Attached files
| file | filename |
|---|---|
| EX-32.1 - Rowl, Inc. | ex32-1.htm |
| EX-31.1 - Rowl, Inc. | ex31-1.htm |
| EXCEL - IDEA: XBRL DOCUMENT - Rowl, Inc. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-54119
OverNear, Inc.
(Exact name of registrant as specified in it charter)
|
Nevada
|
27-3101494
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
1460 4th Street, Suite 304
Santa Monica, CA 90401
(Address of principal executive offices) (Zip Code)
(310) 744-6060
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). o Yes x No
Indicate by check mark whether the registrant is a large accelerated filer, and 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.
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
|
Non-accelerated filer ¨
|
Smaller reporting company x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
60,245,085 shares of the issuer’s common stock are issued and outstanding as of August 17, 2013.
EXPLANATORY NOTE
The purpose of this Amendment No. 1 to the Quarterly Report on Form 10-Q for the period ended June 30, 2013 (the “Amendment No. 1”), as filed with the Securities and Exchange Commission on August 19, 2013 (the “Original Report”), is to update the financial statements filed in the Original Report to clarify that OverNear, Inc. (the “Registrant”) is a development stage company; to include statement of operations, statement of stockholders’ equity and cash flow information for the Registrant for the period from inception (July 22, 2010) through June 30, 2013; to include updated footnotes with disclosures, where applicable, for the period from inception (July 22, 2010) through June 30, 2013 (the “Updated Financial Information”); and to include updated XBRL exhibits reflecting such Updated Financial Information. The financial statements included herein also include changes to conform the disclosures to the financial statements for the three and six months ended June 30, 2013 and 2012, included in our Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, which is being filed with the Securities and Exchange Commission shortly after this filing.
This Amendment No. 1 does not affect any other portion of the Original Report. Additionally, this Amendment No. 1 does not reflect any event occurring after August 19, 2013, the original filing date of the Original Report. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Report and with other filings made by the Registrant with the Securities and Exchange Commission subsequent to the filing of the Original Report.
FORM 10-Q/A
OverNear, Inc.
INDEX
|
Page
|
||||
|
PART I - FINANCIAL INFORMATION
|
||||
|
Item 1.
|
Financial Statements
|
|||
|
Condensed Balance Sheets at June 30, 2013 (unaudited) and December 31, 2012
|
1 | |||
|
Unaudited Condensed Statements of Operations for the Three Months and Six Months Ended June 30, 2013 and June 30, 2012 and for the period from inception (July 22, 2010) through June 30, 2013
|
2 | |||
|
Unaudited Condensed Statement of Changes in Stockholders’ Equity for the period from inception (July 22, 2010) through June 30, 2013
|
3 | |||
|
Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2013 and June 30, 2012 and for the period from inception (July 22, 2010) through June 30, 2013
|
4 | |||
|
Notes to Unaudited Interim Condensed Financial Statements
|
5 | |||
|
PART II - OTHER INFORMATION
|
||||
|
Item 6.
|
Exhibits
|
14 | ||
|
Signatures
|
15 | |||
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
CONDENSED BALANCE SHEETS
|
|
June 30,
|
December 31,
|
|||||||
|
2013
|
2012
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current Assets:
|
||||||||
|
Cash
|
$
|
147,851
|
$
|
150,159
|
||||
|
Prepaid expenses
|
105,482
|
14,387
|
||||||
|
Total Current Assets
|
253,333
|
164,546
|
||||||
|
Furniture and equipment, net
|
27,005
|
20,238
|
||||||
|
Software development in progress
|
710,200
|
499,089
|
||||||
|
Other assets
|
101,972
|
53,510
|
||||||
|
TOTAL ASSETS
|
$
|
1,092,510
|
$
|
737,383
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable
|
$
|
186,803
|
$
|
342,154
|
||||
|
Accrued expenses
|
100,027
|
79,672
|
||||||
|
Current portion of legal settlement payable
|
75,000
|
75,000
|
||||||
|
Total Current Liabilities
|
361,830
|
496,826
|
||||||
|
Legal settlement payable, net of current portion
|
31,250
|
75,000
|
||||||
|
Total Liabilities
|
393,080
|
571,826
|
||||||
|
Stockholders' Equity
|
||||||||
|
Common stock, $0.001 par value; 150,000,000 shares authorized; 59,504,100 and 53,733,208 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
|
59,504
|
53,733
|
||||||
|
Preferred stock, $0.001 par value; 50,000,000 shares authorized, 3,210,000 Series A convertible preferred shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
|
3,210
|
3,210
|
||||||
|
Paid-in capital
|
5,678,963
|
4,166,548
|
||||||
|
Stock subscriptions receivable
|
(100,000
|
)
|
(152,500
|
)
|
||||
|
Accumulated deficit in the development stage
|
(4,942,247
|
)
|
(3,905,434
|
)
|
||||
|
Total Stockholders' Equity
|
699,430
|
165,557
|
||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
1,092,510
|
$
|
737,383
|
||||
The accompanying notes are an integral part of these condensed financial statements
1
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
Three months ended June 30,
|
Six months ended June 30,
|
For the Period from Inception (July 22, 2010) to | ||||||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
June 30, 2013 | ||||||||||||||||
|
Sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$ |
89
|
||||||||||
|
Cost of Sales
|
-
|
-
|
-
|
-
|
17
|
|||||||||||||||
|
Gross Profit
|
-
|
-
|
-
|
72
|
||||||||||||||||
|
Selling, General and Administrative Expenses
|
598,250
|
400,225
|
989,674
|
762,639
|
4,989,566
|
|||||||||||||||
|
Impairment of production costs, prepaid royalties and inventory
|
-
|
-
|
-
|
-
|
110,992
|
|||||||||||||||
|
Operating Loss
|
(598,250
|
)
|
(400,225
|
)
|
(989,674
|
)
|
(762,639
|
)
|
(5,100,486
|
) | ||||||||||
|
Other Income (Expense):
|
||||||||||||||||||||
|
Gain (Loss) on Settlement and write-off of Accounts Payable
|
22,541
|
-
|
(45,903
|
)
|
-
|
(45,903
|
) | |||||||||||||
|
Interest Expense
|
(174
|
)
|
(353
|
)
|
(436
|
)
|
(1,154
|
)
|
(15,200
|
) | ||||||||||
|
Gain on forgiveness of debt
|
-
|
-
|
-
|
-
|
248,742
|
|||||||||||||||
|
Other
|
-
|
-
|
-
|
-
|
(27,000
|
) | ||||||||||||||
|
Other Income (Expense), Net
|
22,367
|
(353
|
)
|
(46,339
|
)
|
(1,154
|
)
|
160,639
|
||||||||||||
|
Loss before Income Taxes
|
(575,883
|
)
|
(400,578
|
)
|
(1,036,013
|
)
|
(763,793
|
)
|
(4,939,847
|
) | ||||||||||
|
Provision for Income Taxes
|
-
|
-
|
(800
|
)
|
(800
|
)
|
(2,400
|
) | ||||||||||||
|
Net Loss
|
$
|
(575,883
|
)
|
$
|
(400,578
|
)
|
$
|
(1,036,813
|
)
|
$
|
(764,593
|
)
|
$ |
(4,942,247
|
) | |||||
|
Loss Per Share-Basic and Diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
$ |
(0.12
|
) | |||||
|
Weighted average shares used in computing earnings per share:
|
57,695,859
|
51,867,098
|
55,927,484
|
50,248,371
|
41,842,220
|
|||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
2
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) For the Period from Inception (July 22, 2010) to June 30, 2013
|
|
Preferred Stock
|
Common Stock
|
Paid-in
|
Stock
Subscriptions
|
Accumulated Deficit in the development
|
Total
Stockholders’ |
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Receivable
|
stage |
Equity
|
|||||||||||||||||||||||||
|
Excess of liabilities assumed over assets transferred from uKarma
|
- | - | - | - |
(169,194
|
) | - | - |
(169,194
|
) | ||||||||||||||||||||||
|
Issuance of common stock to uKarma
|
- | - |
10,558,896
|
10,559
|
- | - | - |
10,559
|
||||||||||||||||||||||||
|
Additional capital contributed
|
- | - | - | - |
27,000
|
- | - |
27,000
|
||||||||||||||||||||||||
|
Issuance of common stock in lieu of officer compensation
|
- | - |
4,000,000
|
4,000
|
96,000
|
- | - |
100,000
|
||||||||||||||||||||||||
|
Private placement of Series A convertible preferred stock
|
3,210,000
|
3,210
|
- | - |
654,625
|
- | - |
657,835
|
||||||||||||||||||||||||
|
Fair value of warrants issued in connection with Series A convertible preferred stock
|
- | - | - | - |
135,141
|
- | - |
135,141
|
||||||||||||||||||||||||
|
Fair value of warrant issued to placement agent in connection with Series A convertible preferred stock
|
- | - | - | - |
9,524
|
- | - |
9,524
|
||||||||||||||||||||||||
|
Offering cost – Series A convertible preferred stock
|
- | - | - | - |
(82,100
|
) | - | - |
(82,100
|
) | ||||||||||||||||||||||
|
Subscription receivable for issuance of Series A convertible preferred stock
|
- | - | - | - | - |
(152,500
|
) | - |
(152,500
|
) | ||||||||||||||||||||||
|
Private placement of common stock
|
- | - |
15,688,000
|
15,688
|
1,639,889
|
- | - |
1,655,577
|
||||||||||||||||||||||||
|
Fair value of warrants issued in connection with private placement
|
- | - | - | - |
337,423
|
- | - |
337,423
|
||||||||||||||||||||||||
|
Issuance of common stock for services
|
- | - |
14,623,993
|
14,624
|
676,030
|
- | - |
690,654
|
||||||||||||||||||||||||
|
Issuance of common stock for settlement of accounts payable and retainer
|
- | - |
1,445,332
|
1,445
|
55,957
|
- | - |
57,402
|
||||||||||||||||||||||||
|
Issuance of common stock in lieu of officers deferred compensation
|
- | - |
7,416,987
|
7,417
|
178,008
|
- | - |
185,425
|
||||||||||||||||||||||||
|
Fair value of warrants issued for consulting services
|
- | - | - | - |
5,825
|
- | - |
5,825
|
||||||||||||||||||||||||
|
Fair value of warrants issued for software development
|
- | - | - | - |
27,195
|
- | - |
27,195
|
||||||||||||||||||||||||
|
Stock based compensation
|
- | - | - | - |
575,225
|
- | - |
575,225
|
||||||||||||||||||||||||
|
Net loss for the period from inception (July 22, 2010) to December 31, 2012
|
- | - | - | - | - | - |
(3,905,434
|
) |
(3,905,434
|
) | ||||||||||||||||||||||
|
Balance at December 31, 2012
|
3,210,000
|
3,210
|
53,733,208
|
53,733
|
4,166,548
|
(152,500
|
) |
(3,905,434
|
) |
|
165,557
|
|||||||||||||||||||||
|
Private placement of common stock
|
-
|
-
|
3,660,000
|
3,660
|
757,018
|
-
|
-
|
760,678
|
||||||||||||||||||||||||
|
Common stock subscriptions receivable
|
-
|
-
|
-
|
-
|
-
|
(100,000
|
)
|
-
|
(100,000
|
)
|
||||||||||||||||||||||
|
Fair value of warrants issued in connection with private placement of common stock
|
-
|
-
|
-
|
-
|
154,322
|
-
|
-
|
154,322
|
||||||||||||||||||||||||
|
Proceeds from subscriptions receivable Series A convertible preferred stock
|
-
|
-
|
-
|
-
|
-
|
152,500
|
-
|
152,500
|
||||||||||||||||||||||||
|
Issuance of common stock for consulting services
|
-
|
-
|
930,109
|
930
|
196,017
|
-
|
-
|
196,947
|
||||||||||||||||||||||||
|
Fair value of warrants issued in connection with consulting services
|
-
|
-
|
-
|
-
|
8,840
|
-
|
-
|
8,840
|
||||||||||||||||||||||||
|
Fair value of warrants issued in connection with software development
|
-
|
-
|
-
|
-
|
3,138
|
-
|
-
|
3,138
|
||||||||||||||||||||||||
|
Issuance of common stock in connection with software development
|
-
|
-
|
282,583
|
283
|
59,192
|
-
|
-
|
59,475
|
||||||||||||||||||||||||
|
Issuance of common stock in payment of settlement of accounts payable and retainer fee
|
-
|
-
|
898,200
|
898
|
185,838
|
-
|
-
|
186,736
|
||||||||||||||||||||||||
|
Stock based compensation
|
-
|
-
|
-
|
-
|
148,050
|
-
|
-
|
148,050
|
||||||||||||||||||||||||
|
Net Loss for the six months ended June 30, 2013
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,036,813
|
)
|
(1,036,813
|
)
|
||||||||||||||||||||||
|
Balance at June 30, 2013
|
3,210,000
|
$
|
3,210
|
59,504,100
|
$
|
59,504
|
$
|
5,678,963
|
$
|
(100,000
|
)
|
$
|
(4,942,247
|
)
|
$
|
699,430
|
||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements
3
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
For the six
months ended,
|
For the Period from Inception (July 22, 2010) | |||||||||||
|
June 30
|
through | |||||||||||
|
2013
|
2012
|
June 30, 2013 | ||||||||||
|
Cash Flow from Operating Activities:
|
||||||||||||
|
Net loss
|
$
|
(1,036,813
|
)
|
$
|
(764,593
|
) | $ |
(4,942,247
|
) | |||
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Depreciation
|
3,998
|
2,570
|
16,239
|
|||||||||
|
Amortization of production costs
|
-
|
-
|
172,268
|
|||||||||
|
Loss on settlement of accounts payable
|
45,903
|
-
|
45,903
|
|||||||||
|
Issuance of stock warrants for consulting services
|
8,840
|
1,178
|
14,665
|
|||||||||
|
Issuance of common stock for consulting services
|
133,977
|
-
|
647,756
|
|||||||||
|
Stock based compensation
|
148,050
|
105,000
|
723,275
|
|||||||||
|
Impairment of production costs, prepaid royalties and inventory
|
-
|
-
|
110,992
|
|||||||||
|
Issuance of stock in lieu of officer compensation
|
-
|
-
|
100,000
|
|||||||||
|
Gain on forgiveness of debt
|
-
|
-
|
(248,742
|
) | ||||||||
|
(Increase) Decrease in operating assets:
|
||||||||||||
|
Employee advances
|
-
|
(26,000
|
) |
-
|
||||||||
|
Prepaid expenses
|
(28,125)
|
71,041
|
31,690
|
|||||||||
|
Other assets
|
(26,316)
|
(2,107
|
) |
(30,073
|
) | |||||||
|
Increase (Decrease) in operating liabilities:
|
||||||||||||
|
Legal settlement payable
|
(43,750
|
)
|
(37,500
|
) |
106,250
|
|||||||
|
Accrued expenses
|
(14,518
|
)
|
36,705
|
175,850
|
||||||||
|
Accounts payable
|
20,355
|
71,676
|
387,160
|
|||||||||
|
Net Cash Used in Operating Activities
|
(788,399
|
)
|
(542,030
|
) |
(2,689,014
|
) | ||||||
|
Cash Flow from Investing Activities:
|
||||||||||||
|
Patent costs and trademark
|
(22,145
|
)
|
-
|
(67,702
|
) | |||||||
|
Purchase of equipment
|
(10,766)
|
(2,526
|
) |
(28,115
|
) | |||||||
|
Software development in progress
|
(148,498
|
)
|
(152,069
|
) |
(620,392
|
) | ||||||
|
Cash acquired from uKarma
|
-
|
-
|
6,476
|
|||||||||
|
Net Cash Used in Investing Activities
|
(181,409
|
)
|
(154,595
|
) |
(709,733
|
) | ||||||
|
Cash Flow from Financing Activities:
|
||||||||||||
|
Repayment of notes payable, unrelated parties
|
-
|
-
|
(8,802
|
) | ||||||||
|
Additional capital contributed
|
-
|
-
|
27,000
|
|||||||||
|
Proceeds from private placement of common stock
|
815,000
|
982,000
|
2,808,000
|
|||||||||
|
Proceeds from Series A convertible preferred stock, net of offering cost
|
152,500
|
-
|
720,400
|
|||||||||
|
Net Cash Provided by Financing Activities:
|
967,500
|
982,000
|
3,546,598
|
|||||||||
|
Net (Decrease) Increase in Cash
|
(2,308
|
)
|
285,375
|
147,851
|
||||||||
|
Cash Balance at Beginning of Period
|
150,159
|
181,995
|
-
|
|||||||||
|
Cash Balance at End of Period
|
$
|
147,851
|
$
|
467,370
|
$ |
147,851
|
||||||
|
Supplemental Disclosures:
|
||||||||||||
|
Interest Paid
|
$
|
436
|
$
|
1,154
|
16,081
|
|||||||
|
Taxes Paid
|
$
|
296
|
$
|
1,600
|
2,696
|
|||||||
The accompanying notes are an integral part of these condensed financial statements
4
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 1 – BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES
OverNear, Inc. (“the Company”) was incorporated on July 22, 2010 in the State of Nevada as Awesome Living, Inc. On June 20, 2011, the name of the corporation was changed to OverNear, Inc. The Company’s headquarters are located in Santa Monica, California. The Company is in the process of developing a location-based social networking and mobile advertising platform, a beta version of which was released for use by the general public in January 2013. The condensed consolidated financial statements of OverNear, Inc. (which may be referred to as "OverNear," the "Company," "we," "us," or "our") are prepared in accordance with accounting principles generally accepted in the United States of America.
On August 9, 2010, the Company entered into a Contribution Agreement (“the Agreement”) with uKarma Corporation (“uKarma”) to acquire all of the assets and assume liabilities of uKarma. Pursuant to the terms of the Agreement, the Company issued 10,558,896 shares of its common stock at par value to uKarma as consideration for the acquired assets and assumed certain liabilities. Upon transfer of the assets and liabilities, the Company continued uKarma’s operations.
The Company’s predecessor business developed and marketed a proprietary branded fitness DVD series that targets individuals who seek to enrich their physical, spiritual, and mental wellness. Through infomercials and other marketing initiatives, the predecessor launched its products. The Company plans to monetize the fitness DVD series assets by either selling or licensing the intellectual property and associated products. However, the Company is not certain about achieving success in this line of business.
The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, “Development Stage Entities”. The Company is devoting substantially all of its present efforts to design and develop a location-based social networking and mobile advertising platform and its planned principal operations have not yet commenced. The Company has not generated any significant revenues from operations and has no assurance of any future revenues. All losses accumulated since July 22, 2010, have been considered as part of the Company’s development stage activities.
The condensed financial statements of the Company included herein are unaudited for the periods ended June 30, 2013 and June 30, 2012, have been prepared from the books and records of the Company pursuant to the rules and regulations of the Securities and Exchange Commission, and in the case of the condensed balance sheet as of December 31, 2012, have been derived from the audited financial statements of the Company. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly present the results for the periods presented. Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. These condensed financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2012, included above. The Company has assessed subsequent events through the date of filing of these condensed financial statements with the Securities and Exchange Commission and believes that the disclosures made herein are adequate to make the information presented herein not misleading.
A summary of the Company's critical accounting policies are disclosed below. The Company's critical accounting policies are further described under the caption “Critical Accounting Policies” in Management's Discussion and Analysis of Financial Condition and Results of Operations and in more detail in the Company's 2012 Annual Report on Form 10-K.
5
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 1 – BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES (continued)
Software Development Costs - Research and development costs are charged to expense as incurred. However, the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed are capitalized when technological feasibility has been established. These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in hardware and software technologies. Amortization of capitalized software development costs begins when the product is available for general release to customers and revenues are generated. Amortization is computed as the ratio of current gross revenues for a product to the total of current and anticipated future gross revenues for the product. As of June 30, 2013 and December 31, 2012, the Company had capitalized software development costs of $710,200 and $499,089, respectively, for the development of a location-based social networking and mobile advertising platform to connect people to people and merchants to shoppers.
Net Loss Per Share - The Company applies FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive.
Stock Based Compensation - The Company applies FASB ASC 718, “Stock Compensation,” when recording stock based compensation. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. Generally, all options granted expire ten years from the date of grant. Compensation expense in the amount of $74,025 and $148,050 was incurred for the three and six months ended June 30, 2013 and $52,500 and $105,000 for the corresponding periods in 2012, and $723,275 for the period from inception (July 22, 2010) to June 30, 2013.
The Company accounts for stock issued to non-employees in accordance with the provisions of FASB ASC 505-50 “Equity Based Payments to Non-Employees”. FASB ASC 505-50 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).
New Accounting Pronouncements - Management does not believe that any recently issued, but not yet effective, accounting standards, if adopted, will have a material effect on the financial statements.
NOTE 2 – GOING CONCERN
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. In the near term, the Company expects operating costs to continue to exceed funds generated from operations. As a result, the Company expects to continue to incur operating losses, and the operations in the near future are expected to continue to use working capital.
6
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 2 – GOING CONCERN (continued)
Management of the Company is actively seeking financing to continue the development of its location-based mobile platform and market its products and services. The ability of the Company to continue as a going concern is dependent on its ability to meet its financing arrangements and the success of its future operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The report from the Company’s independent registered public accounting firm relating to the year ended December 31, 2012 states that there is substantial doubt about the Company’s ability to continue as a going concern.
NOTE 3 – ACCRUED EXPENSES
Accrued expenses consisted of the following:
|
June 30,
|
December 31,
|
|||||||
|
2013
|
2012
|
|||||||
|
Accrued Salaries and Related Expenses
|
$
|
50,175
|
$
|
47,519
|
||||
|
Accrued Income Tax
|
2,104
|
1,600
|
||||||
|
Accrued Professional Fees
|
47,748
|
30,553
|
||||||
|
Total Accrued Liabilities
|
$
|
100,027
|
$
|
79,672
|
||||
NOTE 4 – LEGAL SETTLEMENT PAYABLE
In November 2011, the Company settled a legal dispute for the total amount of $275,000, of which $50,000 was paid on December 15, 2011 with the remainder payable in monthly installments of $6,250 through December 7, 2014.
|
Total settlement payable, as of June 30, 2013
|
$
|
106,250
|
||
|
Current portion of settlement payable
|
75,000
|
|||
|
Settlement payable, net of current portion
|
$
|
31,250
|
The following schedule represents maturities of the settlement payable:
|
July 1, 2013 through June 30, 2014
|
75,000
|
|||
|
July 1, 2014 through December 7, 2014
|
31,250
|
|||
|
Total
|
$
|
106,250
|
7
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 5 – STOCKHOLDERS’ EQUITY
Common Stock
During the six months ended June 30, 2013, the Company executed the following common stock transactions:
|
●
|
the issuance of an aggregate 3,660,000 common shares to accredited investors in a private placement. Total consideration from this issuance of common stock amounted to $915,000, of which $100,000 was receivable at June 30, 2013 and was presented as an offset to equity in the accompanying balance sheet. The common stock issued included warrants with a fair value of $154,322.
|
|
●
|
the issuance of an aggregate 930,109 shares of the Company’s common stock with a value of $196,947 for consulting services,
|
|
●
|
the issuance of an aggregate 898,200 shares of the Company’s common stock with a value of $186,736 in payment of settlement of accounts payable and retainer for legal services,
|
|
●
|
the issuance of 282,583 shares of common stock valued at $59,475 for software development services.
|
Preferred Stock
The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock may be issued in one or more series and the first series consisted of 18,000,000 shares and is designated as series A convertible preferred stock (“Series A Preferred Stock”). The holders of Series A Preferred Stock are entitled to receive, if, when and as declared by the Board, dividends at an annual rate of 8% of the original purchase price of Series A Preferred Stock. No dividends were declared for the six months ended June 30, 2013. In the event of any liquidation, dissolution or winding up of the Company, voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive the amount of $0.50 per share. Each share of Series A Preferred Stock is convertible at the option of the holder at any time after the date of issuance into equal number of shares of common stock. Each share of Series A Preferred Stock issued and outstanding is entitled to the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock could be converted. No shares of preferred stock have been issued during the six months ended June 30, 2013.
Warrants
During the six months ended June 30, 2013, the Company issued warrants to purchase common stock to investors in private placements for the right to purchase 3,660,000 shares of the Company’s common stock at $0.50 per share. The warrants vested immediately and have a term of five years from the date the warrants were issued. The warrants were valued at $154,322, using the Black-Scholes option pricing model.
On March 11, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 350,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature and vests as follows: (a) 50,000 shares on July 31, 2013, (b) 50,000 shares on October 31, 2013, and (c) 25,000 shares at the end of every three months starting on January 31, 2014. The warrants were valued at $26,880 using the Black-Scholes option pricing model.
On April 1, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 800,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature and vests as follows: (a) 100,000 shares on July 31, 2013, (b) 100,000 shares on October 31, 2013, and (c) 60,000 shares at the end of every three months starting on January 31, 2014. The warrants were valued at $75,040 using the Black-Scholes option pricing model.
8
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 5 – STOCKHOLDERS’ EQUITY (continued)
On April 1, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 125,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature and vests 12,500 shares at the end of every three months with the first tranche vesting on January 31, 2014. The warrants were valued at $11,725 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model are as follows:
|
Risk-free interest rate
|
0.29% - 0.46
|
%
|
||
|
Expected dividend yield
|
0
|
%
|
||
|
Expected lives
|
2.5 years – 3.5 years
|
|||
|
Expected volatility
|
70
|
%
|
||
Warrants to purchase an aggregate of 24,365,000 shares of the Company’s common stock with exercise prices ranging from $0.01 to $0.75 were outstanding as of June 30, 2013. A summary of the Company’s warrant activity and related information for the six months ended June 30, 2013 is as follows:
|
Warrants
|
Weighted Average Exercise Price
|
|||||||
|
Outstanding at January 1, 2013
|
19,605,000
|
$
|
0.37
|
|||||
|
Granted
|
4,935,000
|
0.44
|
||||||
|
Exercised
|
-
|
-
|
||||||
|
Forfeited/Expired
|
(175,000
|
)
|
0.25
|
|||||
|
Outstanding at June 30, 2013
|
24,365,000
|
$
|
0.38
|
|||||
Stock Options
During 2010, the Board of Directors approved and adopted the 2010 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) to provide for the issuance of non-qualified and/or incentive stock options to employees, officers, directors and consultants and other service providers. The Plan was subsequently amended on various dates. Generally, all options granted expire five to ten years from the date of grant. It is the policy of the Company to issue new shares for stock options exercised, rather than issue treasury shares. Options generally vest over ten years. Effective July 1, 2012, the total number of shares of common stock reserved for issuance was reduced to 15,000,000 shares, subject to annual increases of up to an amount equal to 15% of the outstanding fully-diluted shares of common stock of the Company and any such increase cannot be made until the fully diluted shares of common stock outstanding exceeds 100,000,000 shares. The Company did not grant any stock options during the six months ended June 30, 2013. Options to purchase 17,100,000 shares of common stock at an average exercise price of $0.034 per share are outstanding at June 30, 2013. Of that amount, 9,600,000 are exercisable at an average price of $0.03 per share.
As of June 30, 2013, there was $628,075 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.1 years.
The estimated aggregate pretax intrinsic value (the difference between the Company’s estimated stock price on the last day of the period ended June 30, 2013 and the exercise price, multiplied by the number of in-the-money options) is approximately $1,730,000. This amount changes based on the fair market value of the Company’s common stock.
9
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 5 – STOCKHOLDERS’ EQUITY (continued)
Initial Public Offering
As of the date of this filing, the SEC is in the review process of a Registration Statement the Company filed On May 13, 2013. The Company provided for the registration of (i) up to 10,000,000 shares of common stock of the Company to be offered to public stockholders for up to $5,000,000 in gross proceeds (net $4,537,000 after expenses); (ii) the distribution of 10,558,896 shares (the "Distribution Shares") of common stock of the Company owned by Innolog Holdings Corporation (formerly named uKarma Corporation, or "Innolog"); and (iii) the resale (the "Resale") of an aggregate of 6,420,000 shares of the Company's common stock owned by twenty-two (22) selling shareholders identified therein. No payment will be made by any recipient of the Distribution Shares to either Innolog or the Company and the Company will not receive any proceeds from the Resale. The proceeds from the offering are expected to be used for engineering and research and development; business development and sales and marketing; and general and administrative expenses. The registration statement is subject to approval by the SEC.
NOTE 6 – LOSS PER SHARE
There were no dilutive securities for the three and six months ended June 30, 2013 and 2012 and for the period from inception (July 22, 2010) to June 30, 2013. A total of 41,465,000 warrants and stock options were excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 2013 and for the period from inception (July 22, 2010) to June 30, 2013, and 30,454,000 warrants and stock options were excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 2012, because they were anti-dilutive.
NOTE 7 – NON-CASH TRANSACTIONS
Non cash activities during the six months ended June 30, 2013 are as follows:
|
·
|
The Company issued 898,200 shares of its common stock valued at $186,736 in payment of settlement of accounts payable and retainer fee.
|
|
·
|
The Company issued warrants valued at $3,138 in connection with software development.
|
|
·
|
The Company issued 300,000 shares of its common stock valued at $62,970 for consulting services to be performed from June 2013 to June 2014.
|
|
·
|
The Company issued 282,583 shares of its common stock valued at $59,475 in connection with software development.
|
Non cash activities during six months ended June 30, 2012 are as follows:
|
·
|
The Company issued 502,485 shares of its common stock valued at $105,015 as prepayment for consulting services.
|
|
·
|
The Company issued 40,000 shares of its common stock valued at $4,000 in payment of settlement of accounts payable.
|
10
NOTE 7 – NON-CASH TRANSACTIONS (continued)
Non cash activities from inception (July 22, 2010) to June 30, 2013 exclusive of the above, are as follows:
On August 9, 2010, OverNear, Inc. acquired all of the assets and assumed the liabilities of uKarma Corporation, the predecessor entity. The acquired assets and liabilities, and purchase consideration paid were as follows:
Assets and liabilities acquired:
|
Cash
|
$ | 6,476 | ||
|
Prepayment and other assets
|
92,320 | |||
|
Inventory
|
18,108 | |||
|
Property and equipment, net
|
15,131 | |||
|
Production costs, net
|
207,854 | |||
|
Accounts payable and accrued expenses
|
(489,963 | ) | ||
|
Notes payable
|
(8,561 | ) | ||
| $ | (158,635 | ) |
Purchase consideration
|
Common stock issued by OverNear, Inc.
|
$ | 10,559 | ||
|
Excess of liabilities over assets acquired charged to paid-in capital
|
(169,194 | ) | ||
| $ | (158,635 | ) |
|
·
|
The Company issued 5,500,000 shares of its common stock to its CEO in lieu of accrued compensation in the amount of $137,500.
|
|
·
|
The Company issued 1,405,332 shares of its common stock valued at $53,402 in payment of settlement of accounts payable.
|
|
·
|
The Company issued 7,416,987 shares to its officers valued at $185,425 in payment of settlement of deferred compensation.
|
|
·
|
The Company issued 276,000 warrants valued at $24,923 in connection with software development.
|
|
·
|
The Company issued 1,050,000 shares of its common stock valued at $52,500 in payment of consulting services.
|
|
·
|
The Company issued warrants to purchase 125,000 shares of its common stock valued at $2,272 in connection with software development.
|
11
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Employment Agreement
On August 3, 2010, the Company entered into a 5-year (“Term”) agreement with Bill Glaser for his services as Chief Executive Officer. The agreement was amended on March 15, 2011 to change his title from Chief Executive Officer to President. Per the amendment to the agreement dated August 8, 2010, Mr. Glaser is compensated with an annual salary of $190,000. Mr. Glaser’s annual salary will increase to $250,000 in the event that either (i) OverNear raises an aggregate $5,000,000 in debt or equity financing after August 8, 2010 or (ii) OverNear recognizes $5,000,000 in cumulative gross revenues. The annual salary will increase to $360,000 in the event that either (i) OverNear raises an aggregate $10,000,000 in debt or equity financing after August 8, 2010 or (ii) OverNear recognizes $10,000,000 in cumulative gross revenues. Mr. Glaser will receive a bonus of 5% of OverNear’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). His agreement also provides for options to purchase 5,000,000 shares of common stock under the 2010 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) at an exercise price of $0.025 per share, of which 3,000,000 shares became exercisable on January 1, 2013 and the remainder of which will become exercisable on the following schedule: 500,000 shares at the beginning of each subsequent six (6) month period. The options expire 10 years after grant. In the event of a change of control of OverNear prior to the one (1) month anniversary of Mr. Glaser’s termination, Mr. Glaser will be due the greater of (i) the remainder of his annual salary during the Term or (ii) $250,000. All unvested stock options will become vested, and any unexercised stock options will be paid out as cash in the amount equal to the difference between the consideration paid to OverNear on a per share basis less the exercise price of the stock option, the value of which is multiplied to the number of options held by Mr. Glaser. In the event of Mr. Glaser’s termination without cause by OverNear, Mr. Glaser will be paid the lesser of (i) the remainder of his annual salary during the Term or (ii) one (1) year’s salary, and all stock options held by Mr. Glaser under the Plan will immediately vest in full and remain outstanding and exercisable until ten (10) years from the grant date.
On September 13, 2010, the Company entered into a 5-year (“Term”) agreement with Fred E. Tannous for his services as Chief Financial Officer. The agreement was amended on March 15, 2011 to add the additional title of Chief Executive Officer. Per the amendment to the agreement dated August 8, 2010, Mr. Tannous is compensated with an annual salary of $190,000. Mr. Tannous’ annual salary will increase to $250,000 in the event that either (i) OverNear raises an aggregate $5,000,000 in debt or equity financing after August 8, 2010 or (ii) OverNear recognizes $5,000,000 in cumulative gross revenues. The annual salary will increase to $360,000 in the event that either (i) OverNear raises an aggregate $10,000,000 in debt or equity financing after August 8, 2010 or (ii) OverNear recognizes $10,000,000 in cumulative gross revenues. As a signing bonus, Mr. Fred Tannous was issued shares of OverNear’s common stock valued at $50,000. Mr. Fred Tannous will also receive a bonus of 5% of OverNear’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). His agreement also provides for options to purchase 10,000,000 shares of common stock under the 2010 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) at an exercise price of $0.025 per share, of which 1,000,000 shares became exercisable on January 1, 2013 and the remainder of which will become exercisable on the following schedule: 1,000,000 shares at the beginning of each subsequent six (6) month period. The options expire 10 years after grant. In the event of a change of control of OverNear prior to the one (1) month anniversary of Mr. Tannous’ termination, Mr. Tannous will be due the greater of (i) the remainder of his annual salary during the Term or (ii) $250,000. All unvested stock options will become vested, and any unexercised stock options will be paid out as cash in the amount equal to the difference between the consideration paid to OverNear on a per share basis less the exercise price of the stock option, the value of which is multiplied to the number of options held by Mr. Tannous. In the event of Mr. Tannous’ termination without cause by OverNear, Mr. Tannous will be paid the lesser of (i) the remainder of his annual salary during the Term or (ii) one (1) year’s salary, and all stock options held by Mr. Tannous under the Plan will immediately vest in full and remain outstanding and exercisable until ten (10) years from the grant date.
12
OVERNEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
NOTE 8 – COMMITMENTS AND CONTINGENCIES (continued)
The following table summarizes the Company’s minimum obligations in the event of no early termination under employment agreements as of June 30, 2013:
|
Twelve Months Ending June 30
|
Amount
|
|||
|
2014
|
$
|
380,000
|
||
|
2015
|
380,000
|
|||
|
2016
|
300,000
|
|||
|
Total
|
$
|
1,060,000
|
||
Consulting Agreement
On April 15, 2013, the Company entered into a consulting agreement with an author whereby such individual shall cross-promote OverNear and its products and services, make introductions to certain key influential individuals, and make appearances at certain company events. In consideration of the aforementioned consulting services, the Company agreed to a one-time grant of 535,764 shares of the Company’s common stock, which shall be earned based on a vesting schedule, provided the consulting agreement remains in effect, at the rate of 267,884 shares upon execution and the balance of 267,880 shares at the rate of 33,485 shares at the end of every three-month period starting from the date of this agreement. In addition, the Company agreed to purchase a maximum of 6,000 copies of his soon-to-be released book by November 26, 2013, valued at approximately $102,000.
Lease Commitment
The Company leases its office facility in Santa Monica, California pursuant to a lease agreement expiring May 2015. Under the terms of the lease agreement the Company is also required to pay additional amount for operating expenses.
The following table summarizes the Company's future minimum commitment under lease agreement as of June 30, 2013:
|
Twelve Months Ending June 30,
|
Amount
|
|||
|
2014
|
$
|
53,000
|
||
|
2015
|
47,000
|
|||
|
Total
|
$
|
100,000
|
||
NOTE 9 – VENDOR SETTLEMENTS AND GAIN ON FORGIVENESS OF DEBT
The Company has entered into arrangements with various professional service providers for amounts different than the liability recorded in the accounts payable. The Company's officers also forgave their deferred compensation during 2011. As a result of these transactions, the Company recorded gain (loss) on settlement and forgiveness of debt of $22,541, $(45,903), and $202,839 for the three and six months ended June 30, 2013 and for the period from inception (July 22, 2010) to June 30, 2013, respectively. There was no such gain (loss) on settlement and forgiveness of debt during the three and six months ended June 30, 2012.
NOTE 10 – SUBSEQUENT EVENTS
Common Stock
Subsequent to June 30, 2013, the Company executed the following common stock transactions:
|
●
|
the issuance of an aggregate 432,500 shares to investors in a private placement. Total consideration from issuance of common stock amounted to $108,125. These issuances were exempt from registration requirements in reliance on Section 4(2) of the Securities Act.
|
|
●
|
On July 1, 2013, the Company entered into an agreement with an individual to provide consulting services. In connection with the agreement the Company granted 250,000 shares of its common stock. These issuances were exempt from registration requirements in reliance on Section 4(2) of the Securities Act.
|
13
PART II – OTHER INFORMATION
Item 6. Exhibits
|
Exhibit No.
|
Exhibit Description
|
|
|
2.1
|
Contribution Agreement between uKarma and Awesome Living (1)
|
|
|
3.1
|
Articles of Incorporation (2)
|
|
|
3.2
|
Bylaws of Awesome Living (1)
|
|
|
31.1
|
Section 302 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer *
|
|
|
32.1
|
Section 906 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer **
|
|
|
101.INS
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XBRL Instance Document (3)
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101.SCH
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XBRL Taxonomy Extension Schema (3)
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase (3)
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase (3)
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101.LAB
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XBRL Taxonomy Extension Label Linkbase (3)
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase (3)
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* Filed herewith.
** Furnished herewith.
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(1)
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Filed on September 15, 2010 as an exhibit to our Registration Statement on Form 10, and incorporated herein by reference.
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(2)
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Filed on August 5, 2011 as an exhibit to our Quarterly Report on Form 10-Q, and incorporated herein by reference.
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(3)
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XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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OVERNEAR, INC.
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(Registrant)
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Date: November 4, 2013
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By:
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/s/ Fred E. Tannous
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Fred E. Tannous
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Chief Executive Officer (Principal Executive
Officer) and Chief Financial Officer
(Principal Financial & Accounting Officer)
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15