Attached files
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| EXCEL - IDEA: XBRL DOCUMENT - NOUVEAU VENTURES INC. | Financial_Report.xls |
| EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, - NOUVEAU VENTURES INC. | saas321ex_123112.htm |
| EX-31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION - NOUVEAU VENTURES INC. | saas311ex_123112.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| Q | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 000-54504
SaaSMAX, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 27-4636847 | |
| (State of incorporation) | (I.R.S. Employer Identification No.) | |
| 7770 Regents Road, Suite 113-129, San Diego, CA 92122 | 858-518-0447 | |
| (Address of principal executive offices) | (Registrant’s telephone number, including area code) |
| Securities registered under Section 12(b) of the Act: | |
| Title of each class registered: | Name of each exchange on which registered: |
| None | None |
|
Securities registered under Section 12(g) of the Act: Common Stock, Par Value $0.001 | |
Indicate by check mark if the registrant
is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and, (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein and, will not be contained, to the best of 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2012, was approximately $1,016,996 based on the price per share of the common stock sold in a private placement during the three months ended June 30, 2012.
The outstanding number of shares of common stock as of March 25, 2013 was 4,429,704.
Documents incorporated by reference: None
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FORWARD LOOKING STATEMENTS
Information in this report contains “forward looking statements” which may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
PART I
| ITEM | 1. DESCRIPTION OF BUSINESS |
Overview of the Business and Recent Developments
SaaSMAX, Inc. is a Nevada Corporation incorporated January 19, 2011, with its principal place of business in San Diego, California. SaaSMAX is a development stage company that is developing and launching an online business-to-business marketplace (the "SaaSMAX Marketplace") and channel management tools for the rapidly growing software-as-a-service ("SaaS") market.
Software-as-a-Service, sometimes referred to as "on-demand software," is a software delivery model in which software is delivered over the Internet through a web browser. With SaaS Applications ("SaaS Apps"), software and data is hosted on virtual servers (often referred to as "cloud-based" or "cloud computing"). Cloud computing fundamentally changes the way business software applications are developed and deployed. SaaS App developers no longer need to create and manage their own infrastructure of servers, storage, network devices, operating system software and development tools in order to create a business application. Instead, the entire software infrastructure is managed by third parties who specialize in infrastructure management, and developers use a remote management connection/console to access the development environment. SaaS App users can gain access to a multitude of business applications via an Internet browser or mobile device, and are able to take advantage of a robust, secure, scalable and highly available application at a relatively low cost, without the cost and complexity of managing the application.
While practically every Internet service (such as a Web search engine or web-based Email) is driven by some underlying software, the terms "SaaS" or "SaaS Apps" are often used in the context of business software. Independent Software Vendors ("ISVs" or "App Vendors") of SaaS Apps or traditional software applications develop and sell software apps that run on one or more operating system platforms. The companies that make the operating platforms encourage and lend support to ISVs, often with special "business partner" programs. Some ISVs focus on a particular operating platform like Apple iPhone's iOS for which there are tens of thousands of ISV applications. Other ISVs specialize in a particular application area, such as customer relationship management or business intelligence, for example, and integrate with multiple platforms.
The Company intends to become a sales distribution channel program for SaaS, by offering a Marketplace for SaaS Apps and by facilitating, improving and increasing the Sales Value Chain for SaaS ISVs. The "Sales Value Chain" refers to the value-adding activities and the participants that are involved in selling a software product to an end-user. For example, a software application is typically developed and sold by an ISV. That ISV may offer to sell licenses for its software application directly to an end user, or it may contract with a wholesaler, distributor or retailer (collectively referred to herein as "Reseller") which then markets and resells that software application to end users. Moreover, when software applications require customization or user training before they are employed by the end user, ISV's will seek to partner with independent VARs, service providers, solution providers, systems integrators or other types of consultants (collectively referred to herein as "Solution Providers") who will provide those services to the end users.
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With SaaS Apps, there is no physical delivery of a software product. Instead, a SaaS App is available and ready-to-use when it is accessed on-line. As a result of this non-physical, direct-to-end-customer deployment method, there is no product that can be accounted for physically. This may lead to a situation where a Solution Provider in the Sales Value Chain is ignored during a sales transaction and, in such a case, may not be compensated by the SaaS App Vendor for referring the end-user.
In traditional software sales, the Solution Provider usually has a pre-existing relationship with the end-user and is therefore the trusted advisor to the end-user for most software purchases. For SaaS App Vendors, we believe that the Sales Value Chain must also incorporate the Solution Providers for software purchases. We believe that when completed and implemented, the SaaSMAX Marketplace will provide SaaS App Vendors with the tools to track sales and manage reseller programs for each Solution Provider interested in their SaaS App.
Our SaaSMAX Marketplace is intended to be a "B2B" or "business to business" solution to be implemented between SaaS App Vendors and SaaS Solution Providers, which will enable SaaS App Vendors to market, promote and manage the sales and distribution of their SaaS App to participants in the Sales Value Chain and to business users around the world.
SaaSMAX management believes that the SaaSMAX Marketplace will:
| · | Make it easier and more efficient for SaaS App Vendors to promote their SaaS Apps, sell licenses, find new customers, and build a channel of Solution Providers. |
| · | Be the first SaaS marketplace that will enable SaaS App Vendors to sell, market, manage and monitor their sales and marketing efforts in real time across the SaaS Sales Value Chain. |
| · | Be a valuable, efficient business and educational tool for SaaS Solution Providers, enabling them to thoroughly research each listed SaaS App and gain access to online demos, technical specifications, peer ratings, support, pricing, commission plans and much more. |
| · | Make it easier for Solution Providers to find SaaS Apps for their customers and earn commissions from SaaS App Vendors for reselling or referring their SaaS Apps to end user customers. |
| · | Include a Solution Provider Directory which will contain the business profiles of Solution Providers, to enable end user businesses to identify and do business with Solution Providers, and to enable SaaS App Vendors to network with Solution Providers. |
In late 2011 the SaaSMAX Marketplace entered into its beta test-phase ("SaaSMAX Beta,"). During the Beta phase, our primary focus has been and will continue to be to recruit several dozen SaaS Apps Vendors and several dozen Solution Providers to use our service. During SaaSMAX Beta we have and will continue to: i) study the use of our service; ii) adjust the business pricing model ; iii) add features and functionality ; iv) plan and prepare marketing campaigns; v) adjust our standard service agreement to meet the expressed needs and wants of participating SaaS App Vendors and Solution Providers.
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The Company has entered into several dozen agreements with ISVs in which the ISV agrees to compensate SaaSMAX for every purchase transaction that is initiated through the SaaSMAX Marketplace. The Company is responsible for monitoring, aggregating and reporting total transaction volumes completed between its member Solution Provides and the ISVs, as well as the commissions earned by the Solution Providers. The Company has also entered into more than one hundred agreements with Solution Providers, who currently are not required to pay fees to SaaSMAX.
Once management is satisfied with the results of SaaSMAX Beta, we will commercially launch SaaSMAX. We intend to continually develop new features and functionality for the SaaSMAX Marketplace into the foreseeable future, and have identified several additional potential product opportunities that stem from what we have learned to date.
We are a development stage business and have had limited revenues since our formation. There can be no assurance that even if revenues are generated by the SaaSMAX Marketplace,, that those revenues will be sufficient to enable the Company to maintain its operations. The Company will need to secure additional financing in the future to continue to develop the product, attract customers, and start generating revenues. There are no assurances that the Company will be successful with any subsequent financings
The Auditor's Report included in our audited financial statements at December 31, 2012 included language raising doubt about our ability to continue as a going concern. Since inception we have had limited revenues. Our business plan estimates that we will need to raise additional capital to fund our operations during the remainder of 2013 and there can be no assurance that we will be able to raise any or all of the capital required. During the year ended December 31, 2012 we have incurred a net loss of $478,174, have net cash used in operating activities of $249,347 and have an accumulated deficit of $660,195 at December 31, 2012. Accordingly, we will have to obtain additional funding from the sale of our securities or from strategic transactions in order to fund our current level of operations and there can be no assurance that we will be able to raise any or all of the capital required. If the Company is unable to generate sufficient cash flow from operations and/or continue to obtain financing to meet its working capital requirements, it may have to curtail its business sharply or cease business altogether.
Customers
The SaaSMAX Marketplace will be utilized primarily by two different types of customers. App Vendors, who make business-related SaaS Apps, and Solution Providers, who are IT Consultants, VARs MSPs and other Trusted Advisors who will resell business-related SaaS Apps through the SaaSMAX Marketplace. In addition, the SaaSMAX Marketplace will be available to other business organizations ("Business Users"), who will be provided limited access to the proposed features and functionality of SaaSMAX. There can be no assurance that these types of customers will in fact utilize the SaaSMAX Marketplace.
The SaaSMAX Platform - How it Works
The SaaSMAX Platform is comprised of the SaaSMAX Marketplace, channel management tools for App Vendors and Solution Providers, and will eventually include premium marketing and advertising tools for App Vendors and Solution Providers. The SaaSMAX Platform is currently under development and is expected to be released in multiple phases as the features and functionality become available. The Company contracts with independent software developers who are currently designing, building, and testing the SaaSMAX Platform.
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Revenue Generation
SaaSMAX intends to generate revenue from the following revenue streams:
| · | Annual Membership Fees from SaaS App Vendors who list their SaaS App on the SaaSMAX Marketplace. |
| · | Annual Membership Fees from Solution Providers who want to resell SaaS Apps and also list their profile in the SaaSMAX Solution Provider Directory. |
| · | Advertising and Marketing Fees from SaaS App Vendors who want to conduct premium marketing and/or advertising campaigns within the SaaSMAX Marketplace. |
| · | Transaction fees based on a percentage of the revenue earned by SaaS App Vendors who sell and promote their SaaS App through the SaaSMAX Marketplace. |
| · | Advertising and marketing fees from companies who want to advertise within the SaaSMAX Marketplace or on the SaaSMAX website. |
User Participation
In order to participate in SaaSMAX, a potential user will first register as an App Vendor, a Solution Provider or a Business User. App Vendors and Solution Providers will be manually screened by Management and approved in order to maintain a high degree of quality and integrity in the SaaSMAX Marketplace.
App Vendors will be required to select from one of several pricing plans in order to: a) display their App's profile(s) on the SaaSMAX Marketplace; b) utilize our channel management tools, and; c) take advantage of marketing and advertising tools. Premium marketing programs will also be available "a la carte" to potential members of any pricing plan.
Solution Providers may join free of charge and are required to: a) display their Company Profile in the SaaSMAX Solution Provider Directory; b) utilize our channel management tools, and; c) take advantage of marketing and advertising tools. Premium marketing programs are planned to also be available "a la carte" to members of any pricing plan.
Business Users may join free of charge and may be able to a) find, view and purchase the Apps in the SaaSMAX Marketplace, and; b) view and contact Solution Providers in the SaaSMAX Solution Provider Directory.
Searching and Viewing the SaaSMAX Marketplace
End users will have access to search and view the planned SaaSMAX Marketplace depending on what type of user they may be. Solution Providers are enabled to view a comprehensive profile of every SaaS App that is registered in the SaaSMAX Marketplace and have access to more information and assessment tools than the other user types.
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SaaSMAX Solution Provider Directory
"Lead Generation" will be one of the expected major benefits of being a SaaSMAX Solution Provider. Also, Business Users who may be seeking a trusted Solution Provider to help implement, integrate or provide training for a SaaS App, will be able to inquire through SaaSMAX and identify potential candidates.
SaaSMAX Channel Management Tools
SaaSMAX Channel Management Tools are our own proprietary software-as-a-service that enables App Vendors to track and manage their reseller channel of SaaSMAX Solution Providers, and enables Solution Providers to track and manage their various SaaS App transactions. Using our Tools App, Vendors will be able to administer and manage reseller incentive programs, address commission provisioning, and have real time access to performance analytics and reports.
SaaSMAX Premium Marketing Services
The Company intends to sell App Vendors and Solution Providers "premium" advertising and marketing campaign opportunities to increase their brand and product exposure within the SaaSMAX Marketplace. Such campaigns will include advertising on the public pages of the SaaSMAX.com website; offering webinars; publishing real-time announcements; sponsorships of email newsletters; custom email campaigns, and more.
Sales and Business Development
We anticipate that our sales and business development resources will be primarily dedicated to identifying quality Solution Providers and SaaS App Vendors to join and participate in the SaaSMAX Marketplace. Relationships with our members are anticipated to be managed by the same resources, and we will strive to facilitate and increase the business conducted between our member Service Providers and App Vendors. We also anticipate that our sales and business development resources will focus on selling premium marketing and advertising opportunities to our members and to non-members. We intend to accomplish these strategies through telesales, online and email communication and by attending and speaking at relevant conferences.
Marketing
Our current and future marketing activities may include all or some of the below activities:
| · | Press releases and nurturing relationships with industry thought leaders and bloggers to gain third-party validation and generate positive coverage for the Company; |
| · | Participation in industry events, trade shows and online trade shows, webinars, etc. to create customer awareness, trust and enthusiasm; |
| · | Search engine marketing and search engine optimization; |
| · | Social Media - blog, LinkedIn groups, FaceBook and other online resources; |
| · | Web site development and design to create a pleasant and productive user-experience, engage and educate prospects and generate interest through information and demonstration, case studies, white papers and marketing collateral; |
| · | Email and phone campaigns to capture leads, promote the brand, conduct surveys and communicate information about our member participants; |
| · | Use of customer testimonials and case studies; |
| · | Promotions, partnerships and sponsorships as appropriate; |
| · | Advertising in industry related websites, blogs, e-newsletters and publications; |
| · | Industry contacts and relationships. |
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Customer Service and Support
Basic customer support during business hours will be available to SaaSMAX customers.
Technology and Development
In order to build SaaSMAX services, we have employed resources that have included and may continue to include, but are not limited to, independent software developer consultants, software development firms, an Agile project manager consultant, graphic design consultants and other qualified consultants to meet the various needs of the effort. The Company believes that retaining experienced consultants in the Software programming / IT field is critical to ensure the success of the Company's development and implementation plans.
Our customers can and will access our services through an easy-to-use web-based interface. Our web-based SaaS delivery method provides us with control over our SaaSMAX Marketplace content and permits us to make modifications at a single central location. We further expect to add additional functionality to our services and to be able to deliver additional products to our customers.
We intend to optimize the SaaSMAX Platform to run on a specific database and operating system using the tools and platforms best suited to serve our customers. Performance, functional depth and the usability of our service will drive our technology decisions and product direction. The SaaSMAX Platform will continually be optimized for use on desktop computers, workstations, laptop computers, tablet devices and other handheld devices. Certain parts of the SaaSMAX Platform will also be available on mobile devices.
Infrastructure
Our technology infrastructure is presently hosted externally by cloud service providers and redundantly stored in multiple data center locations. We expect that our customers will depend on the availability and reliability of our services and we have therefore selected an external hosting cloud service provider that is highly reliable and employs system redundancy in order to minimize potential system downtime.
Security
We intend to maintain high security standards and employ an intrusion detection system. Our software "firewalls" will be managed and monitored continuously. Our communications are secured using secure socket layer 128-bit encryption. All incoming traffic must be authenticated before it is authorized to be passed on to the application. Once a user has been authorized, access control to specific functions within the site is performed by the application. Our access control system is highly granular and includes the granting and revocation of user permissions to functions on the site.
Competition
We have numerous direct, indirect and partial competitors, many of which have valuable industry relationships and access to greater resources than we do. The numerous types of direct or indirect competitors that exist in the market today include but may not be limited to: ecosystem marketplaces such as Google Apps Marketplace; enterprise software distributors who are now offering SaaS marketplaces, such as Ingram Micro; unaffiliated online SaaS marketplaces such as GetApp.com; affiliate programs, such as Commission Junction; and ISV in-house channel partner/reseller programs.
There is no assurance that we will be able to produce a product that will be competitive in the marketplace, and even if competitive that we will be able to earn a profit.
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INTELLECTUAL PROPERTY
SaaSMAX® and WiseSaaS® are registered U.S. Trademarks.
On November 21, 2011 we applied for patent No. 61562325 - "Transaction and Auditing Systems Architecture" with the United States Patent Office. In late October 2012, we abandoned this application process as the technology is not applicable to our current technological development efforts.
We have registered several Internet domain names related to our business in order to protect our proprietary interests, including but not limited to SaaSMAX.com, SaasResellerNetwork.com and WiseSaaS.com.
From time to time, we may encounter disputes over rights and obligations concerning intellectual property. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business, our brand and reputation, or our ability to compete. Also, protecting our intellectual property rights could be costly and time consuming.
EMPLOYEES
As of March 25, 2013, the Company does not have any employees besides the Chief Executive Officer, Dina Moskowitz. Any administrative, marketing, technical, IT and/or software development work that is not handled by the CEO is outsourced to qualified professionals as deemed necessary.
PROPERTY
Our principal executive offices are temporarily located at the residence of Dina Moskowitz, our sole Director and Chief Executive Officer, for which we pay no rent.
ITEM 1A: RISK FACTORS
RISKS RELATED TO THE BUSINESS AND FINANCIAL CONDITION
Investing in our common stock is highly speculative and involves a high degree of risk. Any potential investor should carefully consider the risks and uncertainties described below before purchasing any shares of our common stock. The risks described below are those we currently believe may materially affect us. If any of them occur, our business, financial condition, operating results or cash flow could be materially harmed. As a result, the trading price of our stock could decline, and you might lose all or part of your investment. Our business, financial condition and operating results, or the value of any investment you make in the stock of our company, or both, could be adversely affected by any of the factors listed and described below. These risks and uncertainties, however, are not the only ones that we face. Additional risks and uncertainties not currently known to us, or that we currently think are immaterial, may also impair our business operations or the value of your investment.
There is substantial doubt as to whether our Company can continue as a going concern as of December 31, 2012.
We have generated limited revenues since our inception. For the year ended December 31, 2012 we have incurred a net loss of $478,174, have net cash used in operations of $249,347 and have an accumulated deficit of $660,195 at December 31, 2012. Accordingly, we will have to obtain additional funding from the sale of our securities or from strategic transactions in order to fund our current level of operations and there can be no assurance that we will be able to raise any or all of the capital required. If the Company is unable to generate sufficient cash flow from operations and/or continue to obtain financing to meet its working capital requirements, it may have to curtail its business sharply or cease business altogether. Our business plans estimate that we will need to raise additional capital to fund our operations and there can be no assurance that we will be able to raise any or all of the capital required. These factors indicate that we may be unable to continue as a going concern, particularly in the event that we cannot generate sufficient cash flow or raise sufficient capital to conduct our operations. Our financial statements do not include any adjustments to the value of our assets or the classification of our liabilities that might result if we would be unable to continue as a going concern.
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No assurance can be given that a market for SaaSMAX will develop, or that participants, sponsors, partners or non-member advertisers will be willing to pay for the Company's services.
SaaSMAX is a new and unproven business model. The success of our business model depends upon;
| · | Our ability to recruit a critical mass of Solution Providers and ISV's to join, pay for and participate in our online marketplace; |
| · | Our ability to develop and provide a working commission provisioning tool to our members, and; |
| · | Our ability to sell sponsorships, advertising space and other marketing programs. |
Failure to execute on any or all of the above activities would adversely affect the results of our operations.
No assurance can be given that we will have sufficient funding to finance the continued development and completion of a SaaSMAX Marketplace to fulfill our mission and execute our business model.
While the SaaSMAX Marketplace is already in operation, there can be no assurance that we will be able to allocate sufficient funds to complete the development of additional features and functionality of our services.
We may elect from time to time to make changes to our pricing, service, hiring and marketing decisions that could increase our expenses, affect our revenues and impact our financial results.
Because our expense levels in any given quarter are based, in part, on management's expectations regarding future revenues, if revenues are below expectations, the effect on our operating results may be magnified by our inability to adjust spending in a timely manner to compensate for a shortfall in revenues. The extent to which expenses are not subsequently followed by increased revenues would harm our operating results and could seriously impair our business.
If we are unable to generate sufficient cash flow from operations or are unable to obtain additional equity or debt financing, to meet our working capital requirements, we may have to curtail our business operations sharply or cease business altogether.
We have no operating history on which to evaluate our potential for future success. This makes it difficult to evaluate our future prospects and the risk of success or failure of our business.
We began our operations informally in January 2011 and your evaluation of our business and prospects will be based on our limited history. Consequently, our short history and results of operations may not give you an accurate indication of our future results of operations or prospects. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company in a highly competitive market. We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results.
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As we grow our business, we cannot guarantee our business strategies will be successful or that our revenues will ever increase sufficiently to achieve and maintain profitability on a quarterly or annual basis.
Our software platform may have defects or errors which could cause delays in product introductions and commercial launch, result in increased costs and diversion of development resources, or require design modifications.
Software products and services such as those offered by SaaSMAX frequently contain undetected errors or failures when first introduced or as new versions are released. Despite extensive testing, from time to time we may discover defects or errors in products. In addition, there can be no assurance that, despite testing by us and by current and potential customers, errors will not be found after commencement of commercial launch, resulting in loss of or delay in market acceptance, which could have a material adverse effect upon our business, operating results and financial condition.
Defects or disruptions in the delivery of our service could diminish demand, decrease market acceptance or decrease customer satisfaction of our service and subject us to substantial liability.
We may, from time to time, find defects in our service and errors in our proposed service may be detected in the future. In addition, our customers may use our service in unanticipated ways that may cause a disruption in service for other customers attempting to access their data. Any errors, defects, disruptions in service or other performance problems with our proposed service could hurt our reputation and may damage our customers' businesses. If that occurs, potential customers could elect not to renew, or delay or withhold payment to us, we could lose future sales, or, customers may make warranty or other claims against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Interruptions or delays in service from our third-party data center hosting facilities could impair the delivery of our service and harm our business.
We currently intend to serve our customers from third-party data center hosting. Any damage to, or failure of, our systems generally could result in interruptions in our proposed service. We may in the future move or transfer our data and our customers' data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our service. Further, any damage to, or failure of, our systems generally could result in interruptions in our proposed service. Interruptions in our proposed service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our service is unreliable.
If our security measures are breached and unauthorized access is obtained to a customer's data or our data, our proposed service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.
Our proposed service involves the storage and transmission of customers' proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. These security measures may be breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at any time, and result in someone obtaining unauthorized access to our data or our customers' data. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or our customers' data. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
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If we fail to develop strong relationships with providers of major software ecosystems, our ability to grow our business will be diminished.
In the enterprise, internet and mobile software industries, the market leaders typically adopt an open platform strategy that makes their software the center of their own "ecosystems." Many of these providers of major software ecosystems nurture relationships with Third Party ISVs and create Authorized Reseller Programs for Solution Providers. We may be perceived as a direct competitor or future direct competitor in situations where the ecosystem is already facilitating or plans to facilitate commission-based reseller programs and tools for their authorized resellers to do business directly with Third Party ISV's. There can be no assurance that the Company will be able to form relationships with the providers of major software ecosystems. As well, providers of major software ecosystems may already be exclusively collaborating with other, larger and more established distributors and online marketplaces.
If the demand for Internet-based Software-as-a-Service applications in the small and medium-sized business space ("SMB") and in the small and medium-sized enterprise space does not continue to grow, our business will be adversely affected.
The use of SaaS Apps for enterprises, small business and personal business purposes has been growing at an increasing rate over the past five years and is projected to continue to grow. However, no assurance can be given that any or all of these business segments will continue to adopt SaaS Apps into their business infrastructure or that they will renew their subscriptions with SaaS Apps for long periods of time.
As well, there can be no assurance given that ISV's will continue to innovate and develop new SaaS Apps, or that the market of SaaS Apps will not experience aggressive consolidation in the future, thereby reducing the potential number of SaaS Apps available to participate in SaaSMAX.
Weakened global economic conditions may adversely affect our industry, business and results of operations.
Our overall performance will depend, in part, on worldwide economic conditions. The United States and other key international economies have been impacted by falling demand for a variety of goods and services, restricted credit, going concern threats to major multinational companies and medium and small businesses, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets and bankruptcies. These conditions affect the rate of information technology spending and could adversely affect our customers' ability or willingness to purchase our proposed enterprise cloud computing application service, delay prospective customers' purchasing decisions, reduce the value or duration of their subscription contracts, or affect renewal rates, all of which could adversely affect our operating results.
If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses with our revenue forecasts, our results could be harmed.
Due to our evolving business model, the unpredictability of new markets that we intend to enter and the unpredictability of future general economic and financial market conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and investment on estimates of future revenue and future anticipated rate of growth. As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly on a quarterly basis
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We may in the future be sued by third parties for alleged infringement of their proprietary rights.
The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We may receive in the future communications from third parties claiming that we have infringed the intellectual property rights of others. We may in the future be, sued by third parties for alleged infringement of their proprietary rights. Our technologies may not be able to withstand any third-party claims against their use. The outcome of any litigation is inherently uncertain. Any intellectual property claims, whether with or without merit, could be time-consuming and expensive to resolve, could divert management attention from executing our business plan and could require us to change our technology, change our business practices and/or pay monetary damages or enter into short- or long-term royalty or licensing agreements which may not be available in the future at the same terms or at all. In addition, many of our subscription agreements require us to indemnify our customers for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling on such a claim. Any adverse determination related to intellectual property claims or litigation could prevent us from offering our service to others, or could otherwise adversely affect our operating results or cash flows or both in a particular quarter.
We rely on third-party computer hardware and software that may be difficult to replace or which could cause errors or failures of our service.
We will rely on computer hardware purchased or leased and software licensed from third parties in order to offer our proposed service, including database software from Oracle Corporation and an open source content management system. This hardware and software may not continue to be available at reasonable prices or on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could significantly increase our expenses and otherwise result in delays in the provisioning of our service until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which could harm our business.
Supporting a growing customer base could strain our personnel and corporate infrastructure, and if we are unable to scale our operations and increase productivity, we may not be able to successfully implement our business plan.
Our current Management and human resources infrastructure is comprised of our CEO and several outsourced consultants. Our success will depend, in part, upon the ability of our Management to manage our proposed business effectively. To do so, we will need to hire, train and manage new employees as needed. To manage the expected domestic growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. If we fail to successfully scale our operations and increase productivity, we will be unable to execute our business plan.
Our business could be adversely affected if our customers are not satisfied with the SaaS Apps they purchase through us or the implementation and customization services provided by our member Service Providers.
Our business will depend on our ability to satisfy our potential customers. If a customer is not satisfied with the quality of the SaaS App they may purchase through SaaSMAX or our member Service Providers, and/or if they are not satisfied with the work performed a Service Providers identified through SaaSMAX, the customer's dissatisfaction could damage our ability to obtain additional or future orders from that customer. In addition, potential negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with prospective customers.
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We are dependent on our CEO and outsourced consultants, and the loss of one or more of these individuals could harm our business and prevent us from implementing our business plan in a timely manner.
Our success depends substantially upon the continued services of our executive officers and other key members of management, particularly our Chief Executive Officer and Chief Financial Officer, Dina Moskowitz. We do not have an employment agreement with our Ms. Moskowitz and, therefore, she could terminate her employment with us at any time. We do not maintain key person life insurance policies on Ms. Moskowitz and the loss of her services could seriously harm our business.
Our ability to grow our business may depend on developing a positive brand reputation and member loyalty.
Establishing and maintaining a positive brand reputation and nurturing member loyalty is critical to attracting new resellers, ISVs and end-user purchasers. We expect to expend reasonable but limited resources to develop, maintain and enhance our brand in the near future. In addition, nurturing member loyalty will depend on our ability to provide a high-quality user experience and ensure that our ISV members include best-of-breed SMB apps that offer worthwhile commission incentives to our Reseller members, which we may not do successfully. If we are unable to maintain and enhance our brand reputation and member participation, our ability to attract new marketplace participants or convert new sponsors and advertisers will be harmed.
There can be no assurance that we will be able to compete against the numerous direct, indirect and partial competitors, many of which have valuable industry relationships and access to greater resources than we do.
The numerous types of direct or indirect competitors that exist in the market today include but may not be limited to: ecosystem marketplaces such as Google Apps Marketplace; enterprise software distributors who are now offering SaaS marketplaces, such as Ingram Micro; unaffiliated online SaaS marketplaces such as GetApp.com; affiliate programs, such as Commission Junction; and ISV in-house channel partner/reseller programs. There can be no assurance that we will be able to produce a product that will be competitive in the marketplace, and even if competitive that we will be able to earn a profit.
Our reliance upon third party providers to develop our Services, add new functionality and manage technical issues could result in delays to our commercial launch and customer service.
The Company's outsourced software developers and other consultants participate in non-related projects, employment and/or consulting arrangements. Should our outsourced software developers or other consultants be unable to execute their portion of the development effort or their responsibilities, the activities of SaaSMAX or any of its future planned software functionality could be delayed until a replacement(s) is found.
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Investors may lose their entire investment if we fail to reach profitability.
We commenced business in January 2011. We have no demonstrable operations record from which you can evaluate the business and its prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development. We cannot guarantee that we will be successful in accomplishing our objectives. To date, we have incurred losses and will continue to do so in the foreseeable future. Investors should therefore be aware that they may lose their entire investment in the securities.
In order to execute our business plan, we may need to raise additional capital. If we are unable to raise additional capital, we may not be able to achieve our business plan and you could lose your investment.
We will need to raise additional funds through public or private debt or equity financings as well as obtain credit from vendors to be able to fully execute our business plan. Any additional capital raised through the sale of equity may dilute your ownership interest. We may not be able to raise additional funds on favorable terms, or at all. If we are unable to obtain additional funds or credit from our vendors, we will be unable to execute our business plan and you could lose your investment.
We have limited protection of our intellectual property.
Our business prospects do not rely upon company-owned patented technologies. Our business prospects will depend largely on our ability to develop a critical mass of participants in the SaaSMAX online business-to-business marketplace, as well as our ability to successfully develop and provide to our members a commission provisioning SaaSMAX software tool. There can be no assurance that we will be able to adequately protect our trade secrets. In the event competitors independently develop or otherwise obtain access to our know-how, concepts or trade secrets, we may be adversely affected.
RISKS RELATED TO COMMON STOCK
There is currently no trading market for our common stock, and liquidity of shares of our common stock is limited.
Even though our common shares are currently listed on the Over the Counter Bulletin Board in the United States under the symbol "SAAX" since June 22, 2012, there has been very little sales or purchases of our common shares reported. Failure to develop or maintain a liquid trading market could negatively affect our common share's value and make it difficult or impossible for you to sell your shares. Even if a liquid market for common shares does develop, the market price may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common shares.
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If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities in the secondary market.
Companies trading on the Over the Counter Bulletin Board, such as we, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get relisted on the OTC Bulletin Board, which may have an adverse material effect on the Company.
We do not expect to pay dividends in the future; any return on investment may be limited to the value of our common stock.
We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
Our board of directors has the authority to issue up to 20 million shares of "blank check" preferred stock. The issuance of any preferred stock may adversely affect the holders of common stock.
Our Certificate of Incorporation authorizes the issuance of up to 20,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of our authorized preferred stock, there can be no assurance that the Company will not do so in the future.
Our shares are subject to the U.S. "Penny Stock" Rules and investors who purchase our shares may have difficulty re-selling their shares as the liquidity of the market for our shares may be adversely affected by the impact of the "Penny Stock" Rules.
Our stock is subject to U.S. "Penny Stock" rules, which may make the stock more difficult to trade on the open market. Our common shares are not currently traded on the OTCBB, but it is the Company's plan that the common shares be quoted on the OTCBB. A "penny stock" is generally defined by regulations of the U.S. Securities and Exchange Commission ("SEC") as an equity security with a market price of less than US$5.00 per share. However, an equity security with a market price under US$5.00 will not be considered a penny stock if it fits within any of the following exceptions:
| (i) | the equity security is listed on NASDAQ or a national securities exchange; |
| (ii) | the issuer of the equity security has been in continuous operation for less than three years, and either has (a) net tangible assets of at least US$5,000,000, or (b) average annual revenue of at least US$6,000,000; or |
(iii) the issuer of the equity security has been in continuous operation for more than three years, and has net tangible assets of at least US$2,000,000.
Our common stock does not currently fit into any of the above exceptions.
If an investor buys or sells a penny stock, SEC regulations require that the investor receive, prior to the transaction, a disclosure explaining the penny stock market and associated risks. Furthermore, trading in our common stock will be subject to Rule 15g-9 of the Exchange Act, which relates to non-NASDAQ and non-exchange listed securities. Under this rule, broker/dealers who recommend our securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Securities are exempt from this rule if their market price is at least $5.00 per share. Since our common stock is currently deemed penny stock regulations, it may tend to reduce market liquidity of our common stock, because they limit the broker/dealers' ability to trade, and a purchaser's ability to sell, the stock in the secondary market.
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The low price of our common stock has a negative effect on the amount and percentage of transaction costs paid by individual shareholders. The low price of our common stock also limits our ability to raise additional capital by issuing additional shares. There are several reasons for these effects. First, the internal policies of certain institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker's commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, the Company's shareholders may pay transaction costs that are a higher percentage of their total share value than if our share price were substantially higher.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
| ITEM | 2. DESCRIPTION OF PROPERTIES |
Our principal executive offices are temporarily located at the residence of Dina Moskowitz, our sole Director and Chief Executive Officer, for which we pay no rent.
| ITEM | 3. LEGAL PROCEEDINGS |
We are not a party to any material legal proceedings. We are not aware of any pending or threatened litigation against us that we expect will have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings.
| ITEM | 4. MINE SAFETY DISCLOSURE |
Not applicable
PART II
| ITEM | 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our common stock qualified for quotation on the OTCBB on August 24, 2012, under the symbol “SAAX”. No trades of our common stock occurred through the facilities of the OTCBB until September 20, 2012. The following table sets forth the range of the high and low bid prices per share of our common stock for each quarter (or portion thereof) as reported on the OTCBB or OTCQB, as applicable, beginning on September 20, 2012. These quotations represent interdealer prices, without retail markup, markdown or commission, and may not represent actual transactions. There currently is no liquid trading market for our common stock. There can be no assurance that a significant active trading market in our common stock will develop, or if such a market develops, that it will be sustained.
| High | Low | ||||||||
| Third Quarter (August 24, 2012 through September 30, 2012 | $ | 2.00 | $ | 1.50 | |||||
| Fourth Quarter (Through December 31, 2012) | $ | 1.50 | $ | 1.00 | |||||
| March 22, 2013* | $ | 1.00 | $ | 1.00 | |||||
* Represents quoted prices but not actual trades.
As soon as practicable, and assuming we satisfy all necessary initial listing requirements, we intend to apply to have our common stock listed for trading on a national securities exchange, although we cannot be certain that our application will be approved.
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Recent Sales of Unregistered Securities.
During the year ended December 31, 2012, the Company entered into securities purchase agreements with four independent accredited investors for the sale of a total of 329,192 shares of common stock, resulting in total proceeds of $140,000. Proceeds of the sales are being used for the continued development and marketing of the SaaSMAX Marketplace. The foregoing shares were sold in reliance upon an exemption from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Re-Purchase of Equity Securities.
None
Dividends.
None
Equity Compensation Plan Information.
On July 5, 2011 (the “Effective Date”), we adopted the 2011 Stock Incentive Plan, (the “Plan”), pursuant to which we are authorized to grant shares of common stock, stock options intended to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified options and stock appreciation rights to our employees, officers, directors and consultants of up to 1,000,000 shares of common stock.
The following table provides information with respect to outstanding options as of December 31, 2012 pursuant to compensation plans under which equity securities are authorized for issuance.
| Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||
| (a) | (b) | (c) | |||
| 2012 | |||||
| Equity compensation plans approved by security holders | 441,805 | $0.54 | 558,195 | ||
| Equity compensation plans not approved by security holders | -- | -- | -- | ||
| Total | 441,805 | $0.54 | 558,195 | ||
| ITEM | 6. SELECTED FINANCIAL DATA. |
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.
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| ITEM | 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with the information set forth in our audited financial statements and the related notes that appear elsewhere in this Annual Report.
Overview
Business. SaaSMAX, Inc. is developing an online marketplace that electronically facilitates the reselling and purchasing of SaaS Apps through value-added resellers, solution providers, trusted advisors and other reseller channels. The SaaSMAX App Marketplace aims to provide these Solution Providers and SaaS software vendors with the tools and relationships to increase their revenues in this rapidly growing SaaS industry.
Financial. We have generated limited revenues since our inception and have incurred substantial losses to date. Shortly after incorporation, we filed a Registration Statement on Form S-1with the SEC pursuant to which we registered 1,000,500 shares of our common stock that had been sold to thirty-one accredited investors at $0.20 per share through a private placement (total proceeds of $200,100). The Registration Statement was declared effective on October 14, 2011.
During the year ended December 31, 2012, the Company entered into securities purchase agreements with four independent accredited investors for the sale of a total of 329,192 shares of common stock, resulting in total proceeds of $140,000. Proceeds of the sales are being used for the continued development of the SaaSMAX Marketplace.
To further assist in funding our operations during 2012 we entered into five separate convertible promissory notes for $25,000 each (total of $125,000) with a shareholder of the Company. The Convertible Notes bear interest at 8% per annum and are due and payable on the one year anniversary date of each note. Subsequent to December 31, 2012, we entered into two additional $25,000 convertible promissory notes with the same shareholder.
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Results of Operations
Year Ended December 31, 2012 (“2012”) compared to the period from January 19, 2011 (inception) to December 31, 2011 (“2011”)
| 2012 | Increase (decrease) from 2011 to 2012 | 2011 | January 19, 2011 (inception) to December 31, 2012 | |||||||
| $ | $ | |||||||||
| Revenues | 4,538 | 100% | - | $ | 4,538 | |||||
| Costs of services | 1,790 | 100% | - | 1,790 | ||||||
| Net profit | 2,748 | 100% | - | 2,748 | ||||||
| Salaries and professional fees | 300,880 | 271% | 81,087 | 381,967 | ||||||
| Technology and product development | 65,028 | (8%) | 70,721 | 135,748 | ||||||
| General and administrative | 77,477 | 156% | 30,213 | 107,690 | ||||||
| Operating expenses | 443,385 | 144% | 182,021 | 625,406 | ||||||
| Loss from operations | (440,637) | (142%) | (182,021) | (622,658) | ||||||
| Interest expense | 37,537 | (100%) | - | 37,537 | ||||||
| Net loss | $ | (478,174) | (163%) | $ | (182,021) | (660,195) |
Revenues
SaaSMAX revenues recognized during 2012 consist primarily of fees earned from one SaaS App Vendor who sells and promotes its SaaS App through the SaaSMAX Marketplace. The fees earned by SaaSMAX are derived as a percentage of the revenues earned by the SaaS App Vendor. We are still a development stage company and do not expect to begin generating significant revenues until we move out of SaaSMAX Beta and commercially launch the SaaSMAX Marketplace.
Cost of Services
Costs of services recognized during 2012 consist primarily of commissions paid to the Solution Providers related to the SaaS Apps sold through the SaaSMAX Marketplace.
Salaries and professional fees
Salaries and professional fees for 2012 increased 271% over 2011. The increase is primarily attributable to the marketing of the SaaSMAX Marketplace as well as business development services. The Company has focused a significant amount of its attention on the marketing and promotion of the product during 2012. Such costs totaled approximately $156,000 during 2012 compared to $61,000 during 2011.Additionally, during February 2012, the Company’s Chief Executive Officer, Dina Moskowitz, began receiving a salary for her services, earning $40,000 during 2012. The remainder of the expenses during both periods relates primarily to accounting and legal fees incurred in connection with the preparation and filing with the Securities and Exchange Commission of our public company reports.
Salaries and professional fees for the period from January 19, 2011 (inception) through December 31, 2012 totaled approximately $382,000 and consisted primarily of marketing, business development costs and management salaries discussed above, as well as, legal and accounting fees incurred as a result of the Registration Statement on Form S-1 initially filed with the SEC during May 2011, as well as fees incurred in connection with the preparation and filing with the Securities and Exchange Commission of our public company reports. The registration statement was declared effective on October 14, 2011, however, as a result of the filing requirements necessary as a public company, such costs are expected to continue being a significant part of our operating expenses.
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Technology and Product Development
Technology and product development costs have decreased 8% in 2012 in comparison to 2011. Such costs in 2011 related to the development of the SaaSMAX Marketplace. Once technological feasibility of the product was established in October 2011, we began capitalizing the majority of the costs related to the continued development of the product that are expected to be recovered against future revenues. Costs incurred in 2012 relate to research and development of improved functions within the SaaSMAX Marketplace. The Company expects to continue to incur expenses related to technology and product development as it improves and expands the SaaSMAX Marketplace.
Technology and Product Development costs for the period from January 19, 2011 (inception) through December 31, 2012 totaled approximately $136,000 and related primarily to the development and continued improvements of the SaaSMAX Marketplace.
General and Administrative Expenses
General and administrative expenses increased 156% in 2012, of which 25% of this increase was due to the impairment of capitalized software development costs. During 2012, management assessed the value of our SaaSMAX Marketplace and determined that as a result of additional improvements and technological updates deemed necessary to the SaaSMAX Marketplace that the asset had been impaired. Accordingly, we wrote-down the software development costs to the estimated net realizable value of approximately $49,000 and recognized an impairment charge of $12,000. The remainder of the increase in 2012 consists of corporate administrative costs incurred to become DTC eligible, as well as, increases in depreciation, internet services and travel and entertainment.
General and administrative expenses for the period from January 19, 2011 (inception) through December 31, 2012 totaled approximately $108,000. Such costs relate primarily to corporate costs associated with the Registration Statement on Form S-1 initially filed with the SEC during May 2011 as well as costs incurred to become DTC eligible during 2012 totaling approximately $22,000, as well as, the $12,000 impairment charge to software development costs discussed above. Also included are costs related to travel, trade show, automotive, internet services, and depreciation and general office expenses.
Other Expense
Other expense for 2012 and the period from January 19, 2011 (inception) through December 31, 2012 totaled $37,537 and related to the interest expense and the amortization of the debt discount on our Convertible Promissory Notes.
Net Loss
During 2012, 2011 and the period from January 19, 2011 (inception) through December 31, 2012 the Company incurred a net loss of $478,174, $182,021 and $660,195, respectively, due to the items described above.
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Capital Resources and Liquidity
As of December 31, 2012, we had approximately $16,000 of cash and a working capital deficit of approximately $33,000 compared to cash of approximately $33,000 and working capital of approximately $23,000 as of December 31, 2011.
Net cash used in operating activities during 2012, 2011 and the period from January 19, 2011 (inception) through December 31, 2012 totaled approximately $249,000, $146,000 and $396,000, respectively and is primarily attributable to the payment of development, legal, accounting, advertising and corporate fees which are offset by stock based compensation expense and the impairment charge to software development costs.
Net cash used in investing activities during 2012, 2011 and the period from January 19, 2011 (inception) through December 31, 2012 totaled approximately $32,000, $21,000 and $53,000, respectively and resulted from the purchase of capitalized software and the capitalization of the SaaSMAX marketplace upon reaching technological feasibility.
Net cash provided by financing activities during 2012, 2011 and the period from January 19, 2011 (inception) through December 31, 2012 totaled $265,000, $200,100 and $465,100, respectively and resulted primarily from the Company's sale of common stock. Additionally, $125,000 was received during 2012 in the form of convertible promissory notes.
We currently rely on cash flows from financing activities to fund our capital expenditures and to support our working capital requirements. As of March 25, 2013 we have entered into seven separate Convertible Promissory Notes for $25,000 each (total of $175,000 (the “Convertible Note(s)”) with a shareholder of the Company (the “Holder”). The Convertible Notes bear interest at 8% per annum and are due and payable on the one year anniversary date of each Convertible Note. The Holder of the Convertible Notes may at any time prior to the Maturity Date, convert the principal amount of six of the Convertible Note into shares of common stock of the Company on the basis of one share of such stock for each $0.35 (the “Conversion Price”) in unpaid principal and accrued interest. The seventh Convertible Note dated February 23, 2013 has a Conversion Price of $0.20. The Company may at any time compel the conversion of the Convertible Note or any such portion into shares of common stock at the Conversion Price.
During January 2012 proceeds of $75,000 were received from the sale of 214,286 shares of common stock. On April 5, 2012, pursuant to a Private Placement Memorandum (the “Private Offering”), the Company offered for sale 818,816 units (“Units”) at a purchase price of $1.84 per Unit. Each Unit consists of: i) two shares of common stock, and ii) one redeemable warrant (the “Warrant[s]”) entitling the holder to purchase one share of common stock (the “Warrant Shares”), at an exercise price of $1.84, for a period of 24 months. The Private Offering was terminated on May 10, 2012. The Company had sold 21,739 Units pursuant to the Private Offering resulting in proceeds of $40,000. Additionally, on April 5, 2012, proceeds of $25,000 were received from the sale of 71,428 shares of common stock to an independent accredited investor at $0.35 per share.
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During 2011, proceeds of $200,100 were received from the sale of 1,000,500 shares of common stock.
The Company will need to secure additional financing in the future to continue to develop the product, attract customers, and start generating revenues. Our business plans estimate that we will need to raise additional capital to fund our operations during 2013 and there can be no assurance that we will be able to raise any or all of the capital. We began generating a nominal amount of revenue during the third quarter of 2012. However, there can be no assurance that we will be able to generate revenue sufficient to sustain or grow the operations. Please see the section entitled “Risk Factors” included herein.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Inflation
We do not believe our business and operations have been materially affected by inflation.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.
The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.
We have identified the following critical accounting policies that are most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The following is a review of the more critical accounting policies and methods used by us:
Going concern
No assurance can be given that a large market for the SaaSMAX product will develop, or that a critical mass of customers will be willing to pay for the SaaSMAX product. Since inception, through March 25, 2013, proceeds of $340,100 have been received from the sale of 1,329,691 shares of common stock and $175,000 was received through the sale of Convertible Notes. Our business plan estimates that we will need to raise additional capital to fund our operations during 2013 and there can be no assurance that we will be able to raise any or all of the capital required. We have generated limited revenues since our inception and have incurred a net loss of $478,174 and net cash used in operating activities of $249,347 during 2012. Accordingly, we will have to obtain additional funding from the sale of our securities, the continued sale of debt instruments or from strategic transactions in order to fund our current level of operations and there can be no assurance that we will be able to raise any or all of the capital required. If the Company is unable to generate sufficient cash flow from operations and/or continue to obtain financing to meet its working capital requirements, it may have to curtail its business sharply or cease business altogether.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability.
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Development stage company
The Company complies with the Accounting Standards Codification No. 915 “Development Stage Entities” and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as development stage.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Capitalized software
Capitalized software consists primarily of payments made to independent software developers for the development of the SaaSMAX Marketplace. Software development costs are capitalized once technological feasibility of a product is established and it is determined that such costs should be recoverable against future revenues. For products where proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product development costs.
Commencing upon the SaaSMAX Marketplace’s release in October 2012, we began amortizing the capitalized software development costs to operating expenses based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) the straight-line method. The amortization period of the capitalized software costs is two years from the initial release of the product. The recoverability of capitalized software development costs is evaluated based on the expected performance of the specific products for which the costs relate.
Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established, as well as in the ongoing assessment of the recoverability of capitalized costs. If revised forecasted or actual product sales are less than and/or revised forecasted or actual costs are greater than the original forecasted amount utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimated in any given quarter, which could result in an impairment charge.
Recently Issued Accounting Standards
In May 2011, the Financial Accounting Standards Board ("FASB") issued amended guidance on fair value measurement and related disclosures. The new guidance clarified the concepts applicable for fair value measurement of non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. This guidance is effective for reporting periods beginning after December 15, 2011. We adopted this guidance on January 1, 2012. The adoption of this guidance did not have any impact on our financial position, results of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation.
| ITEM | 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements required by Item 8 are submitted in a separate section of this report, beginning on page 33, and are incorporated herein and made a part hereof.
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| ITEM | 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
On November 2, 2012, the Board of Directors of the registrant dismissed Hamilton P.C. as its independent registered public accounting firm. On the same date, the accounting firm of Kyle L. Tingle, CPA, LLC was engaged as the Registrant’s new independent registered public accounting firm.
The Board of Directors of the Registrant and the Registrant's Audit Committee approved of the dismissal of Hamilton, P.C.
On November 2, 2012, the registrant engaged Kyle L. Tingle, CPA, LLC ("Tingle") of Las Vegas, Nevada as its independent accountant. At the time of Tingle's engagement, Registrant was in the process of preparing its Quarterly 10Q Report for the nine months ended September 30, 2012 (the "9-30-12 10Q"). The Company provided Tingle with the documentation necessary for Tingle to review the 9-30-12 10Q. On November 13, 2012, Tingle suggested by email that the Registrant file a Form 12b-25 Extension to file the 9-30-12 10Q, which the Registrant did. Thus, the Registrant's last day to file the 9-30-12 10Q was extended to November 19, 2012 (the "Deadline").
Thereafter, on November 13, 2012, an email was received from Tingle asking that the Registrant execute a Management Representation Letter, which was sent to Tingle on November 16, 2012. Also on November 13, 2012, Tingle sent an email to Registrant's Accountant commenting upon the 10Q information previously sent to Tingle.
On November 14, and 16, 2012 the Registrant's Accountant, and CEO attempted to communicate with Tingle to get Tingle's comments on the 10Q documentation that had been sent to Tingle. Tingle did not communicate with Registrant until mid-day on November 19, 2012, which did not give the Registrant enough time to respond to Tingle's comments and file by the Deadline. Registrant then filed its 10Q for the nine months ended September 30, 2012 on November 19, 2012. The 9-30-12 10Q filed on November 19, 2012 was not Reviewed.
On December 2, 2012, Tingle sent an email to Registrant regarding the filing of the 9-30-12 10Q. Registrant's CEO and Accountant spoke with Tingle on December 3, 2012 about Tingle's December 2, 2012 email. During that December 3, 2012 conversation, Tingle advised the Registrant that Tingle would take into advisement the substance of the information given to Tingle in the conversation. On December 5, 7, 10, and 11, 2012 information was sent to Tingle and attempts to communicate with Tingle were made by Registrant's Accountant. Since December 3, 2012, and through January 24, 2013, Tingle did not respond to any attempts by Registrant's CEO, Accountant and Counsel to contact Tingle.
Registrant's Board of Directors dismissed Tingle as Auditor as of January 23, 2013 because of Tingle's non-responsiveness to Registrant's numerous requests to complete the conversations concerning Registrant's financial reporting, which conversations had commenced in early November 2012 and had been cut off by Tingle on December 3, 2012.
On January 28, 2013, Registrant filed an 8-K (the "Original 8-K") indicating that Tingle had been dismissed as Accountant. A copy of the Original 8-K was sent to Tingle along with a request that Tingle provide a Letter pursuant to Item 304(a)(3) of Regulation S-K ("Item 304(a)(3)") (the "Former Accountant's Letter") on January 28,2013. Tingle did not respond to Registrant's request, notwithstanding several requests by Registrant's counsel,
On January 24, 2013, Registrant engaged Ronald R. Chadwick, P.C. (the "New Accountant") as its independent accountant. Registrant provided the New Accountant with all of the information previously provided to Tingle. The New Accountant reviewed the Financial Statements and agreed that the Financial Statement for the three and nine months ended 9/30/2012 were correct and no changes were required.
On February 4, 2013, a Form 8-K A ("8-KA-1”) was filed, indicating the information set forth in the above Paragraph. Also, on February 4, 2013, a copy of the 8-KA-1 was sent to Tingle along with a request that Tingle provide a Letter pursuant to Item 304(a)(3) of Regulation S-K.
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On February 8, 2013, a period of 67 days since Tingle had last communicated with the Registrant, Tingle sent Registrant a Letter ("Tingle's Letter") pursuant to Item 304(a)(3) indicating the following (the Paragraphs have been numbered by the Company to allow reference thereto in the responses to Tingle's Letter):
| 1. | There are accounting disagreements on the financial statements filed with the Securities and Exchange Commission. The Company filed Form 10-Q on November 19, 2012 without the consent of this firm in violation of Regulation S-X Part 210.8-03. The review of the financial statements was not complete as there were open issues with respect to accounting for options and the timing of the expensing of options on the financial statements. |
| 2. | In review of the prior accountant's workpapers, I did not find audit procedures with regard to the options. A volatility of 100% was used and labeled "conservative" and the risk free interest rate 0.69% was labeled "reasonable" in the workpapers, without documentation for those determinations. I had requested an analysis in compliance with ASC 718-10-30-20 and information on the timing of the issuances prior to the filing. In the analysis provided by the Company in December 2012, the volatility analysis indicated an 80% volatility and created a material change in the computation of option expense for the three and nine month periods ended September 30, 2012. The Company did not adjust the financial statements accordingly. |
| 3. | I also had questions with regard to the payment of invoices and the issuance of options on the first day of the quarter. In the prior year workpapers, it appeared that there were no confirmations of any payables (only tracing to subsequent disbursements) and I needed comfort on the timing of services provided with the posting of the invoices. For example, one contract from January 2011 indicated options as part of compensation. Options were issued in January 2012 and expensed over the four quarters of 2012, not 2011. I received no subsequent information indicating the correct treatment and timing of expensing for the options. These adjustments were material to the financial statements as a whole. |
| 4. | Due to the failure of the Company to file a Form 8-K for Item 4.02, Non-Reliance on Previously Issued Financial Statements, I felt that the concurring reviewer and I were precluded from signing off on the engagement completion document and unable to complete the engagement. |
The Company disagrees with Tingle and responds to Tingle's Letter as follows:
Response to Paragraph 1
On February 4, 2013, the Company filed a Form 10Q-A indicating that the Original 10-Q filed on November 19, 2013 was not reviewed, and that subsequently, the financial statements contained in the original 10-Q were reviewed by the Company's new accountant and that "no changes or amendments were made to the 9/30/12 10Q Report as a result of the Review". See Response to Paragraph 2 below for a discussion of accounting for options and timing of expenses.
Response to Paragraph 2
On November 13, 2012, Tingle had sent an email to the Company inquiring as to the volatility of the market price of the common stock and the calculation of the option expense. In response to such email, the Company, also on November 13, 2012, sent to Tingle the Company's Volatility Calculation. The Company had used a 100% Volatility for the price of its shares in calculating the option expense to be recorded. The 100% Volatility was based upon the following:
The Company was a new public entity, having its S-1 Registration Statement being declared "Effective" by the SEC on October 14, 2011 (the "Effective Date"). A total of 5,000 shares have been traded in the public marketplace since the Effective Date. The Company concluded that it was not reasonable to use the published stock prices in determining their volatility. For all financial statements issued as of 9/30/12, the Company utilized a volatility of 100% in valuing our stock options which appeared conservative based on private sales of the Company’s stock. To determine the reasonableness of the 100%, the Company determined that the most reasonable calculation was to consider the Company's volatility as if it were a non-public company in accordance with Accounting Standards Codification as follows:
30-20 -A nonpublic entity may not be able to reasonably estimate the fair value of its equity share options and similar instruments because it is not practicable for it to estimate the expected volatility of its share price. In that situation, the entity shall account for its equity share options and similar instruments based on a value calculated using the historical volatility of an appropriate industry sector index instead of the expected volatility of the entity’s share price (the calculated value). [FAS 123(R), paragraph 23]
In calculating the volatility, the Company performed the following analysis:
| 1. | Utilized the private market price per share for which stock was sold at from 1/19/11 - 7/1/12 to determine volatility. This resulted in a 94% volatility; |
| 2. | Utilized the private market price for which stock was sold at from 1/19/11 through 9/30/12 adjusted for public sales beginning on 9/21/12. This resulted in a 108% volatility. |
| 3. | Selected various Small Business Filers per the SEC Edgar website in the SIC 7374 - Services - Computer Processing & Data Preparation noting volatility. This resulted in an average volatility of 80%. |
The Company believes that it has made a reasonable estimate of the volatility of its share prices and is satisfied that a 100% volatility is appropriate in the calculation of its option expenses as set forth in its financial statements. Further, the New Accountant is in agreement with the Company's calculations and reporting of the volatility expense.
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Response to Paragraph 3
Tingle has stated "I also had questions with regard to the payment of invoices and the issuance of options on the first day of the quarter. In the prior year workpapers, it appeared that there were no confirmations of any payables (only tracing to subsequent disbursements) and I needed comfort on the timing of services provided with the posting of the invoices." On December 7, 2012, Registrant provided Tingle with the invoices he had inquired about on December 3, 2012. The Schedule provided to Tingle indicated that there was an under accrual of $225, an immaterial amount.
With regard to the options that were posted on the first day of the quarter commencing 10/1/2012, there were a total of 28,900 options that were issued for services performed during the quarter ended 9/30/2012. The invoice for services for which the 28,900 options were based, was not received until after the end of 9/30/2012. Such options were part of the 73,900 options set forth in Footnote 7 to the Financial Statements "Subsequent Events" that were issued as of October 1, 2012. With a volatility factor of 100%, the 28,900 options are valued at $16,419. These expenses were not ignored as they were set forth in Footnote 7. Had these expenses been recorded in the three and nine month period ended September 30, 2012, they would have increased the Company's net loss for the nine months ended September 30, 2012 from $153,521 to $169,940, and the nine months ended September 30, 2012 from $319,029 to $335,448. Had the Company used a volatility factor of 80%, as suggested by Tingle, the 28,900 options would have been valued at $13,736 and, they would have increased the Company's net loss for the three months ended September 30, 2012 from $153,521 to $167,257, and for the nine months ended September 30, 2012 from $319,029 to $332,765. The Company chose to take the more conservative approach by using the Company's best estimate as provided in the Accounting Standards Codification Section above.
On December 5, 2012, Registrant sent to Tingle an analysis of the volatility and attempted to contact Tingle to discuss the analysis. Tingle did not respond to any attempts to communicate with Tingle and as a result, after many phone messages were left and many emails were sent, Tingle was dismissed as Registrant's accountant.
Registrant does not know what “January 2011” contract Tingle is referring to. The Company did not begin operations until January 19, 2011 and the SaaSMAX Stock Option Plan was not formed until July 2011.
Response to Paragraph 4
No demand was made by Tingle for the Registrant to file a form 8-K for Item 4.02, Non-Reliance on Previously issued Financial Statements. On December 2, 2012, Tingle sent an email to Registrant stating: "The goal is not to have a Form 8-K under section 4.02 that would inform readers that the financial statements in the Form 10-Q cannot be relied upon due to lack of auditor review and outstanding accounting issues. The preference is to always get the appropriate information to back up the financial information. If an amendment is necessary, so be it, but the goal needs to have a correct, valid filing." Registrant was fully cooperating with Tingle on December 2, 2012 to give Tingle the "appropriate information". Thereafter Tingle chose to be non-communicative and not respond to Registrant until February 8, 2013.
On February 13, 2013, in response to Form 8-K filed by us on February 12, 2013, Tingle stated in a letter, as follows:
"At this time, there are accounting disagreements on the financial statements filed with the Securities and Commission on November 19, 2012. The Company Fi1ed Form 8-K/A-2 in rebuttal to our original Exhibit 16.1 response dated February 8, 2013.
We agree with the timeline of documentation included therein on communications between our firm and the Company and the differences of opinion between the two entities. As we had not opined or consented on any year end or interim filings of the registrant, we have no disagreements on the statements consented to by other registered accounting firms."
We believe that our financial statements do not require any adjustments.
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| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of disclosure controls and procedures
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer as of the end of the period covered by this report, our Chief Executive Officer, concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting identified below.
As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934. Our Chief Executive Officer/Chief Accounting Officer conducted an evaluation of the effectiveness of our control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on management’s evaluation under the framework, management has concluded that our internal control over financial reporting was not effective as of December 31, 2012.
We identified material weaknesses in our internal control over financial reporting primarily attributable to (i) lack of segregation of incompatible duties; and (ii) insufficient Board of Directors representation. These weaknesses are due to our inadequate staffing during the period covered by this report and our lack of working capital to hire additional staff. Management has retained an outside, independent financial consultant to record and review all financial data, as well as prepare our financial reports, in order to mitigate this weakness. Although management will periodically re-evaluate this situation, at this point it considers that the risk associated with such lack of segregation of duties and the potential benefits of adding employees to segregate such duties are not cost justified. We intend to hire additional accounting personnel to assist with financial reporting as soon as our finances will allow.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting occurred during the year ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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| ITEM 9B. | OTHER INFORMATION |
None.
PART III
| ITEM | 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors and Executive Officers
The names of our directors and executive officers, their principal occupations, and the year in which each of our directors and executive officers initially joined the board of directors are set forth below.
| Name | Age | Position | Date First Appointed |
| Dina Moskowitz | 46 | CEO, CFO, Chairman, President & Secretary | January 19, 2011 |
Dina Moskowitz. Ms. Moskowitz has been our Chief Executive Officer and Chief Financial Officer from our inception. Currently and in the foreseeable future she will devote approximately 100% of her time to the affairs of the Company. From May of 2010 to September 2012, she was also CEO of Critical Digital Data Solutions, Inc., ("CDDS"), a company that offers cloud-based online data storage to individuals and businesses. In addition, Ms. Moskowitz was also Founder and Principal of Corporate Business Plan Associates ("CBPA"), a single proprietorship, through which she has provided business plan and strategic consulting services to early stage companies, primarily in the technology space, for more than 15 years. From 1998 to 2007 she devoted approximately 50% of her time to CBPA. From 2004 to 2008, she served as a part time V.P. of Marketing and consultant for Spoken Translation, Inc., (a speech-to-speech translation software app vendor), and has provided consulting services to other software companies. Ms. Moskowitz is also a licensed real estate salesperson in the State of California. She is a graduate of the Wharton School of Business, University of Pennsylvania, where she earned a B.S. of Economics degree in Finance.
ITEM 11. EXECUTIVE COMPENSATION
Ms. Moskowitz received compensation of $40,000 during 2012 and no compensation during 2011 from the Company. There are no current employment agreements between the Company and its executive officer or understandings regarding future compensation.
Ms. Moskowitz has agreed to work with limited remuneration until such time as the Company receives sufficient revenues necessary to provide proper salaries. Ms. Moskowitz will have the responsibility to determine the timing of remuneration for key personnel.
The Company does not intend to pay employee directors a separate fee for their services.
| Name and principal position | Year | Salary | Bonus |
Stock Awards |
Option Awards |
Non-Equity Incentive Plan Compensation |
Nonqualified Deferred Compensation Earnings |
All Other Compensation |
Total |
| Dina Moskowitz, Chairman of the Board & CEO | January 19, 2011(inception) through December 31, 2011 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Dina Moskowitz, Chairman of the Board & CEO | January 1, 2012 Through December 31, 2012 | $40,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 40,000 |
| Total All Executive Officers | January 19, 2011 (inception) Through December 31, 2012 | $40,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 40,000 |
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information, as of March 25, 2013, with respect to any person (including any "group", as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) who is known to us to be the beneficial owner of more than five percent (5%) of any class of our voting securities, and as to those shares of our equity securities beneficially owned by each of our directors and executive officers and all of our directors and executive officers as a group. Unless otherwise specified in the table below, such information, other than information with respect to our directors and executive officers, is based on a review of statements filed with the Securities and Exchange commission (the "Commission") pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act with respect to our common stock. As of March 25, 2013, there were 4,429,704 shares of our common stock outstanding.
The number of shares of common stock beneficially owned by each person is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within sixty (60) days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
| Name and Address of Beneficial Owner (1) | Common Stock Beneficially Owned | Percentage of Common Stock(4) | ||||||
| Dina M. Moskowitz, 3270 Caminito Eastbluff, Unit 95, La Jolla, CA 92037 |
2,599,988 |
47.8% | ||||||
| Tony Osibov, 204 N. El Camino Real, Suite #E-428, Encinitas, CA 92024 |
300,000 |
5.5% | ||||||
| F.U., LLC, 4324 Hawk Street, San Diego, CA 92103(2) |
714,286 |
13.1% | ||||||
| Jeffrey Fink, 4325 Hawk Street, San Diego, CA 92103(3) | 563,571 | 10.4% | ||||||
| Officers and Directors as a group (1 person) |
2,599,988 |
47.8% | ||||||
| (1) | Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or convertible within 60 days of the date of this Prospectus are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. Percentages are based on a total of shares of common stock outstanding on December 31, 2012, and the shares issuable upon the exercise of options, warrants exercisable, and debt convertible on or within 60 days of the date of this Prospectus. |
| (2) | Jeffrey Fink has full investment authority for these shares. |
| (3) | The 563,571 is comprised of 5,000 shares owned individually by Mr. Fink, 5,000 shares owned individually by Shana Saichek, Mr. Fink’s spouse, and seven convertible notes totalling $175,000 issued to the Jeffrey E. Fink & Shana P. Fink Family Trust which are convertible in total to 553,571 shares. |
| (4) | Calculations are based upon total shares issued and outstanding of 5,436,819, comprised of 4,429,704 shares issued, plus 553,571 shares that would be issued upon the conversion of all seven outstanding Convertible Notes, plus all 21,739 shares that would be issued upon the exercise of all warrants that are exercisable within 60 days, plus 431,805 shares that would be issued upon the exercise of all stock options that are exercisable within 60 days |
Changes in Control. We are not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403 of Regulation S-K.
Option Grants in Last Fiscal Year
On July 5, 2011 the Board of Directors approved and implemented the 2011 Stock Incentive Plan (the "Plan"). The plan authorized option grants to employees and other persons closely associated with the Company for the purchase of up to 1,000,000 shares.
During the period from January 1, 2011 (Inception) through March 25, 2013 we have not awarded options to our executive officers.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
During the period from January 1, 2011 (Inception) through March 25, 2013 there were no options exercised by our executive officers.
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Employment Contract and Termination of Employment Agreements
We have no employment agreements with any officers or employees.
Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, to the fullest extent permitted by Nevada Revised Statutes. Our certificate of incorporation also provides that we must indemnify our directors and officers to the fullest extent permitted by Nevada law and advance expenses to our directors and officers in connection with a legal proceeding to the fullest extent permitted by Nevada law, subject to certain exceptions. We are in the process of obtaining directors' and officers' insurance for our directors, officers and some employees for specified liabilities.
The limitation of liability and indemnification provisions in our certificate of incorporation may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. They may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though an action of this kind, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. However, we believe that these indemnification provisions are necessary to attract and retain qualified directors and officers.
SEC Policy on Indemnification
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant 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.
Long Term Incentive Plans
There are no long term incentive plans.
| ITEM | 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Director Independence
Our board of directors is currently composed of one member, who does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director's business and personal activities and relationships as they may relate to us and our management.
Related Party Transactions
During 2012 and 2011, the Company granted 90,000 and 20,000 stock options, respectively from the 2011 Stock Incentive Plan to Stanley Moskowitz for legal advisory services. Mr. Moskowitz is the father of the Company’s CEO, Dina Moskowitz. The exercise price of the options ranges from $0.20 to $0.92 per share and were valued at approximately, $34,000 and $2,500, respectively. As of March 25, 2013, no options have been exercised.
Mr. Tony Osibov, a beneficial owner of 6.2% of the Company’s common stock, served as the Company’s technical consultant during 2011.
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| ITEM | 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. |
The Company had appointed Hamilton, PC as our independent registered public accounting firm for 2012 and 2011. On November 2, 2012, the Company dismissed Hamilton P.C. and on the same date, engaged the accounting firm of Kyle L. Tingle, CPA, LLC. Subsequently, on January 23, 2013, the Company dismissed Kyle L. Tingle, CPA, LLC engaged Ronald R. Chadwick, P.C. as its independent registered accountant. See Item 9. Changes In and Disagreements with Accountants on Financial and Accounting Disclosures.
The following table shows the fees that were paid or accrued by us for audit and other services during 2012 and 2011.
| 2012 | 2011 | |
| Audit Fees (1) | $5,592 | $5,500 |
| Audit-Related Fees | - | - |
| Tax Fees (2) | - | - |
| All Other Fees | - | - |
| Total | $5,592 | $5,500 |
| (1) | Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report. |
| (2) | Our independent registered accountants do not provide us with tax compliance, tax advice or tax planning services. |
All audit related services, tax services and other services rendered by our independent registered accountants were pre-approved by our Board of Directors.
| ITEM | 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
EXHIBIT INDEX
The Company’s financial statements and related notes thereto are listed and included in this Annual Report beginning on page F-1. The following exhibits are filed with, or are incorporated by reference into, this Annual Report. References to "the Company" in this Exhibit List mean SaaSMAX, Inc., a Nevada corporation.
| Exhibit # | Description | |
| 3.1 (1) | Articles of Incorporation of SaaSMAX, Inc. as amended | |
| 3.2 (1) | Corporate Bylaws for SaaSMAX, Inc. | |
| 4.1(2) | SaaSMAX 2011 Stock Incentive Plan | |
| 31.1* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1* | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 101.INS(3) | XBRL Instance Document | |
| 101.SCH(3) | XBRL Taxonomy Extension Schema | |
| 101.CAL(3) | XBRL Taxonomy Extension Calculation | |
| 101.DEF(3) | XBRL Taxonomy Extension Definition | |
| 101.LAB(3) | XBRL Taxonomy Extension Label | |
| 101.PRE(3) | XBRL Taxonomy Extension Presentation |
(1)Incorporated by reference to the Registrant’s Registration Statement on Form S-1 as filed May 23, 2011
(2) Incorporated by reference to the Registrant’s Annual Report on Form 10-K dated March 29, 2012.
(3) In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
*Filed herewith.
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Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
SaaSMAX, Inc. (Registrant) |
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| Date: March 25, 2013 | By: | /s/ Dina Moskowitz | |
| Dina Moskowitz | |||
| Chief Executive Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Dina Moskowitz | Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | March 25, 2013 | ||
| /s/ Dina Moskowitz | Chief Financial Officer (Principal Financial and Accounting Officer) | March 25, 2013 | ||
| 32 |
SaaSMAX, Inc.
INDEX TO FINANCIAL STATEMENTS
| Page | |
| Reports of Independent Registered Public Accounting Firm | |
| Report of Ronald R. Chadwick, PC, Independent Registered Public Accounting Firm | 34 |
| Report of Hamilton PC, Independent Registered Public Accounting Firm | 35 |
| Balance Sheets as of December 31, 2012 and 2011 | 36 |
| Statements of Operations for the Year Ended December 31, 2012, the Period from January 11, 2011 (inception) to December 31, 2011 and the Period from January 11, 2011 (inception) to December 31, 2012 | 37 |
| Statements of Cash Flows for the Year Ended December 31, 2012, the Period from January 11, 2011 (inception) to December 31, 2011 and the Period from January 11, 2011 (inception) to December 31, 2012 | 38 |
| Statements of Stockholders’ Equity for the Period from January 11, 2011 (inception) to December 31, 2012 | 39 |
| Notes to the Financial Statements | 40 |
| 33 |
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Saasmax, Inc.
San Diego, California
I have audited the accompanying balance sheet of Saasmax, Inc. (a development stage company) as of December 31, 2012, and the related statements of operations, stockholders' equity, and cash flows for the year then ended and for the period from January 19, 2011 (inception) through December 31, 2012. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. The Company's financial statements as of and for the period from January 19, 2011 (inception) through December 31, 2011 were audited by other auditors whose report, dated March 16, 2012, included an explanatory paragraph describing going concern issues as discussed in Note 1 to the financial statements. The financial statements for the period from January 19, 2011 (inception) through December 31, 2011 reflect a net loss applicable to common stockholders of $182,012 of the related total. The other auditors' report has been furnished to me, and my opinion, insofar as it relates to the amounts for such prior period, is based solely on the report of such other auditors.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, based on my audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Saasmax, Inc. at December 31, 2012, and the results of its operations and its cash flows for the year then ended and for the period from January 19, 2011 (inception) through December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficit. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Ronald R. Chadwick, P.C.
RONALD R. CHADWICK, P.C.
Aurora, Colorado
March 18, 2013
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
SaaSMAX, Inc
San Diego, California
We have audited the accompanying balance sheet of SaaSMAX, Inc, as of December 31, 2011, and the related statements of operations, stockholders’ equity and cash flows for the period from January 19, 2011 (inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 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 of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SaaSMAX, Inc. as of December 31, 2011, and the result of its operations and its cash flows for the period from January 19, 2011 (inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that SaaSMAX, Inc. will continue as a going concern. As discussed in Note 1 to the financial statements, SaaSMAX, Inc. suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Hamilton, PC
Hamilton, PC
Denver, Colorado
March 16, 2012
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| SaaSMAX, INC. | |||||
| (A Development Stage Company) | |||||
| BALANCE SHEETS | |||||
| December 31, 2012 | December 31, 2011 | ||||
| ASSETS | |||||
| Current assets: | |||||
| Cash | $ | 16,375 | $ | 33,158 | |
| Accounts receivable, net | 962 | - | |||
| Other current assets | 1,123 | 2,555 | |||
| Total current assets | 18,460 | 35,713 | |||
| Property & equipment, net of accumulated depreciation | 34,122 | 20,195 | |||
| Total assets | $ | 52,582 | $ | 55,908 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||
| Current liabilities: | |||||
| Accounts payable and accrued expenses | $ | 17,020 | $ | 8,526 | |
| Accounts payable - related parties | - | 3,778 | |||
| Convertible debt, net of debt discount | 34,727 | - | |||
| Total current liabilities | 51,747 | 12,304 | |||
| Total liabilities | 51,747 | 12,304 | |||
| Stockholders’ equity | |||||
| Preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding | - | - | |||
| Common stock, $0.001 par value; 100,000,000 shares authorized; 4,429,704 and 4,100,512 shares issued and outstanding as of December 31, 2012 and 2011, respectively | 4,430 | 4,100 | |||
| Additional paid-in capital | 668,091 | 227,647 | |||
| Deferred compensation expense - options | (8,491) | (3,122) | |||
| Founders' receivable | (3,000) | (3,000) | |||
| Deficit accumulated during development stage | (660,195) | (182,021) | |||
| Total stockholders’ equity | 835 | 43,604 | |||
| Total liabilities and stockholders’ equity | $ | 52,582 | $ | 55,908 | |
| See accompanying notes to financial statements | |||||
| 36 |
| SaaSMAX, INC. | |||||||||
| (A Development Stage Company) | |||||||||
| STATEMENTS OF OPERATIONS | |||||||||
| Year ended December 31, 2012 | January 19, 2011 (inception) to December 31, 2011 | January 19, 2011 (inception) to December 31, 2012 | |||||||
| Revenues | $ | 4,538 | $ | - | $ | 4,538 | |||
| Costs of services | 1,790 | - | 1,790 | ||||||
| Gross profit | 2,748 | - | 2,748 | ||||||
| Operating expenses | |||||||||
| Salaries and professional fees | 300,880 | 81,087 | 381,967 | ||||||
| Technology and product development | 65,028 | 70,721 | 135,748 | ||||||
| General and administrative | 77,477 | 30,213 | 107,690 | ||||||
| Total operating expenses | 443,385 | 182,021 | 625,406 | ||||||
| Loss from operations | (440,637) | (182,021) | (622,658) | ||||||
| Other expense | |||||||||
| Interest expense | 37,537 | - | 37,537 | ||||||
| Total other expense | 37,537 | - | 37,537 | ||||||
| Net loss | $ | (478,174) | $ | (182,021) | $ | (660,195) | |||
| Weighted average number of common | |||||||||
| shares outstanding - basic and fully diluted | 4,361,258 | 3,947,925 | 4,164,039 | ||||||
| Net loss per share - basic and fully diluted | $ | (0.11) | $ | (0.05) | $ | (0.16) | |||
| See accompanying notes to financial statements | |||||||||
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| SaaSMAX, INC. | ||||||||||
| (A Development Stage Company) | ||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||
| Year ended December 31, 2012 | January 19, 2011 (inception) to December 31, 2011 | January 19, 2011 (inception) to December 31, 2012 | ||||||||
| Cash flows from operating activities | ||||||||||
| Net loss | $ | (478,174) | $ | (182,021) | $ | (660,195) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||
| Stock based compensation | 170,405 | 25,525 | 195,930 | |||||||
| Depreciation | 6,495 | 403 | 6,898 | |||||||
| Impairment of software development costs | 12,014 | - | 12,014 | |||||||
| Amortization of debt discount | 34,727 | - | 34,727 | |||||||
| Changes in operating assets and liabilities | - | |||||||||
| Accounts receivable | (962) | - | (962) | |||||||
| Other current assets | 1,432 | (2,555) | (1,123) | |||||||
| Accounts payable and accrued expenses | 8,494 | 8,526 | 17,020 | |||||||
| Accounts payable - related parties | (3,778) | 3,778 | - | |||||||
| Net cash used in operating activities | (249,347) | (146,344) | (395,691) | |||||||
| Cash flows from investing activities | ||||||||||
| Purchase of capitalized software | (32,436) | (20,598) | (53,034) | |||||||
| Net cash used in investing activities | (32,436) | (20,598) | (53,034) | |||||||
| Cash flows from financing activities | ||||||||||
| Proceeds from convertible promissory notes | 125,000 | - | 125,000 | |||||||
| Proceeds from issuance of common stock | 140,000 | 200,100 | 340,100 | |||||||
| Net cash provided by financing activities | 265,000 | 200,100 | 465,100 | |||||||
| Net increase in cash | (16,783) | 33,158 | 16,375 | |||||||
| Cash, beginning of period | 33,158 | - | - | |||||||
| Cash, end of period | $ | 16,375 | $ | 33,158 | $ | 16,375 | ||||
| Supplemental disclosure of cash flow information: | ||||||||||
| Income taxes paid | $ | - | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | $ | - | ||||
| Supplementary disclosure of noncash financing activities: | ||||||||||
| Beneficial conversion feature on convertible debt | $ | 125,000 | $ | - | $ | 125,000 | ||||
| Issuance of common stock for founders' receivable | - | $ | 3,000 | $ | 3,000 | |||||
| See accompanying notes to financial statements | ||||||||||
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| SaasMAX, INC. | ||||||||||||||
| (A Development Stage Company) | ||||||||||||||
| Statement of Stockholders' Equity | ||||||||||||||
| Period from January 19, 2011 (inception) to December 31, 2012 | ||||||||||||||
| Additional Paid-In Capital | Deferred Comp. Expense | Accumulated Deficit During Development Stage | ||||||||||||
| Common Stock | Founders' Receivable | |||||||||||||
| Shares | Amount | Total | ||||||||||||
| Balance, | ||||||||||||||
| January 19, 2011 | - | $ - | $ - | $ - | $ - | $ - | $ - | |||||||
| Issuance of founders' shares - January 2011 | 3,000,000 | 3,000 | - | - | (3,000) | - | - | |||||||
| Issuance of common stock for cash - February 2011 | 790,500 | 790 | 157,310 | - | - | - | 158,100 | |||||||
| Issuance of common stock for cash - March 2011 | 210,000 | 210 | 41,790 | - | 42,000 | |||||||||
| Issuance of common stock for services - October 2011 | 100,012 | 100 | 19,902 | - | 20,002 | |||||||||
| Deferred compensation expense - options | - | - | 3,122 | (3,122) | - | |||||||||
| Earned compensation expense - vested options | - | - | 5,523 | - | - | - | 5,523 | |||||||
| Net loss | - | - | - | - | - | (182,021) | (182,021) | |||||||
| Balance, | ||||||||||||||
| December 31, 2011 | 4,100,512 | 4,100 | 227,647 | (3,122) | (3,000) | (182,021) | 43,604 | |||||||
| Issuance of common stock for cash - February 2012 | 214,286 | 215 | 74,785 | - | - | 75,000 | ||||||||
| Issuance of common stock for cash -April 2012 | 114,906 | 115 | 64,885 | - | - | 65,000 | ||||||||
| Debt discount related to beneficial conversion feature | - | - | 125,000 | - | - | 125,000 | ||||||||
| Deferred compensation expense - options | - | - | - | 3,122 | 3,122 | |||||||||
| Earned compensation expense - vested options | - | - | 175,774 | (8,491) | - | - | 167,283 | |||||||
| Net loss | - | - | - | - | (478,174) | (478,174) | ||||||||
| Balance, | ||||||||||||||
| December 31, 2012 | 4,429,704 | $ 4,430 | $ 668,091 | $ (8,491) | $ (3,000) | $ (660,195) | $ 835 | |||||||
See accompanying notes to financial statements
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SaaSMAX, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2012
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
SaaSMAX, Inc. (“SaaSMAX” or the “Company”) was incorporated on January 19, 2011 under the laws of the State of Nevada with its principal place of business in San Diego, California. SaaSMAX is a development stage company that is developing and launching an online global business-to-business marketplace for software-as-a-service (“SaaS”) providers, resellers and users, with the goal to improve the sales value chain in this rapidly growing sector.
Upon incorporation, SaaSMAX authorized 100,000,000 shares of common stock with a par value of $0.001 per share and 20,000,000 shares of preferred stock with a par value of $0.001.
The Company’s mission is to become a channel program for SaaS, by facilitating, improving and increasing the Sales Value Chain for SaaS Applications (“SaaS Apps”). Our plan is to develop and launch the SaaSMAX Marketplace, which is intended to be a "B2B" or business to business solution to be implemented between SaaS Independent Software Vendors (“ISVs”) and SaaS Solution Providers, that will enable SaaS App Vendors to market, promote and manage the sales and distribution of their SaaS App to participants in the Sales Value Chain and to business users around the world. The SaaSMAX Marketplace will also provide easy-to-use tools for SaaS Resellers and Solution Providers to, among other things, thoroughly research each listed SaaS App, including online demos, technical specifications, ratings, support, pricing, and commission plans. The SaaSMAX Marketplace will also provide a Solution Provider Directory which will contain the business profiles of Solution Providers, which will enable businesses to network with Solution Providers, and will enable Solution Providers to generate new business leads.
The Company intends to enter into an agreement with each of its potential ISVs in which the ISV agrees to compensate SaaSMAX for every purchase transaction that is initiated through the SaaSMAX Online Marketplace or a private labeled version thereof. The Company will be responsible for monitoring, aggregating and reporting total transaction volumes completed between its member Service Providers and the ISVs.
Revenue is expected to be recognized through multiple avenues including but not limited to:
| 1) | Earning fees from SaaS App Vendors who list their respective SaaS Apps on the SaaSMAX Marketplace. |
| 2) | Earning fees from Solution Providers who want to resell SaaS Apps and also list their profile in the SaaSMAX Solution Provider Directory. |
| 3) | Advertising and marketing fees from SaaS App Vendors who want to conduct premium marketing and/or advertising campaigns within the SaaSMAX Marketplace. |
| 4) | Commissions based on a percentage of the revenue earned by SaaS App Vendors who sell and promote their SaaS App through the SaaSMAX Marketplace. |
| 5) | Advertising and marketing fees from companies who want to advertise within the SaaSMAX Marketplace or on the SaaSMAX website. |
There can be no assurance that we will be successful in generating any revenue from the means stated above.
Going concern
No assurance can be given that a large market for the SaaSMAX product will develop, or that a critical mass of customers will be willing to pay for the SaaSMAX product. Since inception, through December 31, 2012, proceeds of $340,100 have been received from the sale of 1,329,691 shares of common stock and $125,000 was received through the sale of Convertible Notes. Our business plan estimates that we will need to raise additional capital to fund our operations during 2013 and there can be no assurance that we will be able to raise any or all of the capital required. We have generated limited revenues since our inception and have incurred a net loss of $478,174 and net cash used in operating activities of $249,347 during the year ended December 31, 2012. Accordingly, we will have to obtain additional funding from the sale of our securities, the continued sale of debt instruments or from strategic transactions in order to fund our current level of operations and there can be no assurance that we will be able to raise any or all of the capital required. If the Company is unable to generate sufficient cash flow from operations and/or continue to obtain financing to meet its working capital requirements, it may have to curtail its business sharply or cease business altogether.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability.
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Basis of presentation
The accompanying financial statements have been prepared, under accounting principles generally accepted in the United States, assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability.
Development stage company
The Company complies with the Accounting Standards Codification No. 915 “Development Stage Entities” and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as development stage.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Related party transactions
Accounts payable – related parties include amounts owed to management, shareholders owning greater than 5% of the Company’s outstanding common shares and/or members of their immediate family for costs incurred in the ordinary course of business such as software development consulting fees and expense reimbursements. Additionally, the Company pays an auto allowance to its Chief Executive Officer of approximately $390 per month, resulting in approximately $4,400 of expense included in general and administrative expenses in the accompanying financial statements for the year ended December 31, 2012.
Revenue recognition
Upon the generation of revenue, the Company shall follow the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin 104 for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured. Subscription revenues shall be recognized over the period benefited. Deferred revenues shall be recorded when cash has been collected, however the related service has not yet been provided.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Cash
For purposes of the balance sheet and statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Fair value estimates
Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.
Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties. Cash, accounts receivable, other assets, and accounts payable approximate fair value because of the short maturity of these instruments. The Company currently has no other financial assets or liabilities that are measured at fair value.
The Company’s non-financial assets, which consist of property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required and the Company is required to evaluate the non-financial asset for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the fair value.
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Capitalized software
Capitalized software consists primarily of payments made to independent software developers for the development of the SaaSMAX Marketplace. Software development costs are capitalized once technological feasibility of a product is established and it is determined that such costs should be recoverable against future revenues. For products where proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product development costs.
Commencing upon the SaaSMAX Marketplace’s release in October 2012, we began amortizing the capitalized software development costs to operating expenses based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) the straight-line method. The amortization period of the capitalized software costs is two years from the initial release of the product. The recoverability of capitalized software development costs is evaluated based on the expected performance of the specific products for which the costs relate.
Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established, as well as in the ongoing assessment of the recoverability of capitalized costs. If revised forecasted or actual product sales are less than and/or revised forecasted or actual costs are greater than the original forecasted amount utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimated in any given quarter, which could result in an impairment charge.
Depreciation
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated two year useful lives of the assets. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are expensed as incurred.
Product development costs
Product development costs are clearly identified and are expensed as incurred in accordance with ASC No. 730, "Research and Development". Product development costs incurred during the years ended December 31, 2012 and 2011 totaled $65,028 and $70,721, respectively.
Stock-based compensation
Stock based compensation expense is recorded for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
Net loss per common share
Net loss per common share is computed pursuant to ASC No. 260 “Earnings Per Share”. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no dilutive shares outstanding as of December 31, 2012.
Recently issued accounting pronouncements
In May 2011, the Financial Accounting Standards Board ("FASB") issued amended guidance on fair value measurement and related disclosures. The new guidance clarified the concepts applicable for fair value measurement of non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. This guidance is effective for reporting periods beginning after December 15, 2011. We adopted this guidance on January 1, 2012. The adoption of this guidance did not have any impact on our financial position, results of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
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NOTE 2 – PROPERTY, PLANT AND EQUIPMENT
|
December 31,
| ||||||
| 2012 | 2011 | |||||
| Purchased software | $ | 3,900 | 3,900 | |||
| SaaSMAX Marketplace | 37,120 | 16,698 | ||||
| Less: accumulated depreciation | (6,898) | (403) | ||||
| Total capitalize software, net | $ | 34,122 | 20,195 | |||
During the year ended December 31, 2012, management assessed the value of the costs capitalized for our SaaSMAX Marketplace and determined that as a result of additional improvements and technological updates deemed necessary to the SaaSMAX Marketplace that the asset had been impaired. Accordingly, we wrote-down the software development costs to the estimated net realizable fair value of $37,120 and recognized an impairment charge of $12,014.
Depreciation expense for the years ended December 31, 2012 and 2011 was $6,495 and $403, respectively.
NOTE 3 –CONVERTIBLE PROMISSORY NOTES
On July 1, August 15, September 26, October 26, and December 6, 2012 the Company entered into five separate Convertible Promissory notes in the principal amounts of $25,000, $25,000, $25,000, $25,000 and $25,000, respectively (the “Convertible Note(s)”) with a shareholder of the Company (the “Holder”). The Convertible Notes bear interest at 8% per annum and are due in full one year following the date entered into. The Holder of the Convertible Notes may at any time prior to the Maturity Date, convert the principal amount of the Convertible Notes into shares of common stock of the Company on the basis of one share of such stock for each $0.35 (the “Conversion Price”) in unpaid principal and accrued interest. The Company may at any time compel the conversion of the Convertible Note or any such portion into shares of common stock at the Conversion Price.
The intrinsic value of the embedded beneficial conversion feature of the Convertible Notes was determined to be $125,000. The intrinsic value of $125,000 was charged to the note discount and credited to Additional Paid in Capital. The note discount is amortized over the term of the Convertible Notes and charged to interest expense. As of December 31, 2012, the discount on the Convertible Note totaled $90,273, and for the year ended December 31, 2012, interest expense related to such amortization totaled $34,727.
NOTE 4 – STOCKHOLDERS’ EQUITY
Common Stock
Pursuant to a Private Placement Memorandum (the “Private Offering”) dated April 5, 2012, the Company offered for sale 818,816 units (“Units”) at a purchase price of $1.84 per Unit. Each Unit consists of: i) two shares of common stock, and ii) one redeemable warrant (the “Warrant[s]”) entitling the holder to purchase one share of common stock (the “Warrant Shares”), at an exercise price of $1.84, for a period of 24 months. The terms of the Warrants provide that the Company may redeem some or all of the Warrants at any time provided: (a) the Company files a registration statement with the SEC to register the Warrant Shares; (b) the registration statement is declared “effective’ by the SEC; and (c) the Company gives Notice of Redemption to the Warrant holders 30 days prior to the date of the Redemption Date, which the Company may do at any time after the average closing bid price for the shares of common stock on the principal market on which the shares of common stock may be traded, for any 20 consecutive trading days, has equaled or exceeded $2.76 per share. The Private Offering was terminated on May 10, 2012. The Company had sold 21,739 Units, consisting of 43,478 shares of common stock and 21,739 warrants, resulting in proceeds of $40,000.
On April 5, 2012, the Company entered into a securities purchase agreement with a single accredited investor for the sale of 71,428 shares of common stock at $0.35 per share, resulting in total proceeds of $25,000. The Company concurrently entered into a registration rights agreement with the investor providing piggy-back registration rights to the investor should the Company propose to register any of its securities under the Securities Act of 1933 in connection with the public offering of such securities solely for cash (other than a registration on Form S-4, Form S-8, or any successor or similar forms).
During January 2012, the Company entered into a stock purchase agreement with a shareholder in which the Company received proceeds totaling $75,000 for the issuance of 214,286 shares of common stock ($0.35 per share). The stock purchase agreement includes an anti-dilution clause whereby should the Company sell additional shares of common stock and receive a minimum of $500,000 (a “First Funding”) then said shareholder shall have the right to purchase an amount of shares of common stock of the Company, up to a maximum amount of common shares of the Company that would maintain the shareholder’s 4.97% ownership at a price of $0.35 per share, or the purchase price paid by the purchasers of the First Funding. After a First Funding, should the Company sell additional shares of its common stock and receive a minimum of $500,000, (a “Subsequent Funding”) said shareholder shall have the right to purchase an amount of common shares of the Company up to the shareholder’s then percentage ownership at the price equal to the price that the Company sold its common shares in the Subsequent Funding.
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On October 17, 2011, the Company entered into an agreement with a consultant to provide certain technical and business consulting services to assist in launching the SaaSMAX Marketplace, grow the membership base and generate revenue. As compensation for the services, the consultant was granted 100,012 shares of common stock valued at $0.20 per share, or $20,002.
Subsequent to incorporation, SaaSMAX offered (the "Offering") to sell 1,000,500 shares of common stock (the “Shares”) at $0.20 per share in a private placement pursuant to Rule 506 of Regulation D of the Securities Act of 1933 (the "Act"). The Shares were being offered on a “Best Efforts” basis to "Accredited Investors" as that term is defined under Rule 144 of Act. The Offering resulted in the sale of 1,000,500 shares of common stock and proceeds of $200,100. On May 23, 2011 the Company filed a Form S-1 registration statement (the “Registration Statement”) with the Securities and Exchange Commission (“SEC”) to register the 1,000,500 shares of our common stock for resale by the Selling Shareholders which were sold in the Offering. On October 14, 2011, we received notification from the SEC that the Registration Statement was Effective.
In conjunction with the Company’s incorporation, the two founders of SaaSMAX were issued a combined total of 3,000,000 shares of common stock. The purchase of the shares is evidenced by a Founders’ Receivable in the amount of $3,000 which is included in Stockholders’ Equity in the accompanying Balance Sheet.
NOTE 5 –STOCK INCENTIVE PLAN
On July 5, 2011 (the “Effective Date”), the Company adopted the 2011 Stock Incentive Plan, (the “Plan”), pursuant to which we are authorized to grant shares of common stock, stock options intended to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified options and stock appreciation rights to our employees, officers, directors and consultants. The Company is authorized to grant options to purchase up to 1,000,000 shares of common stock under the Plan which as of December 31, 2012, options to purchase 558,195 shares of common stock remained available for future grant. The Company intends that any grant, award or other acquisition of the Company’s securities pursuant to the Plan to any officer and/or director of the Company shall be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended. No participant may be granted ISOs under the Plan that would result in ISOs to purchase shares of Common Stock with an aggregate fair market value (measured on the Date of Grant) of more than $100,000 first becoming exercisable by such Participant in any one calendar year. The Plan shall be administered by a committee of the Board of Directors (the “Committee”). The Committee shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its participants.
As of December 31, 2012, we have granted options to purchase a total of 441,805 shares of common stock under the Plan. The options were granted to advisors and consultants for services rendered at a price equal to the fair market value of the common stock at the date of grant. As permitted by the Plan, the Committee determined fair market value of the common stock at the date of grant based on a number of factors including the $0.92 per common share price that securities were sold to third party investors during 2012 and the $0.20 per common share price that securities were sold to third party investors previously during 2011.
The Company recognizes option expense ratably over the vesting periods. For the years ended December 31, 2012 and 2011, the Company recorded compensation expense related to options granted under the Plan of approximately $170,000 and $6,000, respectively.
The fair value of option grants was estimated using the Black-Scholes option pricing model with the following assumptions:
Assumptions:
| 2012 | 2011 | ||
| Expected dividend yield | 0 | 0 | |
| Risk-free interest rate | 0.36%-0.40% | 0.69% | |
| Expected volatility | 100.00% | 100.00% | |
| Expected life (in years) | 3 | 3 |
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
Stock option activity under the Plan for the period from January 19, 2011 through December 31, 2012 is summarized as follows:
| Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Life (in years) |
Grant Date Fair Value | |||||
| Outstanding at January 19, 2011 | - | $ - | - | |||||
| Options granted | 70,000 | $0.20 | 1.60 | $ | 8,645 | |||
| Options exercised | - | $ - | - | - | ||||
| Options cancelled/forfeited/ expired | - | $ - | - | - | ||||
| Outstanding at December 31, 2011 | 70,000 | $0.20 | 1.60 | 8,645 | ||||
| Options granted | 371,805 | $0.60 | 2.43 | 175,756 | ||||
| Options exercised | - | $ - | - | - | ||||
| Options cancelled/forfeited/ expired | - | $ - | - | - | ||||
| Outstanding at December 31, 2012 | 441,805 | $0.54 | 2.30 | $ | 184,401 | |||
| Exercisable at December 31, 2012 | 426,805 | $0.53 | 2.29 | $ | 178,762 | |||
As of December 31, 2012, there was $8,523 of unrecognized compensation cost related to unvested stock options. The Company intends to issue new shares to satisfy share option exercises.
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NOTE 6 – INCOME TAXES
The provision for refundable Federal income tax consists of the following as of December 31,:
| 2012 | 2011 | ||||
| Refundable Federal income tax calculated at statutory rate of 35% | $ | 167,000 |
$ |
64,000 | |
| Less: Stock based compensation expense | (60,000) | (2,100) | |||
| Change in valuation allowance | (107,000) | (61,900) | |||
| Net refundable amount | $ | - | $ | - | |
The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax amount is as follows at December 31,:
| 2012 | 2011 | ||||
| Deferred tax asset attributable to: | |||||
| Net operating losses carried forward | $ | 169,900 | $ | 61,900 | |
| Less: Valuation allowance | (169,900) | (61,900) | |||
| Net deferred tax asset | $ | - | $ | - | |
The Company established a full valuation allowance in accordance with the provision of ASC No. 740, Income Taxes. The Company continually reviews the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized.
At December 31, 2012, the Company had an unused net operating loss carryover approximating $484,000 that is available to offset future taxable income, which expires beginning in 2031.
No provision was made for federal income tax since the Company has net operating losses.