 
12

 
 
Subsequent events
 
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
 
 
Recently issued accounting pronouncements

In May 2011, the FASB issued the FASB Accounting Standards Update No. 2011-04 “Fair Value Measurement” (“ASU 2011-04”). This amendment and guidance are the result of the work by the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards (IFRSs).

This update does not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:
 
·
An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other price risk) and credit risk are managed on the basis of the entity’s net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured on the basis of the reporting entity’s net, rather than gross, exposure to those risks.
   
·
In the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability consistent with the unit of account.
   
·
Additional disclosures about fair value measurements.

The amendments in this Update are to be applied prospectively and are effective for public entity during interim and annual periods beginning after December 15, 2011.

In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.

The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
 
 
13

 

 
As reflected in the accompanying financial statements, the Company had an accumulated deficit at September 30, 2011 and had a net loss and net cash used in operating activities for the interim period then ended, with no revenues earned since inception.

While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations.  Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 – OFFICE EQUIPMENT

Office equipment, stated at cost, less accumulated depreciation at September 30, 2011 and December 31, 2010 consisted of the following:
 
 
Estimated Useful
Life (Years)
 
September 30, 2011
   
December 31, 2010
 
Office equipment
5
 
$
11,458
   
$
11,458
 
                   
       
11,458
     
11,458
 
                   
Less accumulated depreciation
     
(2,278
)
   
(559
)
               
     
$
9,180
   
$
10,899
 
 
Depreciation expense for the interim period ended September 30, 2011 and 2010 was $1,719 and $0, respectively.
 
NOTE 5 – NOTES PAYABLE

Notes payable

On December 29, 2010, the Company entered into two (2) 10% promissory notes payable of $200,000 and $100,000 with Reindeer Partners LLC and Evan Azriliant, respectively. In connection with the issuance of the promissory notes, the Company granted to the payees warrants to purchase 333,333 and 666,667, or 1,000,000 common shares in aggregate with an exercise price of $0.10 per share expiring ten (10) year from the date of issuance. The promissory notes mature on December 29, 2011 with principal and interest due on the date of maturity. 
 
On January 18, 2011, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement #1”) pursuant to which the Company issued a Promissory Note for $100,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 333,333 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on January 17, 2012, and is subject to interest at an annual rate of 10% with principal and interest due on the date of maturity.  The Warrant vests over a period of one year, 20% on February 1, 2011 and 80% on January 1, 2012.  The vesting of the Warrant has certain acceleration clauses.  
 
On January 24, 2011, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement #2”) pursuant to which the Company issued a Promissory Note for $50,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 166,666 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on January 23, 2012, and is subject to interest at an annual rate of 10% with principal and interest due on the date of maturity.  The Warrant vests over a period of one year, 20% on February 1, 2011 and 80% on January 1, 2012.  The vesting of the Warrant has certain acceleration clauses.  
 
 
14

 

 
On February 4, 2011, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement #3”) pursuant to which the Company issued a Promissory Note for $250,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 833,333 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on February 3, 2012, and is subject to interest at an annual rate of 10% with principal and interest due on the date of maturity.  The Warrant vests over a period of one year, 20% on February 14, 2011 and 80% on January 1, 2012.  The vesting of the Warrant has certain acceleration clauses.

On February 4, 2011, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement #4”) pursuant to which the Company issued a Promissory Note for $50,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 166,667 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on February 3, 2012, and is subject to interest at an annual rate of 10% with principal and interest due on the date of maturity.  The Warrant vests over a period of one year, 20% on February 14, 2011 and 80% on January 1, 2012.  The vesting of the Warrant has certain acceleration clauses.  

On February 7, 2011, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement #5”) pursuant to which the Company issued a Promissory Note for $20,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 66,667 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on February 6, 2012, and is subject to interest at an annual rate of 10% with principal and interest due on the date of maturity.  The Warrant vests over a period of one year, 20% on February 7, 2011 and 80% on March 1, 2012.  The vesting of the Warrant has certain acceleration clauses.

On April 13, 2011, the Company entered into two securities purchase agreements (“Securities Purchase Agreement #6&7”) pursuant to which the Company issued two Notes each for $50,000 principal amount ("Notes") and a ten (10) year common stock warrant to purchase 166,667 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Notes mature on April 13, 2012, and are subject to interest at 10% per annum with principal and interest due upon maturity.  The Warrant vests over a period of one (1) year, 20% on April 13, 2011 and 80% on January 1, 2012.  The vesting of the Warrant has certain acceleration clauses.
 
On April 15, 2011, the Company entered into a securities purchase agreement (“Securities Purchase Agreement #8”) pursuant to which the Company issued a Note for $100,000 principal amount ("Note") and a ten (10) year common stock warrant to purchase 333,333 shares of the Company's common stock at an exercise price of $0.10 per share ("Warrant").  The Note matures on April 15, 2012, and is subject to interest at 10% per annum with principal and interest due upon maturity.  The Warrant vests over a period of one (1) year, 20% on April 15, 2011 and 80% on April 15, 2012.  The vesting of the Warrant has certain acceleration clauses.
 
The proceeds received from these notes were allocated between the notes payable and the warrants based on their relative fair values.
 
The warrants were valued using the Black-Scholes Option-Pricing Model with the following assumptions:
 
Expected warrant life (year)
           
10.00
 
                 
Expected volatility
           
90.00
%
                 
Average risk-free interest rate
           
3.49
%
                 
Dividend yield
           
0.00
%

 
The Company valued the relative fair value of the warrants granted, estimated on the dates of grant, at $363,750, which was recorded as a discount to the notes and is being amortized over the term of the notes.
 
 
15

 
 
Notes payable consisted of the following at September 30, 2011 and December 31, 2010:
 
   
September 30, 2011
   
December 31, 2010
 
Promissory notes payable with interest at 10% per annum due December 29, 2011
 
$
300,000
   
$
300,000
 
                 
Discount on note payable
   
(112,500
)
   
(112,500
)
                 
Accumulated amortization of discount
   
84,375
     
-
 
                 
     
271,875
     
187,500
 
                 
Promissory notes payable with interest at 10% per annum due January 17, 2012
   
100,000
     
-
 
                 
Discount on note payable
   
(37,500
)
   
(-
)
                 
Accumulated amortization of discount
   
28,125
     
-
 
                 
     
90,625
     
-
 
                 
Promissory notes payable with interest at 10% per annum due January 23, 2012
   
50,000
     
-
 
                 
Discount on note payable
   
(18,750
)
   
(-
)
                 
Accumulated amortization of discount
   
14,065
     
-
 
                 
     
45,315
     
-
 
                 
Promissory notes payable with interest at 10% per annum due February 3, 2012
   
50,000
     
-
 
                 
Discount on note payable
   
(18,750
)
   
(-
)
                 
Accumulated amortization of discount
   
14,065
     
-
 
                 
     
45,315
     
-
 
                 
Promissory notes payable with interest at 10% per annum due February 3, 2012
   
250,000
     
-
 
                 
Discount on note payable
   
(93,750
)
   
(-
)
                 
Accumulated amortization of discount
   
70,314
     
-
 
                 
     
226,564
     
-
 
 
                 
Promissory notes payable with interest at 10% per annum due February 6, 2012
   
20,000
     
-
 
                 
Discount on note payable
   
(7,500
)
   
(-
)
                 
Accumulated amortization of discount
   
5,625
     
-
 
                 
     
18,125
     
-
 
                 
Promissory notes payable with interest at 10% per annum due April 14, 2012
   
100,000
     
-
 
                 
   Discount on note payable
   
(37,500
)
   
-
 
                 
   Accumulated amortization of discount
   
18,750
     
-
 
                 
     
81,250
     
-
 
                 
Promissory notes payable with interest at 10% per annum due April 14, 2012
   
100,000
     
-
 
                 
  Discount on notes payable
   
(37,500)
     
-
 
                 
Accumulated amortization of discount
   
18,750
     
-
 
                 
     
81,250
     
-
 
                 
Total promissory notes payable
   
970,000
     
-
 
                 
Discount on note payable
   
(363,750
)
   
(-
)
                 
Accumulated amortization of discount
   
254,069
     
-
 
             
   
$
860,319
   
$
187,500
 

 
The Company recorded $254,069 and $0 amortization of the discount to the notes for the interim period ended September 30, 2011 and 2010, respectively.
 
Note payable - Director

On December 17, 2010, the Company entered into a 10% promissory note payable of $300,000 with Jay Krigsman maturing on December 15, 2011. In connection with the issuance of the promissory note, the Company granted to the Payee a warrant to purchase 1,000,000 common shares with an exercise price of $0.10 per share expiring ten (10) years from the date of issuance. The note matures on December 15, 2011 with principal and interest due on the date of maturity.  
 
The proceeds received from this note were allocated between the note payable and the warrant at $187,500 and $112,500 respectively based on their relative fair values.
 
 
16

 
 
The warrant was valued using the Black-Scholes Option-Pricing Model with the following assumptions:
 
Expected life (year)
           
10.00
 
                 
Expected volatility
           
90.00
%
                 
Risk-free interest rate
           
3.33
%
                 
Dividend yield
           
0.00
%
 
The Company valued the relative fair value of the warrant granted, estimated on the date of grant, at $112,500, which was recorded as a discount to the notes and is being amortized over the term of the promissory note.

Note payable – director consisted of the following at September 30, 2011 and December 31, 2010:
 
   
September 30, 2011
   
December 31, 2010
 
Promissory notes payable with interest at 10% per annum due December 29, 2011
 
$
300,000
   
$
300,000
 
                 
Discount on note payable
   
(112,500
)
   
(112,500
)
                 
Accumulated amortization of discount
   
84,375
     
-
 
                 
   
$
271,875
   
$
187,500
 

The Company recorded $84,375 and $0 amortization of the discount to the note – director for the interim period ended September 30, 2011 and 2010, respectively.

NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)

Shares authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Twenty One Million (21,000,000) shares of which One Million (1,000,000) shares shall be Preferred Stock, par value $.001 per share, and Twenty Million (20,000,000) shares shall be Common Stock, par value $.001 per share.

Capital contribution

On June 30, 2009, net accrued expenses of $21,296 as of February 6, 2009 were assumed by certain stockholders of the Company and have been reclassified to additional paid-in capital.

For the period from July 1, 2009 through December 31, 2009, certain stockholders of the Company paid $11,213 professional fees on behalf of the Company and contributed the payments as capital.

For the year ended December 31, 2010, certain stockholders of the Company paid $15,000 of professional fees on behalf of the Company and contributed the payments as capital.
 
 
17

 

 
Warrants issued to officer

On February 22, 2011, effective January 1, 2011, the Company appointed Elliot Goldman as Chief Operating Officer of the Company.  Mr. Goldman was issued a warrant to purchase 250,000 shares of the Company's common stock at an exercise price of $1.00 per share expiring ten (10) years from the date of issuance for his service of three (3) years.  The Company valued the warrant granted using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:
 
Expected life (year)
           
3.00
 
                 
Expected volatility
           
90.00
%
                 
Risk-free interest rate
           
1.22
%
                 
Dividend yield
           
0.00
%

The fair value of the warrant granted, estimated on the date of grant, was $12,500 and is being amortized over the period of service of three (3) years.

The Company recorded $3,126 and $0 as compensation - officer for the interim period ended September 30, 2011 and 2010, respectively.

The table below summarizes the Company’s stock warrants activities through September 30, 2011:
 
   
Number of
Warrant 
Shares
Exercise 
Price Range
Per Share
Weighted 
Average
Exercise Price
 
Fair Value at
Date
of Issuance
Aggregate
Intrinsic
Value
           
 
 
Balance, December 31, 2009
   
-
   
$
-
   
$
-
   
$
-
   
$
-
 
                                         
Granted
   
2,000,000
     
0.10
     
0.10
     
225,000
     
200,000
 
Cancelled
   
(-
)
   
-
     
-
     
-
     
-
 
Exercised
   
(-
)
   
-
     
-
     
-
     
-
 
Expired
   
-
     
-
     
-
     
-
     
-
 
Balance, December 31, 2010
   
2,000,000
   
$
0.10
   
$
0.10
   
$
225,000
   
$
200,000
 
                                         
Granted
   
4,483,332
     
0.10 – 1.00
     
0.18
     
623,750
     
423,334
 
Cancelled
   
(-
)
   
-
     
-
     
-
     
-
 
Exercised
   
(-
)
   
-
     
-
     
-
     
-
 
Expired
   
-
     
-
     
-
     
-
     
-
 
Balance, September 30, 2011
   
6,483,332
   
$
0.10 – 1.00
   
$
0.16
   
$
848,750
   
$
623,334
 
                                         
Vested and exercisable, September 30, 2011
   
2,896,666
   
$
0.10 – 1.00
   
$
0.18
   
$
457,750
 
 
$
284,667
 
                                         
Unvested, September 30, 2011
   
3,586,666
   
$
0.10 – 1.00
   
$
0.15
   
$
391,000
   
$
338,667
 
 
The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2011:
 
   
Warrants Outstanding
 
Warrants Vested and Exercisable
 
Range of Exercise Prices
 
Number
Outstanding
 
Average
Remaining
Contractual Life 
(in years)
 
Weighted Average
Exercise Price
 
Number
Vested and Exercisable
Average Remaining
Contractual Life  
(in years)
 
Weighted
Average
Exercise Price
 
                               
$0.10
   
6,233,332
 
9.37
 
$
0.10
 
2,846,666
9.37
 
$
0.10
 
                               
$1.00
   
250,000
 
2.40
 
$
1.00
 
50,000
2.40
 
$
1.00
 
                               
$0.10 - $ 1.00
   
6,483,332
 
9.11
 
$
0.13
 
2,896,666
9.11
 
$
0.13
 
 
 
 
18

 

 
NOTE 7 – RELATED PARTY TRANSACTIONS

Related parties

 
Related parties with whom the Company had transactions are:
 
Related Parties
 
Relationship
     
Robert Ellen
 
Chief Executive Officer of the Company
     
Elliot Goldman
 
Chief Operating Officer of the Company
     
Cameo Stars, LLC
 
An entity of which the CEO of the Company is a Co-Chairman
     
Trinad Management, LLC
 
A majority stockholder of the Company

Loan receivable – related party and impairment loss

On April 4, 2011, the Company entered into a Loan Agreement (“Loan Agreement”) with Cameo Stars, LLC (“Cameo”), an entity  of which the Chairman and CEO of the Company is a Co-Chairman.  Pursuant to the Loan Agreement, the Company agreed to loan Cameo the principal amount of $250,000 in accordance with a senior promissory note issued to the Company on the same date (the “Note”).  Principal and interest at 10% per annum are due April 4, 2012.  The Loan Agreement provides a right of first refusal to the Company to consummate a Financing (as defined in the Loan Agreement) with Cameo or any of its affiliates at anytime while the principal balance remains outstanding under the Note.
 
In order to secure Cameo’s obligations under the Loan Agreement, the Company and Cameo entered into a Security Agreement (the “Security Agreement”), pursuant to which Cameo has granted the Company a security interest in substantially all of its assets.
 
In addition, Robert Ellin, Company’s Chief Executive Officer, agreed to provide strategic, operational, management and financial advice and consultation to Cameo, and serve as the Co-Chairman of the Board of Cameo.  Cameo issued Mr. Ellin a five year warrant to purchase 1,349,851 common unit interests in Cameo with an exercise price of $0.01 per unit.  The warrant may be cancelled by Cameo if Cameo satisfies its obligations under the Note within sixty (60) days of the issuance of the Note, or within thirty (30) days prior to the closing of a pending equity transaction of at least $2,000,000 of equity during the term of the warrant.  The Loan Agreement, the Note, and the Security Agreement are attached as exhibits to this report and incorporated herein by reference.
 
Management uses estimated expected future cash flows to measure the recoverability of loan receivable held whenever events or circumstances indicate that such a measurement be made. Based on current information and events, the Company estimates it is probable that the Company will be unable to collect all amounts due in accordance with the terms of the loan agreement. As of September 30, 2011, the Company recorded impairment loss on the entire balance of $250,000 loan receivable.
 
 
19

 
 
Free office space

The Company has been provided office space by its principal stockholder at no cost.  The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.

Management service from stockholder
 
On March 21, 2011, effective January 1, 2011, the Company entered into a Management Agreement (“Management Agreement”) with Trinad Management, LLC (“Trinad”), a significant stockholder of the Company.  Pursuant to the Management Agreement, Trinad has agreed to provide certain management services to the Company for a period of three (3) years expiring December 31, 2013, including without limitation the sourcing, structuring and negotiation of a potential business combination transaction involving the Company.  Under the  Management Agreement the Company will compensate Trinad for its services with (i) a fee equal to $2,080,000, with  $90,000 payable in advance of each  consecutive three-month period during the term of the Agreement and  with $1,000,000 due at the end of the 3 year term unless the Management Agreement  is otherwise  terminated earlier in accordance with its terms, and (ii) issuance of a Warrant to purchase 2,000,000 shares of the Company common stock at an exercise price of $0.10 per share (“Warrant”).  The Company valued the warrant granted, using the Black-Scholes - pricing model with the following weighted-average assumptions:
 
Expected life (year)
           
10.00
 
                 
Expected volatility
           
90.00
%
                 
Risk-free interest rate
           
3.34
%
                 
Dividend yield
           
0.00
%

The fair value of the warrant granted, estimated on the date of grant, was $360,000 and is being amortized over the period of service of three (3) years.  The Company recorded $90,000 and $0 as stockholder services for the interim period ended September 30, 2011 and 2010, respectively.

The Company (i)(a) recorded $90,000 per quarter and accrued (i)(b) $83,333 per quarter for the $1,000,000, due at the end of the three (3) year term; and (ii) recorded amortization of $30,000 per quarter for the fair value of the warrant issued on March 21, 2011 in connection with the Management Agreement per quarter, or $203,333 of management services per quarter in aggregate.

The management services from the significant stockholder for the interim period ended September 30, 2011 and 2010 were as follows:
 
   
September 30, 2011
   
September 30, 2010
 
(i) (a) Quarterly management services billed or accrued
 
$
270,000
   
$
-
 
                 
(i) (b) Long-term management services accrued
 
$
249,999
   
$
-
 
                 
(ii) amortization of $30,000 per quarter of the fair value of the warrant issued
 
$
90,000
   
$
-
 
                 
   
$
609,999
   
$
-
 

NOTE 8 – SUBSEQUENT EVENTS

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.  The Management of the Company determined that there were no reportable subsequent events to be disclosed.
 
 
20

 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Statements
 
Certain statements made in this Quarterly Report on Form 10-Q (“Quarterly Report”) are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995). Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements.
 
The forward-looking statements are based on various factors and were derived using numerous assumptions. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
 
References to “Company,” “we” or “us” refer to Noble Medical Technologies, Inc., unless the context requires otherwise.
 
Description of Business
 
At present, the Company has no sources of revenue and we are an inactive company. The Company is currently considered to be a blank check company. The SEC defines those companies as any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) and Rule 3a51-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies. Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a shell company because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of blank check companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.
 
Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
 
The Company currently does not engage in any business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:
 
(i)           filing Exchange Act reports, and
 
(ii)          investigating, analyzing and consummating an acquisition.
 
We believe we will be able to meet these costs through use of funds in our treasury, through deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. There are no assurances that the Company will be able to secure any additional funding as needed. Currently, however our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and enter into a possible reverse merger with such company. Management’s plan includes obtaining additional funds by equity financing through a reverse merger transaction and/or related party advances, however there is no assurance of additional funding being available.
 
 
21

 
 
The Company may consider acquiring a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
 
Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks. Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
 
The Company anticipates that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
 
Management Agreement
 
On March 21, 2011, the Company entered into a Management Agreement (“Management Agreement”) with Trinad Management LLC. Pursuant to the Management Agreement, Trinad Management has agreed to provide certain management services to the Company for a period of three (3) years, including without limitation the sourcing, structuring and negotiation of a potential business combination transaction involving the Company. Under the Management Agreement the Company will compensate Trinad Management for its services with (i) a fee equal to $2,080,000, with $90,000 payable in advance of each consecutive three-month period during the term of the Agreement and with $1,000,000 due at the end of the 3 year term the Management Agreement unless the Management Agreement is otherwise terminated earlier in accordance with its terms, and (ii) issuance of a warrant to purchase 2,000,000 shares of the Company common stock at an exercise price of $0.10 per share. The warrant may be exercised in whole or in part by Trinad Management at any time for a period of ten (10) years.
 
Cameo Stars
 
On April 4, 2011, Company entered into a loan agreement with Cameo Stars, LLC (“Cameo”), a private company engaged in a social entertainment platform that enables celebrities, as well as the stars and characters from leading entertainment companies and consumer brands, to make virtual cameo appearances branded social content. Consumers use the company’s applications to share and collect a variety of “social cameos” directly in their social network pages and mobile devices. Brands and entertainment companies use the Cameo platform to engage consumers with branded social content. Pursuant to the loan agreement, the Company advanced to Cameo $250,000 in accordance with a senior promissory note issued to the Company on the same date. Principal and interest at an annual rate of 10% is due on April 4, 2012. The loan agreement provides a right of first refusal to the Company to consummate a “financing” (as defined in the loan agreement) with Cameo or any of its affiliates at anytime while the principal balance remains outstanding. The note is secured by a security interest in substantially all of Cameo’s assets.
 
 
22

 
 
Liquidity and Capital Resources
 
As of September 30, 2011, the Company had assets equal to $276,746 comprised of cash, advance for travel,and office equipment. This compares with assets of $538,892, comprised of cash and office equipment as of December 31, 2010. The Company had current liabilities of $1,220,291, comprised of short term notes outstanding to investors, accounts payable and accrued expenses as of September 30, 2011. This compares with liabilities of $468,721 as of December 31, 2010.
 
The Company has nominal assets and has generated no revenues since inception. The Company is dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
 
On April 13, 2011, the Company entered into two securities purchase agreements with two investors pursuant to which the Company issued each investor a promissory note in the amount of $50,000 and a 10 year common stock warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $0.10 per share.  The notes mature on April 12, 2012, and are subject to interest at 10% per annum with principal and interest due upon maturity. The warrant vests over a period of one year, 20% on April 13, 2011 and 80% on January 1, 2012. The vesting of the warrant will accelerate to 100% upon a liquidity event or funding event as defined in the warrant.
 
On April 15, 2011, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued a promissory note in the amount of $100,000 and a 10 year common stock warrant to purchase 333,333 shares of the Company’s common stock at an exercise price of $0.10 per share. The note matures on April 15, 2012, and is subject to interest at an annual rate of 10%. The warrant vests over a period of one year, 20% on April 15, 2011 and 80% on April 15, 2012. The vesting of the warrant will accelerate to 100% upon a liquidity event or funding event as defined in the warrant.
 
Results of Operations
 
The Company has not conducted any active operations since inception. No revenue has been generated by the Company from July 25, 2007 (Inception) to September 30, 2011. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. These circumstances may hinder the Company’s ability to continue as a going concern. The Company’s plan of operation for the next twelve months is to continue its efforts to locate suitable acquisition candidates.
 
For the three months ended September 30, 2011, the Company had a net loss of $460,914, consisting of professional fees of $64,535, including legal, accounting, audit, and other professional service fees; general administrative expenses $15,346; consulting fees $57,820; management services $203,333; officer compensation $1,042; and  amortization of discount on notes $119,065.
 
For the three months ended September 30, 2010, the Company had a net loss of $7,500 comprised exclusively of legal, accounting, audit, and other professional service fees incurred in relation to the preparation and filing of the Company’s periodic reports and other transactional matters.
 
 
23

 
 
For the nine months ended September 30, 2011, the Company had a net loss of $1,608,091compared to a net loss of $22,286 for the nine months ended September 30, 2010, consisting of professional fees including legal, accounting, audit, and other professional service fees and general administrative expenses incurred in relation to the filing of the Company’s periodic reports and its recent financial transactions, amortization of discount on notes, impairment loss on loan receivable, and equity instrument based compensation expenses.
 
For the cumulative period from July 25, 2007 (Inception) to September 30, 2011, the Company had a net loss of $1,857,429, comprised professional fees, including of legal, accounting, audit, other professional service fees and general administrative expenses incurred in relation to the formation of the Company, the filing of the Company’s Registration Statement on Form S-1, and the filing of the Company’s periodic reports, consulting fees, management services fees; officer compensation; amortization of discount on notes, and impairment loss on loan receivable.
 
Off-Balance Sheet Arrangements
 
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Contractual Obligations
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Going Concern
 
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have a history of losses that are likely to continue in the future. Our financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We may be required to cease operations which could result in our stockholders losing almost all of their investment.
 
Item 3.    Quantitative and Qualitative Disclosures about Market Risk
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Item 4.    Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our principal executive officer and principal financial officer performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2011, our disclosure controls and procedures were ineffective for the period ended September 30, 2011, subject to the two material weaknesses described below.
 
 
24

 
 
As a result of our assessment, of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, as reported in our Annual Report of Form 10-K for the year ended December 31, 2010, we have determined that our internal control over financial reporting was ineffective as of December 31, 2010. We had neither the resources, nor the personnel, to provide an adequate control environment. The following two material weaknesses in our internal control over financial reporting existed at December 31, 2010:
 
(i)           We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2010. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
 
(ii)           We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures, and concluded that the control deficiency that resulted represented a material weakness.
 
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
25

 
 
PART II.  OTHER INFORMATION
 
Item 1 – Legal Proceedings
 
There are no material legal proceedings to which we are a party, or of which any of our property is subject, and we are not aware of any threatened legal proceedings against us.
 
Item 1A – Risk Factors
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
 
On April 13, 2011, the Company entered into two securities purchase agreements with two investors pursuant to which the Company issued each investor a promissory note in the amount of $50,000 and a 10 year common stock warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $0.10 per share.  The notes mature on April 12, 2012, and are subject to interest at 10% per annum with principal and interest due upon maturity. The warrant vests over a period of one year, 20% on April 13, 2011 and 80% on January 1, 2012. The vesting of the warrant will accelerate to 100% upon a liquidity event or funding event as defined in the warrant.
 
On April 15, 2011, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued a promissory note in the amount of $100,000 and a 10 year common stock warrant to purchase 333,333 shares of the Company’s common stock at an exercise price of $0.10 per share. The note matures on April 15, 2012, and is subject to interest at an annual rate of 10%. The warrant vests over a period of one year, 20% on April 15, 2011 and 80% on April 15, 2012. The vesting of the warrant will accelerate to 100% upon a liquidity event or funding event as defined in the warrant.
 
The transactions and related issuance of securities was pursuant to an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D of the 1933 Act. No commissions were paid to any person in connection with these transactions.
 
Item 3 – Defaults Upon Senior Securities
 
None.
 
Item 4 – (Reserved)
 
Item 5 – Other Information
 
None.
 
Item 6 – Exhibits
 
Exhibit
No.
 
Description
3.1
 
Certification of Incorporation (previously filed as Exhibit 3.1 to Registrant’s Registration Statement on Form S-1, filed with the SEC on April 28, 2008 and incorporated herein reference).
3.2
 
Bylaws (previously filed as Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on April 28, 2008 and incorporated by reference).
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
26

 

 
SIGNATURES
 
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
NOBLE MEDICAL TECHNOLOGIES, INC.
       
       
Date: November 21, 2011
By:
/s/Elliot Goldman
 
 
Elliot Goldman
 
 
Chief Operating Officer
 
 
(Principal Executive Officer)
 
       
       
Date: November 21, 2011
By:
/s/Tatiana Walker
 
 
Tatiana Walker
 
 
Interim Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
 





 
27

 

Exhibit Index
 
Exhibit
No.
 
Description
3.1
 
Certification of Incorporation (previously filed as Exhibit 3.1 to Registrant’s Registration Statement on Form S-1, filed with the SEC on April 28, 2008 and incorporated herein reference).
3.2
 
Bylaws (previously filed as Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on April 28, 2008 and incorporated by reference).
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
28