UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the quarterly period ended: June 30, 2012
Or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the transition period from: _____________ to _____________

Commission File Number: 000-53574

———————

MMAX Media, Inc.

(Exact name of registrant as specified in its charter)

———————

Nevada	20-4959207
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

511 N.E. 3rd Avenue, 1st Floor, Fort Lauderdale, Florida 33301

(Address of Principal Executive Office) (Zip Code)

(800) 991-4534

(Registrant’s telephone number, including area code)

———————

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
							þ	Yes	¨	No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
							þ	Yes	¨	No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer	¨					Accelerated filer			¨
Non-accelerated filer	¨	(Do not check if a smaller				Smaller reporting company			þ
		reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
							¨	Yes	þ	No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class				Shares Outstanding as of August 16, 2012
Common Stock, $0.001 Par Value Per Share				47,325,116

 

 

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MMAX Media, Inc. and Subsidiaries

TABLE OF CONTENTS

Page

Number

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Unaudited Financial Statements 2 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 Item 4. Controls and Procedures 19   PART II. OTHER INFORMATION   Item 1. Legal Proceedings. 21 Item 1A. Risk Factors 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3. Defaults Upon Senior Securities 21 Item 4. Mine Safety Disclosures 21 Item 5. Other Information 21 Item 6. Exhibits 21

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PART I. FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

MMAX MEDIA, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2012				2011
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash		$	1,016			$	6,328
Prepaid expenses			—				3,000
TOTAL CURRENT ASSETS			1,016				9,328
COMPUTER EQUIPMENT AND WEBSITE COSTS, NET			16,575				21,313
OTHER ASSETS
Deposits			4,290				4,290
TOTAL OTHER ASSETS			4,290				4,290
TOTAL ASSETS		$	21,881			$	34,931
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable		$	64,448			$	45,115
Accrued expenses			169,665				45,550
Deferred revenue			16,573				—
Due to related parties			4,300				—
Notes Payable - convertible			155,000				—
TOTAL CURRENT LIABILITIES			409,986				90,665
COMMITMENTS AND CONTINGENCIES (SEE NOTE 5)			—				—
STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value, 5,000,000 shares authorized,  0 shares issued and outstanding, respectively			—				—
Common stock, $0.001 par value, 195,000,000 shares authorized,  45,071,539 and 44,646,539 shares issued and outstanding, respectively			45,070				44,645
Additional paid in capital			2,496,909				1,769,355
Accumulated deficit			(2,930,084	)			(1,869,734	)
TOTAL STOCKHOLDERS'S DEFICIT			(388,105	)			(55,734	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	21,881			$	34,931

 

See accompanying notes to unaudited condensed consolidated financial statements.

2

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MMAX MEIDA INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2012				2011				2012				2011
						(Restated)								(Restated)
Revenue
Service Revenue, net		$	9,796			$	10,653			$	16,449			$	18,643
OPERATING EXPENSES
Professional fees			22,787				37,803				53,683				87,540
Web development and hosting			698				22,886				1,745				38,111
Payroll and payroll taxes			93,248				64,395				192,469				93,762
Consulting			352,197				211				732,261				55,211
Travel and entertainment			1,412				2,997				5,479				13,021
General and administrative			46,108				12,405				84,688				37,995
Total Operating Expenses			516,450				140,697				1,070,325				325,640
NET LOSS FROM OPERATIONS			(506,654	)			(130,044	)			(1,053,876	)			(306,997	)
OTHER EXPENSES
Liquidated damages			—				16,575				—				16,575
Interest expense			4,448				—				6,474				34,726
Total other expenses			4,448				—				6,474				51,301
Net loss before provision for income taxes			(511,102	)			(146,619	)			(1,060,350	)			(358,298	)
Provision for Income Taxes			—				—				—				—
NET LOSS		$	(511,102	)		$	(146,619	)		$	(1,060,350	)		$	(358,298	)
Net loss per share - basic and diluted		$	(0.01	)		$	(0.00	)		$	(0.02	)		$	(0.01	)
Weighted average number of shares outstanding during the period - basic and diluted			45,063,297				36,884,141				44,940,536				30,056,795

 

See accompanying notes to unaudited condensed consolidated financial statements.

3

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MMAX MEDIA, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

		For the Six Months Ended June 30,
		2012				2011
						(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,060,350	)		$	(358,298	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			4,738				4,449
Impairment of license			—				1,454
Warrants issued for services			699,479				12,323
Common stock issued for services			28,500				41,500
Common stock issued for liquidated damages			—				34,250
Changes in operating assets and liabilities:
Decrease / (increase) in prepaid expenses			3,000				2,082
Increase in deposits			—				—
Increase in accounts payable			143,448				26,347
Increase in accrued expenses			—				16,575
(Decrease) / increase in deferred revenue			16,573				(3,389	)
Net Cash Used In Operating Activities			(164,612	)			(222,707	)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Deposit			—				(4,290	)
Purchase of computer equipment and website			—				(5,155	)
Cash acquired in acquisition			—				4,088
Net Cash Used In Investing Activities			—				(5,357	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable			—				30,000
Repayment of notes payable			—				(30,000	)
Proceeds from notes payable - convertible			155,000				—
Sale of common stock			—				267,462
Due to related parties			4,300				—
Cash acquired in acquisition			—				1,389
Net Cash Provided By Financing Activities			159,300				268,851
NET INCREASE / (DECREASE) IN CASH			(5,312	)			40,787
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			6,328				13,989
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	1,016			$	54,776

See accompanying notes to unaudited condensed consolidated financial statements.

4

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MMAX MEDIA, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

(Unaudited)

		For the Six Months Ended June 30,
		2012				2011
						(Restated)
Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	—			$	—
Cash paid for interest expense		$	—			$	—
Supplemental disclosure of non cash investing & financing activities:
Common stock issued for payment of liquated damages		$	—			$	—
Common stock issued for prepaid expenses		$	—			$	—
License		$	—			$	1,454
Accounts payable and accrued liabilities		$	—			$	14,573

On March 16, 2011, the Company issued 144,000 shares of common stock in exchange for a note payable of $15,000 with a beneficial conversion feature valued at $3,000.

On March 16, 2011, the Company issued 12,403,374 common shares and 638,602 preferred shares for the acquisition of Mmax Media, Inc.

See accompanying notes to unaudited condensed consolidated financial statements.

 

5

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN

 

(A)

Organization

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended June 30, 2012 are not necessarily indicative of results for the full fiscal year. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

 

On March 16, 2011 (the “Closing Date”) MMAX Media, Inc. (“MMAX”) completed its agreement and plan of merger (the “Merger Agreement”) to acquire Hyperlocal Marketing, LLC, a Florida limited liability company (“Hyperlocal”), pursuant to which Hyperlocal merged with and into HLM Paymeon, Inc., a Florida corporation and wholly owned subsidiary of MMAX. Under the terms of the Merger Agreement, the Hyperlocal members received 20,789,395 shares of MMAX common stock, which equal approximately 50.1% of the total shares of MMAX issued and outstanding following the merger on a fully diluted basis. In accordance with ASC Topic 360-10-45-15, the transaction is accounted for as a reverse acquisition and Hyperlocal is considered the accounting acquirer and the acquiree is MMAX since the members of Hyperlocal obtained voting and management control of MMAX and the transaction has been accounted as a reverse merger and recapitalization.

 

Hyperlocal Marketing, LLC was originally organized in the State of Florida on January 22, 2010. The Company has focused its efforts on organizational activities, raising capital, software development and evaluating operational opportunities.

 

Hyperlocal is a company that owns and operates products aimed at the location-based marketing industry. Hyperlocal develops and markets products that provide merchants and consumers with mobile marketing services and offers, including but not limited to, mobile coupons, mobile business cards, mobile websites, use of SMS short codes and contest management. Hyperlocal has nominal revenues since its inception. Hyperlocal has also developed “PayMeOn”, a product designed to offer its customers income potential through the purchase and referral of “coupon-style” deals through its mobile and web interfaces

MMAX Media, Inc. and its wholly owned subsidiaries are herein referred to as the “Company”.

During the six months ended June 30, 2012 the Company emerged from Development Stage Status.

 

(B)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of MMAX Media, Inc. from the acquisition date of March 16, 2011 and its wholly owned subsidiaries, Hyperlocal Marketing, LLC. and HLM Paymeon, Inc.  All intercompany accounts have been eliminated in the consolidation.

 

6

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

(C)

Going Concern

Since inception, the Company has incurred net operating losses and used cash in operations. As of June 30, 2012, the Company had a net loss of $1,060,350 an accumulated deficit of $2,930,084, a working capital deficiency of $408,970, and used cash in operations of $164,612. Losses have principally occurred as a result of the substantial resources required for research and development and marketing of the Company’s products which included the general and administrative expenses associated with its organization and product development.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(A)

Cash and Cash Equivalents

The Company considers investments that have original maturities of three months or less when purchased to be cash equivalents.

 

(B)

Use of Estimates in Financial Statements

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the period covered by these financial statements include the valuation of website costs, valuation of deferred tax asset, stock based compensation and any beneficial conversion features on convertible debt.

 

(C)

Fair value measurements and Fair value of Financial Instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

7

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.

 

(D)

Property and Equipment and Website Costs

Computer Equipment and Website Costs are capitalized at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is three years for all categories. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of computer equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations.

 

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized.

The Company has adopted the provisions of ASC 350-50-15, “Accounting for Web Site Development Costs.” Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years.

 

		Depreciation/
		Amortization
Asset Category		Period
Computer equipment		3 Years

Property and equipment and website costs consisted of the following:

 

		June 30,				December 31,
		2012				2011
		(Unaudited)
Computers and equipment		$	5,408			$	5,408
Website development			24,775				24,775
Total			30,183				30,183
Accumulated depreciation			(13,608	)			(8,870	)
Balance		$	16,575			$	21,313

Depreciation expense for three and six months ended June 30, 2012 and 2011 was $2,367, $4,738, $2,337 and $4,449, respectively.

 

(E)

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or a change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset.

 

8

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

(F)

Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(G)

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

 

The Company recognizes sales of deals and texts when revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

The Company recognizes revenue from the sale of keywords over the period the keywords are purchased for exclusive use, usually one year.

 

The Company recognizes revenue from setup fees in accordance with Topic 13, which requires the fees to be deferred and amortized over the term of the agreements. Revenue from the sale of bulk text messages sales and packages are recognized over twelve months. Revenue from monthly membership fees are recorded during the month the membership is earned.

 

(H)

Segments

The Company operates in one segment and therefore segment information is not presented.

(I)

Loss Per Share

The basic loss per share is calculated by dividing the Company's net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company's net loss available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.. The Company has 15,900,000 shares issuable upon the exercise of options and warrants and 1,240,000 shares issuable upon conversion of convertible notes payable that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive. There were no dilutive securities outstanding at June 30, 2012.

 

(J)

Stock-Based Compensation

The Company recognizes compensation costs to employees under FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

9

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

 

(K)

Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation.

 

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE

 

Between the dates of January 3, 2012 and March 31, 2012, the Company entered into agreements to issue secured convertible promissory notes in the aggregate principal amount of $120,000 (the “Notes”) to certain accredited investors. The Notes bear interest at an annual rate of 7% and are payable on or before 12 months from the date of issuance. The Notes are secured by all of the assets of the Company and include customary provisions concerning events of default. In addition, the Notes may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.125 per share, subject to adjustment. During the three months ended June 30, 2012 the Company received an additional $35,000 from the accredited investors under the same terms. Accrued interest amounted to $6,474 at June 30, 2012.  There was no beneficial conversion expense recorded as the fair value of the common stock was less than the exercise price.

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

During January 2011, the Company entered into a two year software development and marketing agreement with a software developer. The agreement requires the developer to develop an application to use the Company’s product in an iPhone application. The agreement requires the application to reach one of the following milestones; 200,000 downloads or 10,000 gift certificate purchases within 60 days of the application becoming available. The developer is entitled to 3% of the gross sales of the gift certificates and the issuance of 207,319 shares of common stock of the Company upon meeting the milestone. In January 2011, the Company amended the agreement to remove the milestones and issued the developer 207,319 shares of common stock valued at a recent cash offering cost of $29,000 ($0.14 per share). As of June 30, 2012, there were no amounts owed.

 

On August 15, 2011, the Company entered into an employment agreement with its Chief Executive Officer. The agreement is for a period of one year and automatically extends for one day each day until either party notifies the other not to further extend the employment period, provides for an annual base salary totaling $250,000 and annual bonuses based on pre-tax operating income, as defined, for an annual minimum of $50,000 in total. As of June 30, 2012 the Company recorded a salary expense of $150,000 including the prorated portions of the minimum annual bonus of $25,000. Accrued compensation at June 30, 2012 and December 31, 2011, was $123,193 and $18,615, respectively.

 

10

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

Effective February 23, 2012, the Company entered into a consulting agreement with a Consultant/Advisor to provide marketing and sales services through February 23, 2016.  In consideration of the Consultant/Advisor to perform the services for the Company, the Consultant/Advisor will receive a warrant to purchase 2,300,000 shares of the Company’s Common Stock and a warrant to purchase 2,200,000 shares of the Company’s Common Stock.  Common Stock issued upon exercise of the warrant will not be registered under the Securities Act, but may be included, at the Company’s option, in future registrations that the Company may undertake of its Common Stock.  The warrant to purchase 2,300,000 shares shall have a cash exercise price of $.07 per share, and shall expire on February 23, 2015.  The warrant to purchase 2, 200,000 shares shall have a cash exercise price of $0.18 per share and shall have an expiration date of February 23, 2016.  The warrants shall have a vesting schedule, including certain vesting acceleration rights.  If Consultant/Advisor ceases to provide services or the agreement is terminated by either party, then any vested, but unexercised warrants must be exercised within 180 days of Consultant/Advisor’s departure date or by the expiration date of the warrants, whichever is sooner.  Any unexercised warrants that remain 180 days after Consultant/Advisor’s departure date (or at the expiration date) shall expire and terminate forever.

 

NOTE 6 – STOCKHOLDERS EQUITY

 

The Company is authorized to issue up to 195,000,000 shares of common stock, par value $0.001, and up to 5,000,000 shares of convertible preferred stock, par value $0.001. Each share of the convertible preferred stock can be exchanged for ten (10) shares of common stock of the Company.  

On February 23, 2012, the Company issued 300,000 shares of its common stock to consultants valued at $21,000 ($.07 per share) the fair value of the common stock on the date of issuance.

On April 6, 2012 the Company issued 125,000 shares of its common stock to consultants valued at $7,500 ($.06 per share) the fair value of the common stock on the date of issuance.

 

OPTIONS AND WARRANTS

 

The following tables summarize all options and warrant grants to consultants for the period ended June 30, 2012 and the related changes during these periods are presented below.

 

		Number of Options And Warrants		Weighted Average Exercise Price
Stock Options and Warrants
Balance at December 31, 2011		11,200,000		$0.22
Granted		4,700,000		$0.12
Exercised		—		—
Expired		—		—
Balance at June 30, 2012		15,900,000		$0.19
Options and Warrants Exercisable at June 30, 2012		3,218,500		$0.18
Weighted Average Fair Value of Options and Warrants Granted During the six months ended June 30, 2012				$0.12

 

11

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

The following table summarizes information about options and warrants for the Company as of June 30, 2012, no options or warrants were outstanding at June 30, 2011:

 

		2012 Options and Warrants Outstanding						Options and Warrants Exercisable
Range of Exercise Price		Number Outstanding at June 30, 2012		Weighted Average Remaining Contractual		Weighted Average Exercise Price		Number Exercisable at June 30, 2012		Weighted Average Exercise Price
$.07 to $.15		2,500,000		2.65		$0.07		18,500		$0.07
$.16 to $.26		13,400,000		2.58		$0.21		3,200,000		$0.19

 

On September 8, 2011, the Company granted options to purchase 8,000,000 shares of its common stock to consultants at an exercise price of $0.23 per share. The options vest over various terms for each consultant ranging from two – three years. The options expire on September 8, 2015. The options were valued using the Black Scholes Option Pricing Model, with the following assumptions: dividend yield at 0%, annual volatility of 182%, risk free interest rates of .19% to .33% based on expected life, and expected lives of 2 – 3 years. For the three and six months ended June 30, 2012, the Company expensed $ 345,665 and $699,451, the fair value.

 

On February 23, 2012, the Company granted warrants to purchase 200,000 shares of its common stock to consultants at an exercise price of $0.07 per share. The warrants vest ratably upon the sale of 400 associated accounts by the consultant. However, in the event of the sale of the Company to a third party within 18 months of the date of the warrants, 50% of the warrants shall immediately vest.  In the event of the sale of the Company to a third party after 18 months of the date of the warrants (and prior to the expiration of the warrants), all remaining issued, but unexercised warrants shall immediately vest. The warrants expire on February 2, 2015. As of June 30, 2012 the consultant has sold 37 accounts. The Company accounts for equity instruments issued to non-employees for services and goods under ASC Topic 505.50; EITF 96-18 (Accounting for Equity Instruments Issued to Other Than Employees). These warrants require a future performance commitment by the recipient. Therefore, the Company will expense the fair market value of these securities over the period in which the performance commitment is earned.  For the three and six months ended June 30, 2012, the warrants were valued using the Black Scholes option pricing model, with the following assumptions:  dividend rate of 0%, annual volatility of 232%, risk free interest rate of .29% and expected life of 2 years.  The total fair value of the warrants vested was $0 and $1,133 for the three and six months ended June 30, 2012.

On February 23, 2012, the Company granted warrants to purchase 2,200,000 shares of its common stock to consultants at an exercise price of $0.18 per share. The warrants begin to vest upon the sale of 5,000 associated accounts by the consultant and will vest 440 warrants per account sold thereafter. The warrants were issued pursuant to a marketing and sales consulting agreement. The term of the agreement is through February 23, 2016, unless earlier terminated by either party.  In the event the consultant ceases to perform services under the agreement or either party terminates the agreement, then any vested, but unexercised warrants shall expire at the earlier of 180 days of the date of termination or the expiration date of the warrants. The warrants expire on February 23, 2016. As of June 30, 2012, the consultant has not reached these milestones (See Note 8).

 

On February 23, 2012, the Company granted warrants to purchase 2,300,000 shares of its common stock to consultants at an exercise price of $0.07 per share. The warrants begin to vest upon the sale of 401 associated accounts by the consultant and will vest 500 warrants per account sold thereafter. The warrants expire on February 23, 2015. As of June 30, 2012 the consultant has not reached these milestones (See Note 5).

  

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MMAX MEDIA, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2012

(UNAUDITED)

NOTE 7 – RELATED PARTIES

 

On August 15, 2011, the Company entered into an employment agreement with its Chief Executive Officer. The agreement is for a period of one year and automatically extends for one day each day until either party notifies the other not to further extend the employment period, provides for an annual base salary totaling $250,000 and annual bonuses based on pre-tax operating income, as defined, for an annual minimum of $50,000 in total. As of June 30, 2012 the Company recorded a salary expense of $150,000 including the prorated portions of the minimum annual bonus of $25,000. Accrued compensation at June 30, 2012 and December 31, 2011, was $123,193 and $18,615, respectively.

During the six months ended June 30, 2012, the Company’s Chief Executive Officer advanced the Company a total of $4,300. The amounts are non –interest bearing and payable on demand.

NOTE 8 – CONCENTRATIONS

 

For the six months ended June 30, 2011, one customer accounted for 39% of total sales. There were no concentrations during the six months ended June 30, 2012.

 

NOTE 9 – SUBSEQUENT EVENTS

 

On July 2, 2012, the Company completed a private placement and sold an aggregate of 2,253,577 shares of restricted shares of Common Stock to an accredited investors for net proceeds of $25,000 ($.01 per share).

On July 24, 2012, the Company entered into an agreement to issue a unsecured convertible promissory note in the aggregate principal amount of up to $45,000 (the “Notes”) to an accredited investor. The Note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the Notes may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.01 per share, subject to adjustment.

 

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ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements are based on our management’s beliefs, assumptions and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to product sales, future financings, or the commercial success of our products. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules of the Securities and Exchange Commission (the “SEC”). We may not actually achieve the plans, projections or expectations disclosed in our forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described from time to time in our future reports filed with the SEC.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim consolidated condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Overview

On March 16, 2011, MMAX Media, Inc. completed its agreement and plan of merger to acquire Hyperlocal Marketing, LLC, a Florida limited liability company (“Hyperlocal”), pursuant to which Hyperlocal merged with and into HLM Paymeon, Inc., a Florida corporation and wholly owned subsidiary of MMAX. Pursuant to the terms of the merger agreement, Tommy Habeeb resigned as our chief executive officer and director and Edward Cespedes was appointed to serve as our chief executive officer and director. Under the terms of the merger agreement, the Hyperlocal members received 20,789,395 shares of MMAX common stock, which equal approximately 50.1% of the total shares of MMAX issued and outstanding following the merger on a fully diluted basis. In accordance with ASC Topic 360-10-45-15, Hyperlocal is considered the accounting acquirer and MMAX is considered the accounting acquiree. Hyperlocal was organized in January 2010 and has nominal revenues since its inception.

Business Overview

We own and operate products aimed at the location-based marketing industry. We develop and market products that provide merchants and consumers with mobile marketing services and offers, including but not limited to, mobile coupons, mobile business cards, mobile websites, use of SMS short codes and contest management.

Since inception, we have incurred net operating losses. Losses have principally occurred as a result of the substantial resources required for research and development and marketing of our products which included the general and administrative expenses associated with its organization and product development. We expect operating losses to continue, mainly due to the anticipated expenses associated with the marketing of the our products.

We have developed “PayMeOn”, a product designed to offer its customers “social income” potential through the purchase and referral of “coupon-style” deals through its mobile and web interfaces. The PayMeOn product will pay customers that refer “coupon-style” deals a “payout” amount for successful referrals (referrals that result in a purchase). “Payout” amounts come from our monetary share of the deals we offer. Offering “payout” amounts on our deals cause PayMeOn to have an additional expense that our competitors do not have. We manage this competitive disadvantage by striving to keep our overhead costs low. While our competitors invest in large numbers of employees dedicated to securing “deals” to offer their customers, PayMeOn has chosen to partner for most of its deal offerings, including, but not limited to an agreement with Adility, Inc. By partnering for our deals, we are able to offer deals in a substantial number of cities (more

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than 40 currently), while maintaining a very small internal deal acquisition team (currently 1 person). We believe that we will be able to offer competitive “payout” amounts because of our low internal overhead and because we believe that the cash incentive will result in higher “sharing” rates among our customers. By “sharing” rates, we mean the number of deals that PayMeOn members share with their contacts. We believe that PayMeOn deals will be shared often because of the potential for cash earnings for members that share them. PayMeOn intends to derive its “net revenue” from the difference of what it charges consumers for a particular “deal” and what it owes merchants and third parties as their share of a particular deal. The difference is PayMeOn’s net revenue. PayMeOn establishes a “payout” amount for each of the deals it offers from its share of the net revenue. PayMeOn users earn their “social income” from the payout amount established by PayMeOn. Because PayMeOn sources most of its deal offerings from a third party, such as, Adility, Inc., PayMeOn does not control the “share” of the revenue it retains versus the amount due the merchant and due to the third party provider. PayMeOn does control which deals it chooses to offer its customers and can choose not to offer certain deals. While our third party relationships will reduce our margins, we believe that because of our low cost structure, specifically the need for fewer personnel dedicated to deal acquisition relative to our competitors, our ultimate “net revenue” should be competitive and allow for PayMeOn to set payout amounts attractive enough to encourage members to share deals.

Our Hyperlocal Platform also supports multiple text messaging services such as WAP, MMS and XHTML, runs on a commercial grade mobile marketing platform used by the National Football League, Major League Baseball and others and operates with all major mobile carriers, including AT&T, Sprint, T-Mobile and Verizon. The fully-integrated interface allows for web-based monitoring of customers. It provides access to real-time statistics for each customer’s account, including incoming and outgoing messages, number of keywords, credits, account status and more.

We have recently integrated our PayMeOn offerings with the Hyperlocal Marketing Platform to create the “PayMeOn Merchant Profit Center”. The PayMeOn Merchant Profit Center platform is designed to provide local merchants with a mobile and web based marketing platform that allows merchants to distribute coupons or “daily deals”, capture and retain customers, and earn money from their customers whenever they purchase from the PayMeOn network. The product is  sold on both an annual and monthly “package” basis (bronze, silver, gold, platinum or custom). Packages are distinguished by different distribution opportunities and volume of text messages available.

Distribution of coupons or “daily deals”

Customers of the PayMeOn Merchant Profit Center are able to market coupons or “daily deals” at http://www.paymeon.com  as often as once a month (depending on the plan they select), and retain up to 90% of the proceeds. Unlike most PayMeOn competitors in the daily deal space, PayMeOn is able to allow merchants to retain nearly all their proceeds from sales of coupons or daily deals on its network because it charges annual or monthly up-front fees.

Capture and retention of customers

Use of the mobile marketing module of the PayMeOn Merchant Profit Center allows merchants to acquire and retain customer mobile phone numbers and merchants are able to market via text to customers from the platform in the future. “Keyword” driven accounts are created for merchants on the mobile module of the PayMeOn Merchant Profit Center Keywords are descriptive words created for the merchant in the system that are “marketed” at the point of sale or in print or online advertising to customers. For example, a customer might enter a restaurant called “Stephs”. When the customer enters the restaurant, they see a sign that reads, “to join our VIP club, text “stephs <space> your email address to 41513”. When the customer texts the keyword (“stephs”) and his/her email into the system, he/she is “opting in” to that merchant’s account on the mobile marketing module of the PayMeOn Merchant Profit Center and also being “anchored” to the merchant’s profit center account at PayMeOn.

The platform also provides the merchant with various other capabilities, including the ability to run contests for members, create mobile websites and other useful applications.

The PayMeOn Merchant Profit Center is marketed primarily to small and medium sized businesses in various categories, including but not limited to restaurants, automotive supply and repair shops, spas, specialty retail and medical offices. Merchants use the platform in a variety of ways by marketing “keywords” that drive consumer interest:

·

Mobile coupons

·

Calls to action (text “MMAX” to 41513 to view a working demonstration)

·

Brand engagement (voting, contests, polling)

·

Geotargeted ads (travel, rental cars)

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·

Send alerts, sales related notifications

·

Appointment reminders

·

Audience interactions (concerts, conferences, airports)

Generating revenue from customers from purchases on the PayMeOn network

When customers “text in” keywords and email addresses to PayMeOn Merchant Profit Center accounts, they are “anchored” or “connected” to the merchant’s account at PayMeOn. Merchants earn “anchor” payments for anything purchased by their anchored customers anywhere on the PayMeOn network.

Our operations are currently conducted principally through our wholly-owned subsidiary, HLM PayMeOn, Inc.

Critical Accounting Policies and Estimates

Revenue Recognition

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

The Company recognizes revenue from the sale of keywords over the period the keywords are purchased for exclusive use, usually one year.

The Company recognizes revenue from setup fees in accordance with Topic 13, which requires the fees to be deferred and amortized over the term of the agreements. Revenue from the sale of bulk text messages sales are recognized at the time messages are delivered. Revenue from monthly membership fees are recorded during the month the membership is earned.

Stock-Based Compensation

The Company recognizes compensation costs to employees under FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

Results of Operations

Three Month Period Ended June 30, 2012 as Compared to the Three Month Period Ended June 30, 2011

Revenues for the three months ended June 30, 2012, totaled $9,796 and were principally derived from sales of the Company’s PayMeOn Merchant Profit Center packages to small businesses and from incremental text purchases from subscribers to the mobile text marketing packages. A small amount of sales were derived from the portion of our PayMeOn business that sells deals directly to consumers. Revenues for the three months ended June 30, 2011, were $10,653 and substantially all revenues were derived from Hyperlocal mobile text marketing packages.

Operating expenses for the three months ended June 30, 2012, totaled $516,450, an increase of $375,753 or 267% from $140,697 for the three months ended June 30, 2011. Operating expenses for the three months ended June 30, 2012 were largely made up of a $345,665 non-cash expense primarily related to the issuance of warrants issued to certain consultants and service providers in consideration of marketing, business and general consulting services. Operating expenses for the three months ended June 30, 2011, totaled $140,697, the majority of which was related to professional fees ($37,803), payroll

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and payroll taxes ($64,395) and general and administrative expenses ($12,405). A summary of our material operating expenses for the three months ended June 30, 2012 are as follows: 

·

professional fees of $22,787 primarily related to legal and accounting expenses associated with the operations of our business and SEC reporting;

·

payroll and payroll taxes of $93,248;

·

consulting fees of $352,197 primarily relating to the issuance of warrants to consultants and service providers as discussed above; and

·

general and administrative expenses of $46,108.

Six Month Period Ended June 30, 2012 as Compared to the Six Month Period Ended June 30, 2011

Revenues for the three months ended June 30, 2012, totaled $16,449 and were principally derived from sales of the Company’s PayMeOn Merchant Profit Center packages to small businesses and from incremental text purchases from subscribers to the mobile text marketing packages. A small amount of sales were derived from the portion of our PayMeOn business that sells deals directly to consumers. Revenues for the six months ended June 30, 2011, were $18,643 and substantially all revenues were derived from Hyperlocal mobile text marketing packages.

Operating expenses for the six months ended June 30, 2012, totaled $1,070,325, an increase of $744,685 or 229% from $325,640 for the six months ended June 30, 2011. Operating expenses for the six months ended June 30, 2012, were largely made up of a $699,479 non-cash expense primarily related to the issuance of warrants issued to certain consultants and service providers in consideration of marketing, business and general consulting services. Operating expenses for the six months ended June 30, 2011, totaled $325,640, the majority of which was related to consulting fees ($55,211) and professional fees ($87,540), payroll and payroll taxes ($93,762) and general and administrative expenses ($37,995). A summary of our material operating expenses for the six months ended June 30, 2012, are as follows: 

	·	professional fees of $53,683 primarily related to legal and accounting expenses associated with the operations of our business and SEC reporting;
	·	payroll and payroll taxes of $192,469;
	·	consulting fees of $732,261 primarily relating to the issuance of warrants to consultants and service providers as discussed above; and
	·	general and administrative expenses of $84,688.

Liquidity and Capital Resources

At June 30, 2012, we had a cash balance of $1,016.  At June 30, 2012 we had working a capital deficit of $408,970 and an accumulated deficit of $2,930,084. We require additional working capital. See “Plan of Operations” below.

On January 3, 2012, the Company entered into an agreement to issue secured convertible promissory notes in the aggregate principal amount of $120,000 (the “Notes”) to certain accredited investors. The Notes bear interest at an annual rate of 7% and are payable on or before 12 months from the date of issuance. The Notes are secured by all of the assets of the Company and includes customary provisions concerning events of default. In addition, the Notes may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.125 per share, subject to adjustment. The Company received $120,000 in gross proceeds. The Company intends to use the proceeds from the Notes for working capital purposes.

The Company received additional advances from existing note holders of $35,000 on May 11, 2012.  The Company has communicated with the existing note holders that it is treating these advances as advances under the same convertible promissory notes (“Notes”) and security terms.  The Notes are secured by all of the assets of the Company and include customary provisions concerning events of default. In addition, the Notes may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.125 per share, subject to adjustment.

On June 12, 2012, the Company received an unsecured non-interest bearing cash advance from its president and CEO in the amount of $2,000.  The cash advance was used to pay payroll taxes and for general working capital purposes.  The cash advance is repayable on demand.

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On June 15, 2012, the Company received an unsecured non-interest bearing cash advance from its president and CEO in the amount of $2,300.  The cash advance was used to pay payroll and for general working capital purposes.  The cash advance is repayable on demand

On June 18, 2012, the Company received unsecured non-interest bearing cash advances from its president and CEO in the amount of $2,077 and $434.  The cash advances were used to pay commissions due the Company’s third party sales personnel and for general working capital purposes.  The cash advances are repayable on demand.

On July 5, 2012, the Company privately sold 2,253,577 shares of restricted shares of common stock to an accredited investor for gross proceeds of $25,000.  The proceeds from the private placement shall be used for the continued development of Hyperlocal and PayMeOn products and for general working capital purposes.  The private placement was conducted by the Company’s president and CEO and no fees or commissions were paid in connection with the private placement.

On July 24, 2012, the Company issued a convertible promissory note for the principal amount of $45,000 (“Note”) to an accredited investor.  The Note bears interest at an annual rate of 7% and is payable on or before July 24, 2013.

Since inception, the Company has incurred net operating losses and used cash in operations. As of June 30, 2012, the Company had an accumulated deficit of $2,930,084. The Company has also dedicated substantial resources required to research and development and marketing of the Company’s products which included the general and administrative expenses associated with its organization and product development. The Company expects to incur continued marketing expenses in the near and medium term in pursuit of market share. Necessary marketing spending could curtail the Company’s ability to generate profits in the near and medium term. We expect operating losses to continue, mainly due to the continued costs and expenses associated with development of our business and marketing of the Hyperlocal and PayMeOn products. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

On June 18, 2012, the Company received a letter from the Internal Revenue Service regarding a tax discrepancy for the tax year 2010 (prior to the agreement and plan of merger to acquire Hyperlocal Marketing, LLC).  The letter states that the discrepancy could result in a potential increase of Social Security and/or Income Tax of $7,623.  As part of the agreement and plan of merger to acquire Hyperlocal Marketing, LLC, the Company received representations and warranties from prior management that all taxes had been paid.  The letter has been forwarded to prior management and Internal Revenue Service has been informed of all relevant representations and warranties.  There is no guarantee that prior management will honor its obligations and this amount may remain an obligation of the Company.  

Plan of Operations

We intend on continuing our efforts primarily towards completing development of the Company’s PayMeOn products. We expect to continue marketing our Hyperlocal Marketing platform and products, but primarily as bundled or complimentary additions to our PayMeOn product and under the PayMeOn Merchant Profit Center name. As our development efforts come to fruition, we will focus our efforts on developing sales and distribution channels for PayMeOn. We will primarily focus our sales and distribution efforts on developing partnerships with third-party sales companies and on developing partnerships with businesses that have large databases they wish to monetize in the local, group buying or “deals” space. We completed a substantial portion of the primary development of the PayMeOn product during the third quarter 2011. Though the product has been “deployed” in beta since the second quarter 2011 and we have already generated some small revenue from PayMeOn, we have now completed updates to PayMeOn’s iphone and android mobile applications, additions to our payment tracking databases and implemented additional reporting capabilities, as well as other technical improvements to the product. We believe that there will be minimal new product development going forward and expect only to dedicate resources to maintenance, update and repair of existing products for the near future. Though we will always monitor the competitive landscape for indications that we may need to develop new and additional products and will develop new products as necessary to remain competitive, we expect to primarily focus on accelerating our sales efforts during 2012. Accordingly, in February 2012, we entered into a Master Sales Agreement with PSC LLC, a sales operation that sells third party products through a network of independent sales organizations (iso’s).

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Current working capital is not sufficient to maintain our current operations and there is no assurance that future sales and marketing efforts will be successful enough to achieve the level of revenue sufficient to provide cash to sustain operations. To the extent such revenues and corresponding cash flows do not materialize, we will attempt to fund working capital requirements through third party financing, including a private placement of our securities. In the absence of revenues, we currently believe we require a minimum of $500,000 to maintain our current operations through 2012. We cannot provide any assurances that required capital will be obtained or that the terms of such required capital may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities until sufficient funding is secured or revenues are generated to support operating activities.

Recent Accounting Pronouncements

In December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

Subsequent Events

As disclosed above, on July 5, 2012, the Company privately sold 2,253,577 shares of restricted shares of common stock to an accredited investor for gross proceeds of $25,000.  The private placement was conducted by the Company’s president and CEO and no fees or commissions were paid in connection with the private placement. In addition, on July 24, 2012, the Company issued a convertible promissory note for the principal amount of $45,000 (“Note”) to an accredited investor.  The Note bears interest at an annual rate of 7% and is payable on or before July 24, 2013. The note is convertible at the option of the holder at a conversion price of $0.01 per share, subject to adjustment and certain limitations set forth under the note. No fees or commissions were paid in connection with the issuance of the note.  Proceeds from the sale of stock and note shall be used for working capital purposes.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2012.

During our assessment of the effectiveness of internal control over financial reporting as of June 30, 2012 management identified significant deficiencies related to (i) the U.S. GAAP expertise of our internal accounting staff, (ii) the ability of our internal accounting staff to record our transactions to which we are a party which necessitates our bringing in external consultants to supplement this function, and (iii) a lack of segregation of duties within accounting functions. Therefore, our internal controls over financial reporting were not effective as of June 30, 2012 based on the material weakness described below.

·

insufficient monitoring controls to determine the adequacy of our internal control over financial reporting and related policies and procedures;

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·

lack of competent financial management personnel with appropriate accounting knowledge and training;

·

our financial staff does not hold a license such as Certified Public Accountant in the U.S., nor have they attended U.S. institutions or extended educational programs that would provide enough of the relevant education relating to U.S. GAAP, nor have any U.S. GAAP audit experience;

·

we rely on outside consultant to prepare our financial statements; and

·

insufficient controls over our period-end financial close and reporting processes.

As a result of this material weakness, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective as of June 30, 2012. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. 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 and procedures may deteriorate. In order to mitigate the foregoing material weakness, we engaged an outside accounting consultant to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. This outside accounting consultant has significant experience in the preparation of financial statements in conformity with U.S. GAAP. We believe that the engagement of this consultant will lessen the possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate. We expect to continue to rely on this outside consulting arrangement to supplement our internal accounting staff for the foreseeable future. Until such time as we hire the proper internal accounting staff with the requisite U.S. GAAP experience, however, it is unlikely we will be able to remediate the material weakness in our internal control over financial reporting.

We believe that the foregoing steps will remediate the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.–OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

As of the date of this report, we are not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

ITEM 1A.

RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In addition to those unregistered securities previously disclosed in reports filed with the Securities and Exchange Commission, during the period covered by this report, we have sold securities without registration under the Securities Act of 1933, as amended, in reliance upon the exemption provided under Section 4(2), as provided below. The securities issued contain a legend restricting transfer absent registration or applicable exemption. The securities holders received current information about the Company and had the opportunity to ask questions about the Company.

On April 6, 2012 the Company issued 125,000 shares of its common stock to consultants valued at $7,500 ($.06 per share) the fair value of the common stock on the date of issuance.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURE

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
31.2		Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		XBRL Interactive Data File*

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* To be filed by within the earlier of 30 days from the due date or filing date of this report pursuant to the grace period provided for the filing of the first DFN interactive data exhibit.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 16, 2012

	MMAX Media, Inc.
	By:	/s/ Edward Cespedes
		Edward Cespedes
		Chief Executive Officer
		Chief Financial Officer

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