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EX-31.1 - ROKWADER, INC.rokwader_exhibit31-1.htm
EX-32.1 - ROKWADER, INC.rokwader_exhibit32-1.htm
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      UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

 

FORM 10-K

 

 

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2011
     

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
  For the transition period from _____________ to ____________
     

 

Commission file number 333-125314

 

ROKWADER, INC.

(Exact name of small business issuer as specified in its charter)

 

Delaware 73-1731755
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

 

23300 Ventura Boulevard, 2nd Floor, Woodland Hills, CA 91364

(Address of principal executive offices) (Zip Code)

 

(818) 224-3675

(Issuer’s telephone number)

 

Securities registered under Section 12(b) of the Exchange Act:     None.

 

Securities registered under Section 12(g) of the Exchange Act:     Common Stock, par value $0.001

 

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  o

 

Check 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

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S−B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10−K or any amendment to this Form 10−K. 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

 

Aggregate market value of the voting stock held by non-affiliates: $374,253.00 

 

Issuer revenues for its most recent fiscal year: $ 5,481.00 

 

Number of shares outstanding of each of the issuer's classes of common stock at February 29, 2012:   Common Stock: 2,390,218.

 

Transitional Small Business Disclosure Format: Yes o     No x  

 

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a small.  See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if smaller reporting company) Smaller reporting company þ

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

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TABLE OF CONTENTS

   
  Page
   
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS 4
     
PART I   4
Item 1. Description of Business 4
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 10
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Mine Saftey Disclosures 10
     
PART II   11
Item 5. Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities 11
Item 6. Selected Financial Data 12
Item 7. Management’s Discussion and Analysis Of Financial Condition and Results  of Operation 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 15
Item9A(T). Controls and Procedures 15
Item 9B. Other Information 16
     
PART III   16
Item 10. Directors, Executive Officers and Corporate Governance 16
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 18
Item 13. Certain Relationships and Related Transactions 19
Item 14. Principal Accountant Fees and Services 19
     
Part IV      20
       Item 15.      Exhibits; Financial Statement Schedules 20
SIGNATURES 21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

The information contained in this Report includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.

 

In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

 

 For a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors” set forth under “Item 1. Description of Business” below. In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.

 

PART I

 

Item 1. Description of Business.

 

History and Recent Developments

 

We were organized under the laws of the State of Delaware on March 18, 2005 as a vehicle to seek, investigate and, if such investigation warrants, acquire a target company or business that primarily desires to seek the perceived advantages of a publicly-held corporation. On April 23, 2007, Rokwader completed an acquisition of all of the issued and outstanding capital stock of Latigo Shore Music, Inc. (“Latigo”). Substantially all of the business conducted by Rokwader is through Latigo, its wholly-owned subsidiary. Thereafter, we filed a registration statement on Form SB-2 with the Securities and Exchange Commission (“SEC”) in order to undertake a public offering of shares of our common stock at a purchase price of $.75 per share, which registration statement was declared effective on May 13, 2008. We closed the offering after selling 318,504 shares for aggregate gross proceeds of $238,878.

 

Corporate Overview

 

One of Latigo’s assets is a music catalog (the "Catalog").  The Catalog (including copyrights and publishing rights) consists of 107 original songs written in whole or in part by Andrew Dorff, an adult son of Steve Dorff, a director of the Company and President of Latigo.  Other songwriters and their publishing designees own the balance of the percentages of these songs.  This is standard procedure in the music industry as many songs are collaborations of more than one writer.  Other songwriters also sometimes have their own publishing designees.  Latigo also has the development rights to two master recordings of finished CDs featuring Steve Dorff as a singer, entitled Pacific Sunrise and You Set My Dreams to Music, which have not yet had major distribution.  Steve Dorff and his co-writers of the songs retain the copyrights and publishing rights and they will be paid a writer's fee and publisher's fee if and when Latigo begins distribution of the CDs. 

 

In other developments, four songs from the Catalog have been recorded and used as follows:

 

1.  BEST THINGS IN LIFE - recorded by BJ Thomas, is included in the movie 'Jake's Corner' and the soundtracks, CD.

 

 

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2.  WHEN THE HERO DIES - recorded by BJ Thomas, is included in the movie 'Jake's Corner' and the soundtracks, CD.

 

3.  A GIRL LIKE YOU - recorded by Andrew Dorff, is included in the movie, 'Small Town Saturday Night'

 

4.  PARTY AT HOME – recorded and included on a CD which was released in the fall of 2008.

 

Both 'Jake's Corner' and 'Small Town Saturday Night' are feature films. ‘Jake’s Corner’ was released in the fall of 2008 and ‘Small Town Saturday Night’ was released in 2010. The film ‘Pure Country II’ came out in the first quarter of 2011. Latigo has one song in that film called ‘Love You Never Forget’.

 

Mr. Steve Dorff has also offered his services non-exclusively as a producer for Latigo's music production business and given Latigo a right of first refusal to any future productions he may undertake.

 

"We have also begun to receive minimal royalties (revenues) from the Latigo acquisition of the Gary Harju music catalog in December, 2010.  The Gary Harju acquisition is helping to diversify our existing music catalog to give us a broader based platform going forward.  This catalog acquisition consists of all right, title and interest in 50 musical compositions from the Gary Harju music catalog to the extent of his writer's and publisher's share.  The total catalog (including copyrights and publishing rights) consists of original songs written in whole or in part by Gary Harju.  It is important to note that some of the songs are co-written by other songwriters and the other songwriters and their publishing designees own the balance of the percentages of these songs.  This is standard procedure in the music industry as many songs are collaborations of more than one writer."

 

 Business Strategy

 

Latigo is in the music industry business. Latigo believes emerging technologies and the introduction of innovative business relationships in the current market allow for a unique opportunity for business expansion. We intend to act as a conduit through selling or leasing recordings of any artists that we may exclusively sign to record companies and distributors. In rare cases, should market conditions and emerging technologies warrant, Latigo would distribute music material for signed artists themselves, at their sole discretion. Should the artist also be a songwriter, Latigo will acquire a percentage of these copyright interests, provided the publishing interests are available.

 

 Latigo’s business plan provides for Latigo to produce three or four songs (known as a demo) for each of its artists, to be paid for by Latigo. This is intended to create enough interest that a major music label would pick up the remaining costs and finish the project. Revenues for Latigo would initially be realized in the following ways:

 

· Negotiated royalties for actual sales of the recordings.

 

· Publishing income on copyrights that we acquire.

 

As a small company we can operate with a creative hands-on approach to the selected few composers, songwriters, and artists that we currently promote. The music publishing business is primarily an intellectual property business focused on the exploitation of the song itself. In return for promoting, placing, marketing and the administration of the songwriter’s creativity, we receive a share of the revenues generated from the use of the song(s). We expect that our publishing revenue will be derived from four principal sources:

 

· Mechanical: Latigo, as licensor receives royalties with respect to songs embodied in recordings sold in any format or configuration, including physical recordings (e.g. CD’s, DVD’s, video cassettes), online and wireless downloads and mobile phone ringtones.
   
· Performance: Latigo, as licensor, receives royalties if the song is performed publicly through broadcast of music on television, radio, cable and satellite, live concert performances or other venues, such as nightclubs and stage theatrical productions.
   
· Synchronization: Latigo, as licensor, receives royalties or fees for the right to use the song in combination with visual images such as in films or television programs, television commercials and videogames.
   
· Other: Latigo, as licensor, receives royalties from other uses such as in toys, novelty items and for use in sheet music.

 

 

  

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Management Experience

 

Management is confident that their current officers, as well as the consultants and vendors they utilize at their discretion, are sufficient to execute the goals of Latigo, and operate the business through the initial phase of production and marketing.

 

Steve Dorff, the President of Latigo, is a long-time composer and producer. Mr. Dorff is a three-time Grammy nominee and has often been on the nation's top music charts. His résumé includes nine #1 film songs and 15 Top 10 hits, including the Kenny Rogers' classic "Through the Years", a BMI 3 million performance songs, as well as "I Just Fall In Love Again ", the Anne Murray record that captured Billboard's #1 Song Of The Year honors. His many songs have been sung by some of the greatest artists of our time including Barbra Streisand, Celine Dion, Whitney Houston, George Strait, Vanessa Williams and others. Emmy Nominee for five television compositions, his credits include such stalwarts as "Murphy Brown" and "Murder She Wrote". He has also contributed to various television series’ like "Growing Pains", "Alien Nation", "Spenser: for Hire", "Major Dad", "Colombo", "Reba", and "Rodney".

 

His many TV and cable movie credits include the Emmy nominated CBS mini-series "Elvis", the Hallmark Hall of Fame "Rose Hill", the animated Christmas classic "Annabelle's Wish", "Babe Ruth", "The Quick and The Dead", "Moonshine Highway" and "The Defiant Ones". Mr. Dorff’s many movie songs and scores have been featured in "Bronco Billy", "Blast from the Past", "Rocky IV", "Pure Country", "Tin Cup", "Michael", "Dudley Do-Right", "Dancer, Texas", "The Last Boy Scout", "Curly Sue" and "Honky Tonk Man". Currently, Mr. Dorff is the musical director of the popular television show “the Singing Bee” on CMT (the “Country Music Television” channel).

 

Industry Overview

 

Music is one of the primary entertainment forms of the modern era. The industry is highly competitive, based on consumer preferences, and changes rapidly due to consumer demand and advancements in technology. To be competitive, companies must be able to discover and develop artists and talents that have appeal beyond a domestic audience. They must also be able to successfully promote and market these acts, and maintain strong music publishing catalogues. These catalogues provide for lucrative business opportunities that can be exploited year after year, and are not at the mercy of changing technologies. The top five music consuming countries continue to be the United States, England, France, Japan, and Germany. After many years of declining sales due to the undercutting of traditional CD distribution by peer-to-peer networks such as Napster and Kazaa, the industry has recently made strong gains in the electronic download market with such vectors as iTunes and Rhapsody. In addition various recording companies have recently brought lawsuits claiming copyright infringement against these peer-to-peer networks. It should also be noted that big box stores such as Best Buy, Wal-Mart, and Target have significantly affected sales and promotion within the industry.

 

One of the industry’s biggest challenges is combating piracy. Music piracy exists in two primary forms: digital (which includes illegal downloading and CD-R piracy) and industrial:

 

· Digital Piracy has grown dramatically, enabled by the increasing penetration of broadband Internet access and the ubiquity of powerful microprocessors, fast optical drives (particularly with writable media, such as CD-R) and large inexpensive disk storage in personal computers. The combination of these technologies has allowed consumers to easily, flawlessly and almost instantaneously make high quality copies of music using a home computer by “ripping” or converting musical content from CDs into digital files, stored on local disks. International Federation of the Phonographic Industry (“IFPI”) estimates that billions of songs are illegally downloaded every year.
· Industrial Piracy (also called counterfeiting or physical piracy) involves mass production of illegal CDs and cassettes in factories. This form of piracy is largely concentrated in developing regions, and has existed for more than a decade.

  

The industry has launched an intensive campaign to limit piracy that focused on four key initiatives:

 

· Technological: The technological measures against piracy are geared towards degrading the illegal file sharing process and tracking providers and consumers of pirated music.
   
· Educational: Led by Recording Industry Association of America (“RIAA”) and IFPI, the industry has launched an aggressive campaign of consumer education designed to spread awareness of the illegality of various forms of piracy through aggressive print and television advertisements.
   

 

  

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Legal: In conjunction with its educational efforts, the industry has taken aggressive legal actions against file-sharers and is continuing to file industrial pirates.
   

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Development of online and mobile alternatives: Most of the companies in the music industry believe that the development and success of legitimate digital music channels will be an important driver of recorded music sales going forward, as they represent both an incremental revenue stream and a potential inhibitor of piracy. The music industry has been encouraged by the recent proliferation and early success of legitimate digital music distribution options. We agree that these legitimate online distribution channels offer several advantages to illegal peer-to-peer networks, including greater ease of use, higher quality and more consistent music product, faster downloading, better search capabilities and seamless integration with portable digital music players.

 

These efforts are incremental to the long standing push by organizations such as IFPI to curb industrial piracy around the world. In addition to these actions, the music industry is increasingly coordinating with other similarly impacted industries (such as software and filmed entertainment) to combat piracy.

 

The music publishing market has proven to be more resilient than the recorded music market in recent years as revenue streams other than mechanical royalties are largely unaffected by piracy, and are benefiting from additional sources of income from digital exploitation of music in downloads and mobile phone ringtones.

 

In addition, we have the opportunity to generate significant value by the acquisition of small publishers by extracting cost savings (as acquired libraries can be administered with little or no incremental cost) and by increasing revenues through more aggressive marketing efforts.

 

Competition

 

We encounter intense competition in our business. The competition is experienced, competent and they have far greater financial and marketing resources than we do. Our ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the development, sales and marketing of their services and artists than are available to us.

 

Almost all of our competitors offer a wider range of services and have greater name recognition and more extensive artist base and marketing outlets for their products than Latigo. We compete with other well known music companies and music publishers to identify and sign new artists and songwriters. In addition, our competitors may from time to time reduce their prices in an effort to expand market share and introduce new services, or improve the quality of their products or services. Our music publishing business competes not only with other music publishing companies, but also with songwriters who publish their own works. We are also highly dependent on securing artists that appeal to the music buying customers, and the competition with other music companies for such talent is intense.

 

We also anticipate significant competition from other recording companies, most of which have substantial financial, technical, marketing, and management resources. This has created a greater degree of difficulty in securing proven artists and acquiring musical works by well-known artists in ways that are economically viable. Due to the continuing limitation of platforms for their artists, there is no guarantee the various music companies like Latigo can successfully compete with in the music business marketplace.

 

Employees

 

As of the date of this Report, the Company has four employees who serve as officers and directors. Three of the employees are part time and receive no compensation nor is any compensation accruing.

 

Item 1A. Risk Factors

 

An investment in our securities is highly speculative and subject to numerous and substantial risks. Readers are encouraged to review these risks carefully before making any investment decision.

 

Concentration of ownership will allow one shareholder to control Rokwader’s business

 

The President, and largest shareholder of Rokwader, currently owns approximately 70.2% of the outstanding stock of Rokwader. As a result, this shareholder will be able to exercise control over virtually all matters requiring shareholder approval, including the election of directors and approval of significant corporation transactions. Thus, the present management will be able to maintain their positions as Directors and effectively operate Rokwader’s business, regardless of other investors’ preferences.

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Only one of our directors has any previous experience launching and operating a music/entertainment company, and our officers and directors have only limited experience in the management of start-up companies such as Latigo.

 

Other than Steve Dorff our officers and directors have no previous experience launching and operating a music/entertainment company, such as Rokwader and its Latigo subsidiary, although Mr. Farar and Mr. Saderup have experience investing in and managing non-operating, or shell, companies and in coordinating and closing business combinations. They have only limited experience in establishing and growing a startup company such as Rokwader and its subsidiary, Latigo. As a result, we will continue to rely heavily on the experience and business acumen of Steve Dorff to establish an effective business strategy for our future music/entertainment operations.

 

There is only a limited trading market for our common stock, which may adversely impact your ability to sell your shares.

 

There currently is only a limited trading market for our stock. There is no assurance that a more active public market will ever develop. You will likely not be able to sell your securities if a regular trading market for our securities does not develop and we cannot predict the extent, if any, to which investor interest will lead to the development of a viable trading market in our shares.

 

The music and entertainment business is highly speculative and there is a consequent risk of loss of your investment.

 

The success of Rokwader’s plan of operation will depend to a great extent on the operations, financial condition and management of its sole subsidiary Latigo. Latigo does not have an established operating history. The music and entertainment industry is a very speculative one with changing trends, music and movie themes, contemporary issues, age and gender preferences and other factors determining the success or failure of various types of music, theatre and movies. Consequently, there is no assurance that the interest in the musical catalogue or master recordings currently owned by Latigo will find a significant audience or be commercial successes. Therefore, the success of our operations will be dependent upon management of Latigo’s business and numerous other factors beyond our control.

 

There will be additional dilution as additional shares are issued which may decrease the market price of our common stock.

 

Additional offerings of our common stock will likely have to be made in the future to raise capital to meet operating cash flow needs. Such offerings may include warrants for issuance of additional common stock, further diluting the number of shares of common stock outstanding from time to time. An increase in the number of our shares from these events or others may result in a decrease of the future potential market price for our common stock and will dilute the ownership interest of current shareholders.  

 

We will incur increased costs and may have difficulty attracting and retaining qualified directors and executive officers as a result of being a public company.

 

As a public company, we incur significant legal, accounting, reporting and other expenses that we did not incur as a private company. We also incur costs associated with recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 as well as new rules implemented by the Securities and Exchange Commission. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage. As a result, we may experience difficulty attracting and retaining qualified individuals to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of these requirements or when such costs may be incurred.

 

Our limited assets and the lack of revenues raise substantial doubt about our ability to carry on business operations.  

 

Rokwader has only generated a limited amount of revenues from operations. Consequently, we had a net loss of $112,883 for the year ended December 31, 2011 and $163,622 for the year ended December 31, 2010.  As of December 31, 2011, we had a working capital deficiency of $(162,042) and $3,082 of cash available. The current cash resources may not be sufficient to satisfy the cash requirements of the Company over the next 12 months.

 

Our ability to continue operations is dependent upon our ability to successfully establish our business and secure additional funding sources.  To date, the proceeds from our IPO offering and investment by our principal stockholder has funded our current operations. Additional financing may not be available to us on favorable terms, if at all.

 

Due to our continuing losses from business operations, our independent auditor’s report dated ________, 2012, includes an explanatory paragraph which raises substantial doubt about the Company’s ability to continue as a going concern. Our continued operations are dependent upon obtaining additional working capital either through significantly increasing revenues or through outside financing. We are currently operating with limited cash reserves and no revenues which could inhibit our ability to continue in business or achieve our business objectives.

 

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We lack business diversification, as we are only operating one business in one industry the music/entertainment industry, which makes us subject to all the risks and uncertainties of that industry.

 

Latigo is our sole operating business. Accordingly, the prospects for our success are entirely dependent upon the future performance of a single business in the music/entertainment industry. Unlike other entities with resources to consummate several business combinations or entities operating in multiple industries, we do not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. Consequently, our business is subject to the variable and speculative nature of the music/entertainment business. There is no assurance that our musical inventory, theatrical productions or future artists will achieve a commercially viable audience.

  

We will require substantial investment to develop and promote any music recordings we currently own, may develop or acquire and if we fail to raise sufficient capital to support and fund our expanding marketing and music development operations, our business plan may not be fully realized.

 

We are in effect a new company, in the development stage, launching a business model within the music industry. We will require additional capital in order to acquire, develop, and distribute new music products, to pay for marketing efforts and fund our growth. In addition, we will need to adequately capitalize the development of each new artist and we may be required to spend greater-than-anticipated funds if unforeseen difficulties arise in the course of these or other aspects of our business. As a consequence, we believe that we will be required to raise additional capital through public or private equity or debt financings, collaborative relationships, bank financing or other arrangements. We cannot assure you that such additional capital will be available on terms acceptable to us, if at all. Any additional equity financing is expected to be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants and increased interest costs. While we anticipate that our current shareholders will continue to fund our operating expenses if necessary, there is no assurance that this will continue to be the case. Our inability to obtain sufficient financing may require us to delay, scale back or eliminate some or all of our music development and distribution programs or to limit the operation or marketing of our music products. This could have a material and adverse effect on our business.

 

There is intense competition in Latigo's industry which may adversely affect the business operations of Rokwader.

 

There are numerous competitors in the music industry in which Latigo is currently involved or in which it intends to enter, most of which have developed product lines, strong marketing systems and established customer followings. In almost all cases, Latigo's competitors have far greater financial and other resources. Latigo also expects competition to increase in the future due to evolving media technologies which are reducing the barriers to entry into the music and video industries. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share, any of which could harm Latigo's net revenue and results of operations. Latigo competes or will potentially compete with a variety of entertainment and music companies, most of which have operated for a longer period of time and have significantly greater financial, technical, marketing and other resources. Some of these competitors have established relationships with leading record labels. These competitors include national and independent record distributors, none of which has any existing relationship with Latigo. Further, Latigo may face a significant competitive challenge from alliances entered into between and among its competitors, as well as from larger competitors created through industry consolidation.

 

Efforts to protect intellectual property or the alleged misuse of the intellectual property of others may cause Latigo to become involved in costly and lengthy litigation which could divert needed resources away from its operations.

 

Latigo's success depends in part on its ability to obtain and preserve copyright, trademark and other intellectual property rights, in connection with its music inventory, and services. Latigo currently has trademark or copyright protection relating to its musical catalog and may seek such protections with respect to other music or to its trade logos. The process of seeking trademark and copyright protection can be time consuming and expensive and no assurances can be given that (i) copyrights or trademarks applied for in the future will actually be issued, (ii) new copyrights will be sufficient in scope to provide meaningful protection or any commercial advantage or (iii) others will not independently develop similar products or design around any copyrights Latigo is issued. If Latigo fails to protect its intellectual property from infringement, other companies may offer competitive products. Protection of our intellectual property if such should become necessary could result in costly and lengthy litigation, diverting resources which would otherwise be dedicated to operating the business.

 

The recorded music industry has been declining and may continue to decline which may adversely affect our prospects and results of operations.

 

Since 1999 the recorded music industry has been unstable, which has adversely affected our operating results. The industry-wide decline can be attributed primarily to digital piracy. Other reasons for this decline are the bankruptcies of record retailers and wholesalers, growing competition for consumer discretionary spending and retail shelf space, and the maturation of the CD format, which has slowed the historical growth pattern of recorded music sales. While CD sales still generate most of the recorded music revenues, CD sales continue to decline

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industry-wide and we expect that trend to continue. While new formats for selling recorded music product have been created, including the legal downloading of digital music using the Internet, DVD-Audio formats and the distribution of music on mobile devices, significant revenue streams from these new formats are just beginning to emerge. The recorded music industry performance may continue to negatively impact our operating results. In addition, a declining recorded music industry could continue to have an adverse impact on the music publishing business. This is because our music publishing business intends to generate a portion of its revenues from mechanical royalties received from the sales of music in recorded music formats such as the CD. The industry may continue to decline. In addition, there can be no assurances as to the timing or the extent of any improvement in the industry.

 

Item 1B. Unresolved Staff Comments.

 

None

 

Item 2.  Properties.

  

Our corporate and operational offices are located at 23300 Ventura Boulevard 2nd Floor, Woodland Hills, CA 91364. The office is provided through our President, Yale Farar, at no costs to us. In addition, music studio facilities are provided to us at no cost to the Company by Mr. Dorff, the Director and President of Latigo. We believe these spaces are currently adequate and plans to move to expanded office space are contingent upon raising additional capital, increasing revenues and the hiring of additional employees.

 

Item 3. Legal Proceedings.

 

We are not a party to any legal proceedings.

 

Item 4. Mine Saftey Disclosures.

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 
 

PART II

 

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

 

Market Information

 

The Company's common stock, par value, $0.001 per share ("Common Stock") began trading on the Over the Counter NASDAQ Electronic Bulletin Board ("OTC:BB") under the symbol "ROKR” beginning in November 2008. Since that time there has been only limited trading. The following table sets forth, for the period indicated, the range of high and low closing “Bid” prices reported by the OTC. Such quotations represent prices between dealers and may not include markups, markdowns, or commissions and may not necessarily represent actual transactions.

 

               
               
Fiscal Year Ending December 31, 2010   High Bid Low Bid
               
Quarter Ended   March 31, 2010   $ 1.01   $ 0.51  
Quarter Ended   June 30, 2010     1.01     0.51  
Quarter Ended   September 30, 2010     1.01     0.51  
Quarter Ended   December 31, 2010     1.01     0.51  
               
Fiscal Year Ending December 31, 2011              
               
Quarter Ended  March 31, 2011   $ 1.25   $ 0.75  
Quarter Ended  June 30, 2011     1.01     0.75  
Quarter Ended  September 30, 2011     2.00     0.75  
Quarter Ended  December 31, 2011     0.75     0.75  
               
Fiscal Year Ending December 31, 2012              
               
January 1 through February 22, 2012     0.75     0.75  

 

 

Penny Stock Considerations

 

The trading of our common stock is deemed to be "penny stock" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus are subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

 

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

 

l Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

 

l Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

 

 

 

11

 

 

 

 
 

 

l

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

 

l Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

 

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.

 

Common Stock Currently Outstanding

 

As of February 24, 2012, 1,891,214 of our current outstanding shares were restricted common stock, which are eligible for resale pursuant to Rule 144 of the Securities Act. We have no plans or commitments to register such shares in the future.

 

Holders

 

As of the date of this Report, we had 70 stockholders of record of our common stock.

 

Dividends

 

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

 

Reports to Stockholders

 

We are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file periodic reports, and other information with the SEC. We intend to send annual reports to our stockholders containing audited financial statements.

 

Transfer Agent

 

Computershare Trust Company, Inc., located at 350 Indiana Street, Suite 800, Golden, Colorado 80401 is the registrar and transfer agent for our common stock.

 

Recent Sales of Unregistered Securities

 

On January 3, 2011, the Company sold 70,000 shares of its common stock to one ”accredited” investor at $0.50 per shares for an aggregate amount of $35,000.00. On June 15, 2011, the Company issued 25,000 shares of its common stock, at a price of $.50 per shares, to the President of Latigo, for services rendered. The shares were sold in reliance on exemptions from registration under Regulation D, Rule 506 and Section 4(2) of the Securities Act of 1933, as amended, and applicable state securities laws.

 

Additional Information

 

Copies of our annual reports on Form 10−K, quarterly reports on Form 10−Q, current reports on Form 8−K, and any amendments to those reports, are available free of charge on the Internet at www.sec.gov. All statements made in any of our filings, including all forward-looking statements, are made as of the date of the document, in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

  

Item 6. Selected financial Data.

 

Not required under Regulation S-K for “smaller reporting companies.”

 

12

 

 
 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

This 10−K contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing else where in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to “Risk Factors” and "Cautionary Note Regarding Forward Looking Statements" in Item 1 above.

 

Plan of Operations

 

Our principal business objective for the next 12 months will be to achieve long-term growth through Latigo, our wholly-owned subsidiary.

Furthermore, the Company continues to review other business opportunities.

 

Rokwader completed the acquisition of all of the issued and outstanding capital stock of Latigo on April 23, 2007. Latigo’s primary activity is the development of a production company for the purpose of creating viable entertainment assets. One of Latigo’s major functions will be to discover new musical talent. With the new talent, Latigo can make Master quality recordings and function as a conduit either selling or leasing such recordings to major record companies and distributors. Latigo would pay the costs of producing three or four songs per artist, garnering enough interest to then have a major label pick up the remaining costs to finish the project.

 

Latigo is also interested in acquiring music catalogues. Latigo acquired a 50% interest in its first music catalogue consisting of 107 songs. Latigo hopes to be able to receive publishing fees on the copyrights as other singers, movies, television, or other theatrical outlets utilize the songs in the catalogue.

Latigo owns two Master Recordings from its founder, Mr. Dorff, and a 50% interest in a 107 song music catalogue, respectively. Two of the titles from the Latigo catalog, “When The Hero Dies” and “The Best Things In Life”, have been recorded by legacy artist BJ Thomas for inclusion in the film “Jake’s Corner”. The movie was released in the latter part of 2008. A soundtrack CD was released in conjunction with the release of the movie ‘Jake’s Corner’ which contained two of the Company’s songs.

 

Latigo’s expenses associated with its business through December 31, 2011, were $13,238. Mr. Dorff has a fully equipped recording studio where Master Recordings and demos can be produced. From the current interest in Mr. Dorff’s recordings and in the 107 song musical catalogue, Latigo projects revenues to commence in the fourth quarter of 2011.

 

During the years ended December 31, 2011 and 2010, the Company had revenues of $5,481 and $500, respectively. During the years ended December 31, 2011 and 2010, the Company incurred net losses of $(112,883) and $(163,622), respectively. As of December 31, 2011, the Company had stockholders’ deficit of $(148,474).

 

Costs and Resources

 

During the year ended December 31, 2011, our costs related to filing of Exchange Act reports were $54,734. On April 14, 2010, Mr. Farar, President of the Company, loaned $25,000 to the Company. On November 17 and December 17, 2010, Brooktide, LLC, a company controlled by Mr. Farar, loaned $16,000 to Latigo, the Company’s subsidiary, and $9,000 to the Company, respectively. All of the loans were evidenced by three Subordinated Convertible Promissory Notes (the “Notes”) executed by the Company and, in regard to the $16,000 loan, by Latigo. The Notes bear interest of 6% per annum and are convertible at the option of the holder at any time into common stock of the Company at $.75 per share. The Notes are demand notes and may be paid at any time by the Company without permission or penalty.

 

Equity and Capital Resources

 

We have incurred losses since inception of our business (March 18, 2005), and as of December 31, 2011, we had an accumulated deficit of $924,426. As of December 31, 2011, we had cash of $3,082 and a working capital deficiency of $(162,042).

 

To the extent that the Company's capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will provide any portion of the Company's future financing requirements.

 

 

13

 

 

 
 

 

No assurance can be given that additional financing will be available when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

To date, we have funded our operations through short-term debt and an IPO. We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of our talent base. However, we do not expect to start generating revenues from our operations for another 6 to 9 months. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse affect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate. As of the date of this Report we did not have any commitments from any source to provide additional capital. Even if we are able to secure outside financing, it may not be available in the amounts or the times when we require. Furthermore, such financing would likely take the form of bank loans, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, leases or debt would increase our capital requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.

 

Our auditors have issued a "going concern" opinion, which is included in the financial statements included in this Report. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have generated only minimal revenues and no substantial revenues are anticipated. Our only other source for cash at this time is investments by our CEO and director.

 

 

Off-balance Sheet Arrangements

 

Since our inception through December 31, 2011, we have not engaged in any off-balance sheet arrangements.

 

Recent Accounting Pronouncements

 

We have adopted all applicable recently issued accounting pronouncements. The adoption of the accounting pronouncements did not have a material effect on our operations.

 

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

Not required under Regulation S-K for “smaller reporting companies.”

 

 

Item 8. Financial Statements and Supplementary Data.

 

Our audited consolidated financial statements are set forth in this Annual Report beginning on page F-1.

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 
 

 

ROKWADER, INC.

Index to audited financial statements

 

  Page
Report of Independent Registered Public Accounting Firm-Marcum LLP F-2
   
Consolidated Balance Sheets as of December 31, 2011 and 2010 F-3

Consolidated Statements of Operations for the periods ended December 31, 2011 and December 31, 2010 and for the period from

March 18, 2005 (Inception) to December 31, 2011

 

F-4

Consolidated Statements of Stockholders’ Equity for the periods ended December 31, 2011 and December 31, 2010  and for the period from March 18, 2005 (Inception) to December 31, 2011

 

F-5

Consolidated Statements of Cash Flows for the periods ended December 31, 2011 and December 31, 2010 and for the period from March 18, 2005 (Inception) to December 31, 2011

 

F-7

Notes to Consolidated Financial Statements F-9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

F-1

 

 

 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Audit Committee of the

Board of Directors and Shareholders of Rokwader, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of Rokwader, Inc. and subsidiaries (a development stage company) (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the years then ended and for the period from March 18, 2005 (inception) to December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  The accompanying consolidated financial statements of the Company for the period from March 18, 2005 (inception) to December 31, 2009 were not audited by us. Those statements were audited by other auditors whose report, dated March 29, 2010 expressed an unqualified opinion on those statements and included an explanatory paragraph regarding the Company’s ability to continue as a going concern. The consolidated financial statements for the period from March 18, 2005 (inception) to December 31, 2009 reflect a net loss of $647,921.  Our opinion, insofar as it relates to the amounts included for such prior periods as indicated in the accompanying consolidated financial statements for such periods from March 18, 2005 (inception) through December 31, 2009, is based solely on the report of such other auditors.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rokwader, Inc. and subsidiaries as of December 31, 2011 and 2010 and the consolidated results of their operations and their cash flows for each of the years then ended and for the period from March 18, 2005 (inception) to December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

As set forth in Note 1 to the accompanying consolidated financial statements, although the company has commenced operations, it has generated minimal revenues from operations through December 31, 2011.  As discussed in Note 1, the Company has been generating losses and has incurred an accumulated deficit of $924,426 and has a working capital deficit as of December 31, 2011.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding this uncertainty are disclosed in Note 1 to the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

 

 

/s/ Marcum llp

Los Angeles, California

March 1, 2012

 

  

 

 

 

F-2

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY  
CONSOLIDATED BALANCE SHEETS  
(A DEVELOPMENT STAGE COMPANY)  
                     
ASSETS  
             DECEMBER 31,   DECEMBER 31,  
            2011   2010  
CURRENT ASSETS:                  
                     
  Cash (Note 1)         $ 3,082   $ 10,871  
  Prepaid Insurance         7,016     7,083  
                       
  TOTAL CURRENT ASSETS         10,098     17,954  
                       
OTHER ASSETS                    
                       
  Intangible Assets, Net of Accumulated Amortization              
  of $1,432 and $0, respectively (Note 4)     13,568     15,000  
                       
  TOTAL OTHER ASSETS         13,568     15,000  
                       
TOTAL ASSETS         $ 23,666   $ 32,954  
                       
LIABILITIES AND STOCKHOLDERS’ DEFICIT  
CURRENT LIABILITIES:                  
  Accounts Payable        $                  -     $          243  
  Accrued Expenses                  26,489            15,239  
  Credit Card Payable                  20,651     21,688  
  Related Party Convertible Note Payable (Note 3)           125,000   125,000  
                       
TOTAL CURRENT LIABILITIES               172,140          162,170  
                       
TOTAL LIABILITIES                 172,140          162,170  
                       
STOCKHOLDERS’ DEFICIT:                  
  Preferred Stock, $.001 par value, 10,000,000 shares              
     authorized, none issued and outstanding                          -     -    
  Common Stock, $.001 par value, 100,000,000 shares              
     authorized, 2,390,218 and 2,213,718 shares issued and            
     outstanding as of December 31, 2011 and December 31, 2010              2,390              2,214  
  Additional Paid-In Capital               773,562          680,113  
  (Deficit) Accumulated During Development Stage         (924,426)        (811,543)  
                       
TOTAL STOCKHOLDERS' DEFICIT (Note 2)         (148,474)        (129,216)  
                       
 TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   23,666       $  32,954  
   
SEE ACCOMPANYING NOTES  
                                       


F-3

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(A DEVELOPMENT STAGE COMPANY)

                         
                      FOR THE PERIOD
                      FROM MARCH 18, 2005
          FOR THE YEAR ENDED   FOR THE YEAR ENDED   (INCEPTION)
          DECEMBER 31, 2011   DECEMBER 31, 2010   TO DECEMBER 31, 2011
                         
REVENUE       $ 5,481   $ 500   $ 12,634
                         
                         
EXPENSES                      
  General and Administrative                    118,364     84,578     858,339
  Impairment Losses (Notes 4)                               -       79,548     79,548
TOTAL EXPENSES                      118,364     164,126     937,887
                         
OTHER INCOME                    
  Interest Income       -     4     827
                         
                         
NET LOSS       $ (112,883)   $ (163,622)   $ (924,426)
                         
                         
NET LOSS PER COMMON SHARE - BASIC                  
& DILUTED       $ (0.05)   $ (0.07)   $ (0.49)
                         
                         
WEIGHTED AVERAGE NUMBER                   
OF COMMON SHARES OUTSTANDING      2,329,181     2,213,718     1,850,778
 
SEE ACCOMPANYING NOTES

 

 

 

 

 

 

 

 

 


F-4

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(A DEVELOPMENT STAGE COMPANY)

 

                           
                  DEFICIT      
                  ACCUMULATED      
            ADDITIONAL   DURING      
  COMMON STOCK   PAID-IN   DEVELOPMENT          
  SHARES   AMOUNT   CAPITAL   STAGE   TOTAL
                           

BALANCE,

MARCH 18, 2005

         -     $                 -     $                   -     $                     -     $                -  
                           
Sale of Common Stock on                          
March 30, 2005 1,250,000     1,250     99,990                           -       101,240
                           
Net Loss -       -       -                   (28,230)      (28,230)

BALANCE,

DECEMBER 31, 2005

      1,250,000                1,250                99,990                 (28,230)            73,010
                           
Net Loss   -       -       -                   (85,220)      (85,220)

BALANCE,

DECEMBER 31, 2006

      1,250,000   $         1,250   $         99,990   $           (113,450)   $    (12,210)
                           
Issuance of Common Stock on                          
April 23, 2007 70,000     70     69,930                           -       70,000
                           
Issuance of Common Stock on                          
August 16, 2007 (Note 2) 104,500     105     29,155                           -       29,260
                           
Issuance of Common Stock on                          
August 16, 2007 (Note 2 & 3) 1,000,000     1,000     281,823                           -       282,823
                           

Contribution to Capital

of Corporation

                         
September 26, 2007 (Note 2)  (544,286)      (544)     544                           -       -  
                           
Net Loss -       -       -                (286,207)      (286,207)

BALANCE,

DECEMBER 31, 2007

      1,880,214   $ 1,881   $ 481,442   $        (399,657)   $      83,666
                           
Issuance of Common Stock on                          
August 5, 2008, net of costs of                          
offering of $66,127 (Note 2) 318,504     318     172,433                           -       172,751
                           

Stock compensation expense

(Note 2)

-       -       7,566                           -       7,566
                           
Net Loss -       -       -                (135,324)      (135,324)
                                     

 

 


F-5

 

 

 
 

 

BALANCE,

DECEMBER 31, 2008

      2,198,718   $         2,199   $        661,441   $        (534,981)   $    128,659
                           

Common Stock issued on

February 12, 2009

                         
for services performed (Note 2) 15,000     15     11,235                           -       11,250
                           
Net Loss -       -       -                (112,940)      (112,940)

BALANCE,

DECEMBER 31, 2009

      2,213,718   $          2,214   $        672,676   $        (647,921)   $      26,969
                           

Stock compensation

expense (Note 2)

                    -                          -                    7,437                           -                7,437
                           
Net Loss -       -       -                (163,622)      (163,622)

BALANCE,

DECEMBER 31, 2010

      2,213,718   $          2,214   $        680,113   $        (811,543)   $  (129,216)
                           
Issuance of Common Stock on                          
January 3, 2011 (Note 2) 70,000     70     34,930                           -       35,000
                           

Issuance of Common Stock

for Services

                         

Rendered on June 15, 2011

(Note 2 & 3)

          25,000                     25                12,475                           -              12,500
                           

Issuance of Common Stock

for full satisfaction

                         

of note payable on September

21, 2011 (Note 2 & 3)

           60,000                     60                29,940                           -              30,000
                           

Issuance of Common Stock for the exercise of

                         

a warrant and an option on

September 16, 2011 (Note 2 & 3)

           21,500                     21                16,104                           -             16,125
                           
Net Loss   -       -       -                (112,883)      (112,883)

BALANCE,

DECEMBER 31, 2011

      2,390,218   $          2,390   $        773,562   $        (924,426)   $  (148,474)

 

 

 SEE ACCOMPANYING NOTES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-6

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(A DEVELOPMENT STAGE COMPANY)
                       
                      FOR THE PERIOD
                      FROM MARCH 18, 2005
              FOR THE YEAR ENDED   FOR THE YEAR ENDED   (INCEPTION)
              DECEMBER 31, 2011   DECEMBER 31, 2010   TO DECEMBER 31, 2011
                       
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net loss            $      (112,883)    $                (163,622)    $                  (924,426)
Adjustments for non-cash items:                
Amortization expense                         1,432                            6,000                             55,848
Impairment Losses (Note 4)                             -                            79,548                             79,548
Issuance of stock for interest payable                             -                                     -                                 2,823
Issuance of stock for services rendered                  12,500                                   -                               53,010
Non-cash stock compensation expense                             -                              7,437                             15,003
                       
Changes in assets and liabilities:                
Prepaid insurance                              67                                   -                              (7,016)
Accounts payable                          (243)                          (1,023)                                    -  
Accrued expenses                      11,250                            5,651                             26,489
                       
            Net Cash Used for Operating Activities                (87,877)                        (66,009)                        (698,721)
                       
CASH FLOWS FROM INVESTING ACTIVITY:              
Acquisition of Latigo Shore Music, Inc.                             -                                     -                          (29,964)
Acquisition of Music Catalog (Note 4)                               -                        (15,000)                          (15,000)
                       
Net Cash Used for Investing Activities                               -                        (15,000)                          (44,964)
                       
CASH FLOWS FROM FINANCING ACTIVITIES:              
Issuance of common stock                      51,125                                     -                           325,116
Repayment of loan payable                                 -                                     -                          (34,000)
Proceeds from issuance of loan payable to officer                             -                                     -                           280,000
Proceeds from issuance of note payable                  30,000                          50,000                           155,000
Credit card payable                       (1,037)                          21,688                             20,651
                       
            Net Cash Provided by Financing Activities                  80,088                          71,688                           746,767
                       
NET (DECREASE)/ INCREASE IN CASH                   (7,789)                          (9,321)                               3,082
                       
CASH AT BEGINNING OF PERIOD                    10,871                          20,192                                      -
                       
CASH AT END OF PERIOD          $            3,082    $                    10,871    $                         3,082
                       
Cash Paid During the Period for:                
Interest            $            9,617    $                      7,188    $                       40,217
Income taxes          $            5,548    $                      1,953    $                       18,796
                       
Non-Cash Investing and Financing activities              
  In addition to paying $30,000 in cash for the purchase            
  of Latigo Shore Music, Inc., the Company issued 70,000            
  shares of common stock valued at $1.00      $                   -      $                             -      $                       70,000
                         

 

 

 


F-7

 

 

 
 

 

                       
  The Company issued 104,500 shares of common stock for          
  services rendered. (Note 2)      $                     -   $  -   $ 29,260
                       
  The Company issued 1,000,000 shares of common stock            
  to Mr. Yale Farar in full satisfaction of $280,000 plus            
  interest owed to Mr. Farar. (Note 2 & 3)    $                    -   $                              -   $  282,823
                       
  The Company issued 15,000 shares of common stock for            
  services rendered. (Note 2)      $                    -    $                    11,250 $  11,250
                       
  The Company issued 25,000 shares of common stock for            
  services rendered. (Note 2 & 3)      $           12,500  $                              -   $ 12,500
                       
  The Company issued 60,000 shares of common stock            
  to Brooktide, LLC in full satisfaction of $30,000 owed            
  to Brooktide, LLC. (Note 2 & 3)       $           30,000  $                              -   $ 30,000
SEE ACCOMPANYING NOTES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-8

 

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

HISTORY

 

ROKWADER, INC. (the Company), a development stage company, was organized under the laws of the State of Delaware on March 18, 2005.

 

DEVELOPMENT STAGE ENTERPRISE

 

The Company is a development stage company as defined by the Financial Accounting Standards Board’s Accounting Standards Codification Topic 915 related to Development Stage Entities. With the acquisition of Latigo Shore Music, Inc. (Latigo) as a subsidiary, the Company has commenced operations and has become operational. The Company qualifies as a development stage company as it has not generated significant revenues. All losses accumulated since inception have been considered as part of the Company’s development stage activities.

 

BASIS OF CONSOLIDATION

 

The consolidated financial statements include the accounts of Rokwader, Inc. and subsidiary. Inter-company accounts and transactions have been eliminated.

 

RECLASSIFICATION

 

Certain December 31, 2010 amounts have been reclassified to conform to the December 31, 2011 consolidated financial statement presentation.

 

GOING CONCERN AND PLAN OF OPERATION

 

The Company’s financial statements have been presented on the basis that it will continue as a going concern. Although the Company has commenced operations, it has not generated significant revenues from operations to date, and still meets the requirements of a development stage company. The Company has an accumulated deficit of $924,426 as of December 31, 2011.

 

To the extent that the Company’s capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will provide any portion of the Company’s future financing requirements.

 

No assurance can be given that additional financing will be available when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company and raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

INCOME TAXES

 

The Company follows the guidance of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes. According to Topic 740, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end.

 

For federal income tax purposes, substantially all expenses incurred prior to the commencement of operations must be deferred and then they may be written off over a 180-month period. Tax deductible losses can be carried forward for 20 years until utilized for federal tax purposes. The Company will provide a valuation allowance in the full amount of the deferred tax assets since there is no assurance of future taxable income.

  

F-9

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

INCOME TAXES (CONTINUED)

 

The Company utilizes the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes to account for the uncertainty in income taxes. Topic 740 for Income Taxes clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement and classification in financial statements of tax positions taken or expected to be taken in a tax return. Further, it prescribes a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the accounting for related interest and penalties, financial statement classification and disclosure. The Company’s policy is that any interest or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain tax positions or related interest or penalties requiring accrual at December 31, 2011 and December 31, 2010.

 

CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consist primarily of cash in banks and highly liquid investments with original maturities of 90 days or less.

 

CONCENTRATIONS OF CREDIT RISK

 

The Company maintains all cash in deposit accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts.

 

COMPREHENSIVE INCOME (LOSS)

 

The Company has not presented a separate statement of other comprehensive income (loss) as there are no such items.

 

EARNINGS PER COMMON SHARE

 

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.

 

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

 

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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

 

LONG-LIVED ASSETS

 

The realizability of long-lived assets is evaluated periodically as events or circumstances indicate a possible inability to recover the carrying amount. Long-lived assets that will no longer be used in our business are written-off in the period identified since they are no longer expected to generate any positive cash flows for us. Long-lived assets that continue to be used by us are periodically evaluated for recoverability. Such evaluation is based on various analyses, including cash flow and profitability projections. The analyses necessarily involve significant management judgment. In the event the projected undiscounted cash flows are less than net book value of the assets, the carrying value of the assets is written down to its estimated fair value.

 

F-10

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

LONG-LIVED ASSETS (CONTINUED)

 

During 2010, the Company determined that, based on estimated future cash flows, the carrying amount of the intangible assets acquired in the purchase of Latigo Shore Music, Inc., including the Music Copyright Costs and Master Compact Disks exceed their fair value by $18,942 each. Accordingly, an impairment loss of $37,884 was recognized for the year ended December 31, 2010 related to these intangibles. No impairment loss was recognized for the year ended December 31, 2011. Additionally, during 2010, the Company determined that the carrying amount of goodwill exceeded its fair value. Accordingly, a goodwill impairment loss of $41,664 was recognized for the year ended December 31, 2010.

 

REVENUE RECOGNITION

 

As required by FASB ASC Topic 605, Revenue Recognition (“ASC 605”), the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable.

 

Revenues are earned from the receipt of royalties relating to the licensing of rights in musical compositions. The receipt of royalties principally relates to amounts earned from the public performance of copyrighted material, the mechanical reproduction of copyrighted material on recorded media including digital formats, and the use of copyrighted material in synchronization with visual images. Consistent with industry practice, music publishing royalties, generally are recognized as revenue when cash is received. Revenue generally is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2011, the FASB issued an update to its Accounting Standards Codification Topic 220 related to Comprehensive Income. In this update, the Board reinstated the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05 in June 2011. These requirements are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. Implementation of this update will not have a material impact on our consolidated financial position or results of operations.

 

In December 2011, the FASB issued an update to its Accounting Standards Codification Topic 210 related to Balance Sheet. In this update, entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. Generally Accepted Accounting Principles and those entities that prepare their financial statements on the basis of International Financial Reporting Standards. The scope of this amendment would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. The amendments are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company has evaluated implementation of this update and determined that it will not have a material impact on their consolidated financial position or results of operations.

 

In September 2011, the FASB issued an update to its Accounting Standards Codification Topic 350 related to Intangibles – Goodwill and Other. In this update, an entity is permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments of this update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that is more likely than not that its fair value is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company has evaluated implementation of this update and determined that it will not have a material impact on their consolidated financial position or results of operations.

 

In June 2011, the FASB issued an update to its Accounting Standards Codification Topic 220 related to Comprehensive Income. In this update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.

F-11

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

 

Regardless of the choice in presentation, an entity is required to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments do not change the option for an entity to present components of other comprehensive income wither net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items. In both cases, the tax effect for each component must be disclosed in the notes to the financial statements or presented in the statement in which other comprehensive income is presented. The amendments do not affect how earnings per share is calculated or presented. This Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Implementation of this update will not have a material impact on our consolidated financial position or results of operations.

 

In December 2010, the FASB issued an update to its Accounting Standards Codification Topic 350 related to Goodwill and Other Intangible Assets. When a goodwill impairment test is performed (either on an annual or interim basis), an entity must assess whether the carrying amount of a reporting unit exceeds its fair value (Step 1). If it does, an entity must perform and additional test to determine whether goodwill has been impaired and to calculate the amount of that impairment (Step 2). This update deals with questions about entities with reporting units with zero or negative carrying amounts because some entities concluded that Step 1 of the test is passed in those circumstances because the fair value of their reporting unit will generally be greater than zero. As a result of that conclusion, some constituents raised concerns that Step 2 of the test is not performed despite factors indicating that goodwill may be impaired. This update is effective, for public entities, for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. Implementation of this update did not have a material impact on our consolidated financial position or results of operations.

 

In December 2010, the FASB issued an update to its Accounting Standards Codification Topic 805 related to Business Combinations. The objective of this update is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. It specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This update also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This update is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted.

 

NOTE 2 – STOCKHOLDERS’ EQUITY/ (DEFICIT)

 

On February 1, 2006, the Company completed an initial registered public offering of its common stock pursuant to the Company's registration statement on Form SB−2 (File No. 333−125314) that the Securities and Exchange Commission declared effective on November 2, 2005 (the “Registration Statement”). The Company offered and sold 125,000 registered shares of the Company's common stock, at a price of $1.00 per share. Pursuant to Rule 419 of Regulation C, promulgated under the Securities Act of 1933, as amended, the Company deposited all proceeds of the offering and the shares sold into an escrow account. The offering was conducted by the Company's management without the use of an underwriter or securities dealer and the Company has not paid and will not pay commissions in connection with the sale of the shares. The shares sold and the proceeds of the offering were held in escrow pending completion of a business combination. The Company had until May 2, 2007 to consummate a qualifying business combination with another entity.

 

Accordingly, the $125,000 subject to the withdrawal restrictions had been classified as restricted cash, and in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 480 related to Financial Instruments with Characteristics of Both Liabilities and Equity, a liability was recorded for the obligation to repay these amounts to the investors if an acquisition is not consummated. On April 10, 2007, the Company returned these funds to the investors including interest as management determined that a qualifying business combination would not occur by May 2, 2007.

  

F-12

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 2 – STOCKHOLDERS’ EQUITY/(DEFICIT) (CONTINUED)

 

On August 16, 2007, the Company issued shares of its common stock for services rendered. As a result, Mitchell W. Turk received 32,000 shares of common stock, Gary Saderup received 17,500 shares of common stock, Steve Dorff received 30,000 shares of common stock, and William B. Barnett received 25,000 shares of common stock. The shares of common stock issued are restricted shares and each share certificate contains a legend restricting sales and transfers.

 

The Company applied the Financial Accounting Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account for these shares issued. According to Topic 505, issuance of equity instruments for services received are based on the fair value of the equity instruments issued or on the fair value of the services received, whichever is a more reliable measure. The Company used the value of its common stock shares to account for this transaction. The value of its shares is deemed more reliable as it was obtained from the valuation of an unrelated valuation specialist.

 

On August 16, 2007, the Company issued 1,000,000 shares of common stock to Brooktide, LLC (a company controlled by Mr. Yale Farar) in full satisfaction of $280,000 plus interest owed to Mr. Farar. The shares of common stock are restricted shares and the share certificates contain a legend restricting sales and transfers.

 

On September 26, 2007, in order to provide a fair and reasonable percentage in ownership of the Company and a fair and reasonable share price for potential future investors, the Company adjusted its capitalization. The Company received, from Brooktide, LLC (a company controlled by Mr. Yale Farar), 544,286 shares of common stock for cancellation. The Company cancelled and returned the shares of common stock to authorized but unissued status.

 

The Company, in its development stage, does not have a history of operations, and there is no liquid market for trading the Company’s stock. Subsequently, determining the fair value of our common stock requires making complex and subjective judgements. The valuation of the per share value of the Company’s common stock was determined contemporaneously by the Board of Directors, in its best judgment. Over the past year, the Company’s share valuation has fluctuated in response to the Company’s varying business condition.

 

Significant Factors, Assumptions, and Methodologies Used in Determining Fair Value

Significant factors and assumptions used in determining the Company’s fair value of its common stock include, future prospects for business, economic conditions of the music industry, debt restructuring, availability of capital resources, and cancellation of outstanding shares of common stock.

 

Significant Factors contributing to the Difference between Fair Value as of the Date of Each Grant and Estimated IPO Price

In April 2007 the Company acquired Latigo Shore Music, Inc. which business had been valued at $100,000 by an independent business appraisal firm. In light of the perceived future potential of Latigo’s music inventory and industry experience of Latigo’s President, the Company and Latigo’s President agreed on a per share valuation of $1.00 per share of the Company’s common stock. This valuation was determined after arms-length negotiations between the Company and Latigo and was accepted as a fair valuation by the parties to this transaction.

 

In August 2007, the Company’s ability to continue operations was in question and a restructuring of debt was deemed imperative. The Board considered the then net worth of the Company, the reduced prospects for business at the time, the general economic conditions in the music industry and the subjective value related to development stage companies. Faced with these circumstances, the Board determined a significantly reduced value of $0.28 per share was justified. In October 2007, the Company obtained a retrospective independent valuation of the Company’s stock as of August 16, 2007 of $0.28 per share thus supporting the Board’s valuation. An unrelated valuation specialist performed this independent valuation.

 

In October 2007, when the public offering price was being considered, the Company had recently significantly restructured its debt, had reduced the number of outstanding shares and had received additional loans from its President. In addition, by late 2007, the Company was seeing increased interest in Latigo’s business and music catalog thus enhancing the prospects for business. These internal and external factors, along with the fact that shares offered in the proposed initial public offering (“IPO”) would be freely tradable, convinced the Board that the fair valuation of the Company’s stock in the public offering should be $0.75 per share.

  

F-13

 

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 2 – STOCKHOLDERS’ EQUITY/ (DEFICIT) (CONTINUED)

 

The Company’s business prospects and capitalization have been fluid from month to month and period to period. The Board of Directors, in setting fair values on stock issuances, uses its best judgment to evaluate the then current business condition and prospects for the Company and its industry and determines stock valuation to reflect current business conditions and prospects. Consequently, as business conditions have fluctuated over the past 12 months, so has the Company’s stock valuation as determined by the Board. Future variations in the Company’s stock price should be anticipated.

 

The Company filed a registration statement, Form S-1, with the SEC on December 6, 2007. The SEC declared the registration statement effective on May 13, 2008. On August 5, 2008, the Company closed its initial public offering after selling 318,504 shares of its common stock at a price of $0.75 per share for gross proceeds of $238,878. After $66,127 of offering costs, the net proceeds totaled $172,751. Net proceeds will be used to acquire music catalogues, for music production and promotion and for general working capital.

 

On August 29, 2008, the Company’s board of directors agreed to issue 9,000 stock options to Mr. Gary Saderup for the purchase of the Company’s shares of common stock. The stock options are exercisable at $0.75 per share and expire 2 years from the date of grant. On August 26, 2010, the Company and Mr. Saderup mutually agreed to extend the exercise date of these options to August 28, 2012.

 

On August 31, 2008, the Company additionally agreed to enter into a consulting agreement with Mr. Stephen Horwitz. According to the agreement, Mr. Horwitz would act as a consultant to the Company for 18 months. The Company will grant Mr. Horwitz warrants to purchase 25,000 shares of its common stock at an exercise price of $0.75 per share. Warrants to purchase 12,500 shares will be granted upon execution of the consulting agreement. The warrants to purchase the remaining 12,500 shares were to be granted in 90 days, subject to approval by the President of the Company as to the quality of the work performed by Mr. Horwitz. On November 26, 2008, the Board of Directors denied the grant of the remaining 12,500 shares. Additionally, the consulting agreement expired on June 1, 2009, a total of nine months. The 12,500 warrants issued expire 2 years from the date of grant. On August 26, 2010, the Company and Mr. Horwitz mutually agreed to extend the exercise date of these warrants to August 28, 2012. As a result of this modification, and the modification described above, the Company recognized $7,437 in stock-based compensation in the 2010 consolidated statement of operations.

 

The Company applied the Financial Accounting Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account for these options and warrants issued. According to Topic 505, all transactions in which goods or services are the consideration received for the issuance of equity instruments shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company believes that fair value of these options and warrants is a more reliable measure of the consideration received for services performed for the Company. We determined the fair value of these equity instruments using the Black-Scholes option-pricing model. Factors used in the determination of the fair value of these equity instruments include, the stock price at the grant date, the exercise price, the expected life of the equity instrument, the volatility of the underlying stock, the expected dividends on it, and the risk-free interest rate over the expected life of the equity instrument. The initial fair value of these options and warrants granted was $7,566 which was calculated using the Black-Scholes option-pricing model.

 

At December 31, 2010, the 21,500 vested options and warrants are outstanding at an exercise price of $0.75 per share and there is no intrinsic value. Compensation cost charged to operations was $7,437 for the year ended December 31, 2010. Compensation cost charged to operations was $11,250 for the year ended December 31, 2009.

 

On January 3, 2011, the Company entered into a Securities Purchase Agreement (“Agreement”) with CSB IV US Holdings, LLC (“Purchaser”) to sell 70,000 shares of the Company’s common stock at a price of $.50 per share. The proceeds from this sale will be used to pay fees and expenses; to the extent such expenses are not deferred, arising from the Company’s compliance with its public reporting requirements and to continue to create viable entertainment assets in the music recording industry.

 

On June 15, 2011, the Company issued 25,000 shares its common stock, at a price of $0.50 per share, to Mr. Steve Dorff for services rendered. The shares of common stock issued are restricted shares and each share certificate contains a legend restricting sales and transfers.

 

On September 16, 2011, Mr. Stephen Horowitz exercised his 12,500 warrants to purchase 12,500 shares of the Company’s common stock at an exercise price of $0.75 per share.

 

On September 16, 2011, Mr. Gary Saderup exercised his options to purchase 9,000 shares of the Company’s common stock at an exercise price of $0.75 per share.

 

F-14

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 2 – STOCKHOLDERS’ EQUITY/ (DEFICIT) (CONTINUED)

 

On September 21, 2011, pursuant to the terms and conditions dated July 27, 2011, the Company issued 60,000 shares of common stock to Brooktide, LLC (a company controlled by Mr. Yale Farar) in full satisfaction of $30,000 owed to Brooktide, LLC. The shares of common stock are restricted shares and the share certificates contain a legend restricting sales and transfers. The Company determined that the price of $0.50 per share was a fair value for the shares issued to Mr. Dorff based on its most recent securities sale transaction.

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

On August 16, 2007, the Company issued 1,000,000 shares of common stock to Mr. Yale Farar in full satisfaction of $280,000 plus interest owed to him. The shares of common stock are restricted shares and the share certificates contain a legend restricting sales and transfers. The $280,000 owed to Mr. Farar was comprised of the $170,000 loan to the Company, including $50,000 on March 30, 2007, pursuant to the Agreement to Advance Funds dated September 21, 2005 and the $110,000 loan to the Company in accordance with the 6% Subordinated Convertible Promissory Note on April 26, 2007.

 

Mr. Yale Farar, President, had loaned the Company $170,000, including $50,000 on March 30, 2007, pursuant to the terms of the Agreement to Advance Funds dated September 21, 2005, as amended. The Company used these funds to make payments for its general and administrative expenses and deferred offering costs. Pursuant to the terms of the Agreements to Advance Funds dated September 21, 2005, as amended, the loans were on an interest-free basis, documented by promissory notes and payable only upon consummation of a merger transaction or Event of Default, as defined by the promissory notes.

 

On April 26, 2007, Mr. Farar, the President of Rokwader, loaned the Company $110,000 in accordance with a 6% Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, the loan bears interest at 6% per annum and absent an “Event of Default,” was payable on demand or upon receipt by the Company of not less than $500,000 in capital or sale of substantially all of the Company’s assets or 80% of the Company’s capital stock. The proceeds of the Note were used to complete the acquisition of Latigo and to pay fees and expenses, to the extent such expenses were not deferred, arising from the Company’s compliance with its public reporting requirements.

 

On November 13, 2007, Brooktide, LLC loaned the Company $75,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.375 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at anytime after the occurrence or existence of any one or more of the listed “Events of Default.”

 

The proceeds of the Note were used to pay fees and expenses arising from the Company’s compliance with its public reporting requirements and to continue to create viable entertainment assets in the music recording industry. Additionally, the proceeds of the Note were used to pay for costs relating to its registration statement with the SEC, which was declared effective May 13, 2008 and finalized on August 5, 2008.

 

Based on a conversion price of $.375, the convertibility does not result in a beneficial conversion feature as defined in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 470 related to Debt with Conversion and Other Options. Further, per the Financial Accounting Standards Board’s Accounting Standards Codification Topic 815 related to Contracts in Entity’s Own Equity, the debt meets the definition of conventional convertible debt and bifurcation of the embedded derivative is not necessary.

 

Additionally, Brooktide, LLC owns a controlling interest in the Company’s common stock. Mr. Farar, the President of Rokwader, is the sole manager of Brooktide, LLC. As a sole manager, Mr. Farar, has voting and investment power over the shares owned by Brooktide, LLC.

 

The Company neither owns nor leases any real or personal property. Most office services are provided without charge by the president. In addition, Mr. Dorff, director and President of Latigo provides music studio facilities to us at no cost. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein.

 

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities, such that they may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.

 

F-15

 

 

 
 

 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 3 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

On February 12, 2009, the Company issued 15,000 shares of its common stock at a price of $0.75 per share to Mr. Steve Dorff for services performed. Using the results of its initial public offering performed on August, 5, 2008, the Company determined that the price of $0.75 per share was a fair value for the shares issued to Mr. Steve Dorff.

 

The Company applied the Financial Accounting Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account for these shares issued. According to Topic 505, all transactions in which goods or services are the consideration received for the issuance of equity instruments shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliable measure. The Company believes that the fair value of these shares is a more reliable measure of the consideration received for services performed for the Company.

 

On April 14, 2010, Mr. Yale Farar, the President of Rokwader, loaned the Company $25,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.75 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at anytime after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses arising from the Company’s compliance with its public reporting requirements.

 

On December 17, 2010, Brooktide, LLC loaned Latigo Shore Music, Inc. (“Latigo”), a wholly owned subsidiary of the Company, $16,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by Latigo. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.75 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.”

 

The proceeds of the Note were used to purchase musical compositions from the Gary Harju music catalog to the extent of his writer’s and publisher’s share (“Harju Catalog”). The Harju Catalog consists of 50 original songs written in whole or in part by Gary Harju.

 

On December 17, 2010 Brooktide, LLC loaned the Company $9,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.75 per share. The Note is a demand note and may be paid at any time without premium or penalty.

 

The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.”

 

The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, arising from the Company’s compliance with its public reporting requirements and to continue to create viable entertainment assets in the music recording industry.

 

On June 15, 2011, the Company issued 25,000 shares of its common stock, at a price of $0.50 per share, to Mr. Steve Dorff for services rendered. The shares of common stock issued are restricted shares and each share certificate contains a legend restricting sales and transfers. Based on the Company’s most recent securities sale transaction, the Company determined that the price of $0.50 per share was a fair value for the shares issued to Mr. Dorff.

 

The Company applied the Financial Accounting Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account for these shares issued. According to Topic 505, all transactions in which goods or services are the consideration received for the issuance of equity instruments shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliable measure. The Company believes that the fair value of these shares is a more reliable measure of the consideration received for services performed for the Company.

 

  

F-16

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

NOTE 3 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

On July 27, 2011 Brooktide, LLC loaned the Company $30,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.50 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, arising from the Company’s compliance with its public reporting requirements and to continue to create viable entertainment assets in the music recording industry.

 

Additionally, Brooktide, LLC owns a controlling interest in the Company’s common stock. Mr. Farar, the President of Rokwader, is the sole manager of Brooktide, LLC. As a sole manager, Mr. Farar, has voting and investment power over the shares owned by Brooktide, LLC.

 

Based on a conversion price of $.50, the convertibility does not result in a beneficial conversion feature as defined in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 470 related to Debt with Conversion and Other Options because the conversion price at issuance is the same as the estimated price of the Company’s common stock based on recent issuances of common stock at $.50 per share (see Note 2).  Further, per the Financial Accounting Standards Board’s Accounting Standards Codification Topic 815 related to Contracts in Entity’s Own Equity, the debt meets the definition of conventional convertible debt and bifurcation of the embedded conversion feature is not necessary as the embedded conversion feature is not clearly and closely related to the economic characteristics and risks of the debt.

 

On September 21, 2011, the Company issued 60,000 shares of common stock to Brooktide, LLC in full satisfaction of $30,000 owed to Brooktide, LLC. The shares of common stock are restricted shares and the share certificates contain a legend restricting sales and transfers. The $30,000 owed to Brooktide, LLC was comprised of the $30,000 loan to the Company in accordance with the 6% Subordinated Convertible Promissory Note on July 27, 2011.

 

NOTE 4 – GOODWILL AND INTANGIBLES

 

On December 17, 2010, Latigo, a wholly owned subsidiary of the Company, acquired all right, title and interest in 50 musical compositions from the Gary Harju music catalog to the extent of his writer’s and publisher’s share for a cost of $15,000 paid in cash on the closing date of December 17, 2010. The Harju Catalog (including copyrights and publishing rights) consists of 50 original songs written in whole or in part by Mr. Gary Harju. Some of the songs are owned outright by Latigo as a result of the acquisition, and others are and will continue to be subject to publishing agreements with various music publishers, who will continue to collect the publisher’s share of royalties. The other parties who have partial interests in the catalog will continue to receive their share of royalties and other income. The Company will amortize the costs of the Harju Catalog over its estimated useful life based on projected net revenues. The Company projects to generate revenues from the Harju Catalog for an estimate of 12 years based on Mr. Harju’s past accomplishments and the ability of the recorded music to generate revenues for long periods of time. Therefore, the Company estimated the useful life of the Harju Catalog to be 12 years.

 

      December 31, 2011     December 31, 2010
      Gross     Accumulated     Gross     Accumulated  
      Amount     Amortization     Amount     Amortization  
Intangibles subject to amortization:     15,000     1,432     15,000     -  
        Harju Music Catalog   $ 15,000   $ 1,432   $ 15,000   $ -  
                           
                           

 

For the year ended December 31, 2011 and the year ended December 31, 2010, amortization expense was $1,432 and $6,000, respectively.

  

F-17

 

 

 

 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE COMPANY)

 

Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.  During 2010, the Company determined that, based on estimated future cash flows, the carrying amount of the Music Copyright Costs and Master Compact Disks exceed their fair value by $18,942, each.  Accordingly, an impairment loss of $37,884 was recognized for the year ended December 31, 2010 related to these intangibles.

 

Goodwill is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill’s carrying amount is greater than its fair value.  During 2010, the Company determined that the carrying amount of goodwill exceeded its fair value.,  Accordingly, a goodwill impairment loss of $41,664 was recognized for the year ended December 31, 2010.

 

Amortization of the remaining intangible assets is expected to be $6,083 from 2012 through 2016, and $7,485 in aggregate for years thereafter through 2015.

 

NOTE 5 – INCOME TAXES

 

The current year provision for income taxes includes income taxes currently payable and those deferred due to temporary differences between financial statement and tax basis of assets and liabilities. The provision for income taxes consists of the following:

 

Current      
Federal    $                  -    
State                  1,600  
                   1,600  
       
Deferred      
Net Change in deferred tax assets:      
Federal                        -    
State                        -    
     $                  -    
       

 

 

As of December 31, 2011, the Company had incurred $294,000 of start-up expenses amortizable over 15 years. Also, the Company acquired certain intangible assets in the amount of $58,500 amortizable over 15 years. Additionally, the Company has net operating loss carry forwards of approximately $601,000 and $722,000 for both federal and state purpose, respectively. These federal and state carry forwards are scheduled to expire beginning in 2027. The Company is no longer subject to examination by the Internal Revenue Service for years prior to 2008 and by the Franchise Tax Board for years prior to 2007. There could be certain limitation, imposed by Section 382 of the Internal Revenue Code, on the utilization of these loss carry forwards, if there were more than a 50 percent change of control. The Company has recorded a deferred tax asset of $345,000. As of December 31, 2011, the Company established a valuation allowance of $345,000 to fully offset the deferred tax asset based on a brief history of operations. During the years ended December 31, 2011 and 2010, the company’s valuation allowance increased $48,000 and $48,000 , respectively.

 

The following reconciles the federal statutory income tax rate to the effective rate of the provision for income taxes.

 

  2011 2010
Federal Statutory Rate 34% 34%
Effect of State Income Taxes 6% 6%
Valuation Allowance Adjustment -40% -40%
Effective Rate 0% 0%

 

NOTE 6 – SUBSEQUENT EVENTS

 

We have evaluated subsequent events from the date of the consolidated balance sheet through the date of the filing of this Form 10-K. During this period, no material recognizable subsequent events were identified that relate to the year ended December 31, 2011.

  

F-18

 

 
 

 

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

 

Not Applicable

 

Item 9A Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.

 

The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our chief executive officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2011 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  There have been no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the years ended December 31, 2011.

 

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations.  Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management's assessment of the effectiveness of the small business issuer's internal control over financial reporting is as of the year ended December 31, 2011. We believe that internal control over financial reporting is effective. We have not identified any, current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.

 

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this annual report.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

 

There was no change in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

15

 

 

 
 

 

Item 9B. Other Information.

 

Not applicable.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Our Board of Directors currently consists of three members. Each director holds office until his successor is duly elected by the stockholders. Executive officers serve at the pleasure of the Board of Directors. Our current directors and executive officers are:

 

Name       Age   Position   Year Appointed
Yale Farar       73   President and Director   2005
Mitchell W. Turk       56   Chief Financial Officer, Secretary and Director   2005
Gary Saderup       60   Director   2005
Steve Dorff       62   Director and President of Latigo Shore Music, Inc.   2007

 

Yale Farar, President and Director, has been an active private investor for over forty years, specializing in corporate development. Since April 1996, Mr. Farar has also been the manager and principal owner of Brooktide, LLC, and the controlling stockholder of Rokwader. Brooktide, LLC is owned by, and engages in investment and financial management for Mr. Farar. No other company affiliated with Mr. Farar, other than Brooktide, LLC, has any relationship with Rokwader.

 

Mitchell W. Turk, Chief Financial Officer, Secretary and Director, has been in the electronic component distribution industry for over 30 years. He recently sold his privately owned company after 23 years of ownership and is now a private investor.

 

Gary Saderup, Director, has been an active artist, publisher and independent businessman for over 30 years. Through his company, Gary Saderup, Inc., formed in December 1994, Mr. Saderup has sold his work internationally, including in Japan, Australia, South Africa, the U.K., Germany and Canada, as well as within the U.S. Mr. Saderup studied at Brigham Young University, the University of Hawaii, and the Art Center College of Design. Mr. Saderup has also previously worked as a professional actor and director. Mr. Saderup is also co-owner of a theatrical production company in Ventura County, California. Through this company he has produced and starred in three theatrical productions in the past few years.

 

Steve Dorff, the President of Latigo, is a long-time composer and producer. Mr. Dorff is a three-time Grammy nominee and has often been on the nation's top music charts. His résumé includes nine #1 film songs and 15 Top 10 hits, including the Kenny Rogers' classic "Through the Years", a BMI 3 million performance song, as well as "I Just Fall In Love Again ", the Anne Murray record that captured Billboard's #1 Song Of The Year honors. His many songs have been sung by some of the greatest artists of our time including Barbra Streisand, Celine Dion, Whitney Houston, George Strait, Vanessa Williams and others. Emmy Nominee for five television compositions, his credits include such stalwarts as "Murphy Brown" and "Murder She Wrote". He has also contributed to various television series’ like "Growing Pains", "Alien Nation", "Spenser: for Hire", "Major Dad", "Colombo", "Reba", and "Rodney". Currently, Mr. Dorff is the musical director of the popular television show “The Singing Bee” on CMT (the “Country Music Television” channel) His many other TV and cable movie credits include the Emmy nominated CBS mini-series "Elvis", the Hallmark Hall of Fame "Rose Hill", the animated Christmas classic "Annabelle's Wish", "Babe Ruth", "The Quick and The Dead", "Moonshine Highway" and "The Defiant Ones". Mr. Dorff’s many movie songs and scores have been featured in "Bronco Billy", "Blast from the Past", "Rocky IV", "Pure Country", "Tin Cup", "Michael", "Dudley Do-Right", "Dancer, Texas", "The Last Boy Scout", "Curly Sue" and "Honky Tonk Man".

 

Directors serve for a one-year term. There are currently no agreements or understandings whereby any officer or director would resign at the request of another person. None of our officers or directors are acting on behalf of or will act at the direction of any other person.

 

Board Committees

 

Audit committee

 

The audit committee of our board of directors is responsible for reviewing and monitoring our financial statements and internal accounting procedures, recommending the selection of independent auditors by our board, evaluating the scope of the annual audit, reviewing audit results, consulting with management and our independent auditor prior to presentation of financial statements to stockholders and, as appropriate,

 

  

16

 

 

 
 

 

initiating inquiries into aspects of our internal accounting controls and financial affairs. Our audit committee consists of Mr. Turk who serves as chairman and Mr. Saderup. Due to the fact that we are in our business development stage and have not yet assembled our complete management team, the audit committee does not currently have exclusively disinterested directors as members nor does it have a member who qualifies as a disinterested "audit committee financial expert" under the federal securities laws. We hope to be able to fill these positions during the latter part of 2012.

 

Compensation and Nominations Committees

 

We currently have no compensation or nominating committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in discussions concerning executive officer compensation and nominations to the board of directors.

 

Code of Conduct and Ethics

 

Our board of directors has adopted a code of business conduct and ethics applicable to our directors, officers and employees, in accordance with applicable federal securities laws and the FINRA Rules.

 

Indemnification of Executive Officers and Directors

 

The General Corporation Law of the State of Delaware permits indemnification of directors, officers, and employees of corporations under certain conditions subject to certain limitations. Article VII of our Certificate of Incorporation states that we may provide indemnification of our agents, including our officers and directors to the maximum extent permitted by the Delaware Corporation Law. In the event that a claim for indemnification (other than the payment by us of expenses incurred or paid by our sole director and officer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is appropriate and will be governed by the final adjudication of such issue.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of its Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission ("SEC") and each exchange on which the Company's securities are registered. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all ownership forms they file.

 

Based solely on its review of the copies of such forms received by it, or written representations from the officers, directors, or persons holding greater than 10% of Company stock, no ownership disclosure form (SEC Form 5) was required for those persons. All of the required Form 3's and up to date Form 4's for the directors have been filed with the SEC. There are no transfers of the Company's common stock by any persons subject to Section 16(a) requirements.

 

Item 11. Executive Compensation

 

The following table sets forth the compensation of our Chief Executive Officer during the last three fiscal years ended December 31, 2011, 2010 and 2009. No officers or directors received annual compensation in excess of $100,000 during the last two completed fiscal years.  

 

 

 

  

 

 

 

 

 

 

17

 

 
 

 

 

 

Summary compensation table

 

  Annual Compensation  

Long Term

Compensation

     
      Awards   Payout      
   Year       Salary   Bonus($)  

Other Annual

Compensation($)

 

Restricted Stock

Award(s)

 

Securities

 Underlying

Options (#)

 

LTIP

Payout($)

 

All Other

Compensation

 
Yale Farar 2011       0   0   0   0   0   0   0  
President 2010       0   0   0   0   0   0   0  
  2009       0   0   0   0   0   0   0  

 

Mr. Farar has provided services to us at no charge during the early stages of our business. As our business progresses and grows, we expect to begin paying salaries to each of our officers. We also expect to hire part-time and full-time employees and consultants who will be paid compensation and consulting fees.

 

Employment Agreement

 

The Company has no Employment Agreement with any of its officers or directors.

 

Stock Option Plan

 

We do not have a stock option plan although we may adopt one or more such plans in the future.

 

 

Employee Pension, Profit Sharing or other Retirement Plans

 

We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

 

Director's compensation

 

At present we do not pay our directors for attending meetings of our Board of Directors, although we may adopt a director compensation policy by the end of the current year.

 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following tables set forth as of January 31, 2012 the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are no known pending or anticipated arrangements that may cause a change in control.

 

     

Name and Address of Beneficial Owner (1)

 

Shares Beneficially

Owned

   

Percentage of

Outstanding

Common Stock

     
Brooktide, LLC (2)      1,677,214      70.2 %
Yale Farar (3)      1,677,214      70.2 %
Mitchell W. Turk (4)      40,000     1.6 %
Gary Saderup (4)      34,000      1.4 %
Steve Dorff (4)      140,000     5.8 %
Officers and Directors (4 persons)   1,891,214     79.0 %

  

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(1) The address for each person or entity listed on the table other than Brooktide, LLC is c/o Rokwader, Inc., 23300 Ventura Boulevard, 2nd Floor, Woodland Hills, CA 91364.
   
(2) The address for Brooktide, LLC is 123 West Nye Lane #510, Carson City, Nevada 89706. Brooktide, LLC is owned by, and engages in investment and estate-planning activities for, Mr. Farar.
   
(3) These shares are held in the name of Brooktide, LLC of which Yale Farar, Rokwader’s President and Director, is the sole Manager of Brooktide, LLC. As sole Manager, Mr. Farar has voting and investment power over these shares.
   
(4) Individual has sole voting and investment power over such shares.

 

 

  Item 13. Certain Relationships and Related Transactions and Director Independence.  

 

On September 21, 2011, in accordance with the terms and conditions of a Subordinated Convertible Promissory Note dated July 27, 2011, the Company issued 60,000 shares of its common stock to Brooktide, LLC (a company controlled by Yale Farar, the president, director and majority shareholder of the Registrant) in full satisfaction of $30,000 plus interest owed to Mr. Farar.

 

On September 16, 2011, the Company issued 9,000 shares and 12,500 shares of its common stock to Gary Saderup and Stephen Horowitz, respectively, upon their exercise of previously issued options and warrants respectively at an exercise price of $.75 per share. Mr. Saderup is a director of the Registrant and Mr. Horowitz is a consultant to the Company.

 

All of the individuals and entities receiving the Company’s common stock are “accredited” investors. The shares of common stock are all restricted shares and the stock certificates have been affixed with a legend restricting sales and transfers. The Company issued the common stock pursuant to certain exemptions from registration provided by Rule 506 of Regulation D and Section 4(2) and Section 4(6) of the Securities Act of 1933, as amended.

 

We currently use the offices and music recording studio of management at no cost to us. Management has agreed to continue this arrangement until the Company generates greater revenues.

 

  Item 14. Principal Accountant Fees and Services.    

   

During 2011 and 2010, Marcum Stonefield, a division of Marcum, LLP, the Company’s independent auditors as of December 31, 2011, , have billed for their services as set forth below.. In addition, fees and services related to the audit of the financial statements of the Company for the period ended December 31, 2011, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2011.

 

    Year ended December 31,  
    2011   2010  
           
Audit Fees   $ 24,000   $ 24,000  
               
Audit-Related Fees   $ -0-   $ -0-  
               
Tax Fees   $ -0-   $ -0-  
               
All Other Fees   $ -0-   $ -0-  


Pre-Approval Policy

 

Our Board as a whole pre-approves all services provided by Marcum LLP. For any non-audit or non-audit related services, the Board must conclude that such services are compatible with Marcum LLP independence as our auditors.

 

 

  

 

 

 

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PART IV

Item 15. Exhibits; Financial Statement Schedules.
     
Exhibit ITEM
   
2.1 (4) Securities Exchange Agreement dated February 12, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
2.2 (5) Revised Securities Exchange Agreement dated April 20, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
3.1 (2) Certificate of Incorporation
   
3.2 (2) By-Laws
   
4.1 (2) Specimen Certificate of Common Stock
   
4.2 (7) Escrow Agreement
   
10.2 (2) Agreement to Advance Funds by Yale Farar
   
10.3 (3) Second Amendment to the Agreement to Advance Funds by Yale Farar dated December 4, 2006
   
10.4 (3) Promissory Note dated December 4, 2006 in favor of Yale Farar
   
10.5 (1) Addendum to Agreement to Advance Funds by Yale Farar dated March 27, 2007
   
10.6 (1) Memorandum of Understanding between Ask Street Music, LLC and Latigo Shore Music, Inc. dated January 25, 2007
   
10.7 (1) Employment Agreement between Steve Dorff and Latigo Shore Music, Inc. dated February 1, 2007
   
10.8 (1) Letter Agreement between Latigo Shore Music, Inc. and Jon Estep dated February 13, 2007
   
10.9 (1) Fair Market Valuation Opinion and Report dated March 30, 2007 re: Latigo Shore Music, Inc.
   
10.10 (5)  6% Subordinated Convertible Promissory Note dated April 26, 2007
   
10.11 (6) Convertible Promissory Note dated November 13, 2007
   
10.12 (5) Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $9,000 dated December 17, 2010
   
10.13 (5) Convertible Promissory Note between the Company and Latigo Shore Music, Inc.  in the amount of $16,000 dated Dec. 17, 2010
   
10.14 (5) Security Agreement entered into by Latigo Shore Music, Inc. and Brooktide, LLC dated December 17, 2010
   
31.1 * Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
31.2 * Certification of Chief Financial Officer pursuant to Section 302(a) 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

 

 

* Filed herewith
(1) These exhibits have been previously filed with Registrant’s Post-Effective Amendment No. 2 filed April 5, 2007
(2) These exhibits have been previously filed with the Registrant’s SB-2 Registration Statement (333-125314).
(3) Filed as exhibits to Registrant’s Form 8-K filed December 4, 2006
(4) Filed as an exhibit to Registrant’s Form 8-K filed February 14, 2007.
(5) Filed as an exhibit to Registrant’s Form 8-K filed April 27, 2007
(6) Filed as an exhibit to Registrant’s Form 8-K filed November 13, 2007
(7) Filed as an exhibit to Registrant’s Form SB-2 filed December 6, 2007
(5) Filed as an exhibit to Registrant’s Form 8-K filed December 17, 2010

 

FORM 8-K:

 

None.

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SIGNATURES

 

In accordance with the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 1st day of March, 2012.

 

  ROKWADER, INC.

 

 

 

 

 

 

  By:   /s/ Yale Farar
 

Yale Farar, President

(Principal Executive Officer)

 

In accordance with the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the dates stated.

     
     
/s/ Yale Farar   Dated: March 1, 2012
Yale Farar    
President (Principal Executive Officer) and Director    
     
     
/s/ Mitchell W. Turk   Dated: March 1, 2012
Mitchell W. Turk    

Chief Financial Officer (Principal Financial and

Accounting Officer), Secretary and Director

   
     
     
/s/ Gary Saderup   Dated: March 1, 2012
Gary Saderup  
Director    
     
/s/ Steve Dorff   Dated: March 1, 2012
Steve Dorff    
Director and President of Latigo Shore Music, Inc.    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

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EXHIBIT INDEX

     
Exhibit ITEM
   
2.1 (4) Securities Exchange Agreement dated February 12, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
2.2 (5) Revised Securities Exchange Agreement dated April 20, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
3.1 (2) Certificate of Incorporation
   
3.2 (2) By-Laws
   
4.1 (2) Specimen Certificate of Common Stock
   
4.2 (7) Escrow Agreement
   
10.2 (2) Agreement to Advance Funds by Yale Farar
   
10.3 (3) Second Amendment to the Agreement to Advance Funds by Yale Farar dated December 4, 2006
   
10.4 (3) Promissory Note dated December 4, 2006 in favor of Yale Farar
   
10.5 (1) Addendum to Agreement to Advance Funds by Yale Farar dated March 27, 2007
   
10.6 (1) Memorandum of Understanding between Ask Street Music, LLC and Latigo Shore Music, Inc. dated January 25, 2007
   
10.7 (1) Employment Agreement between Steve Dorff and Latigo Shore Music, Inc. dated February 1, 2007
   
10.8 (1) Letter Agreement between Latigo Shore Music, Inc. and Jon Estep dated February 13, 2007
   
10.9 (1) Fair Market Valuation Opinion and Report dated March 30, 2007 re: Latigo Shore Music, Inc.
   
10.10 (5)  6% Subordinated Convertible Promissory Note dated April 26, 2007
   
10.11 (6) Convertible Promissory Note dated November 13, 2007
   
10.12 (5) Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $9,000 dated December 17, 2010
   
10.13 (5) Convertible Promissory Note between the Company and Latigo Shore Music, Inc.  in the amount of $16,000 dated Dec. 17, 2010
   
10.14 (5) Security Agreement entered into by Latigo Shore Music, Inc. and Brooktide, LLC dated December 17, 2010
   
31.1 * Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
31.2 * Certification of Chief Financial Officer pursuant to Section 302(a) 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

 

 

 

* Filed herewith
(1) These exhibits have been previously filed with Registrant’s Post-Effective Amendment No. 2 filed April 5, 2007
(2) These exhibits have been previously filed with the Registrant’s SB-2 Registration Statement (333-125314).
(3) Filed as exhibits to Registrant’s Form 8-K filed December 4, 2006
(4) Filed as an exhibit to Registrant’s Form 8-K filed February 14, 2007.
(5) Filed as an exhibit to Registrant’s Form 8-K filed April 27, 2007
(6) Filed as an exhibit to Registrant’s Form 8-K filed November 13, 2007
(7) Filed as an exhibit to Registrant’s Form SB-2 filed December 6, 2007
(5) Filed as an exhibit to Registrant’s Form 8-K filed December 17, 2010

   

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