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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q 

 

(Mark One)

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal quarter ended March 31, 2014

 

or

 

¨TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________.to _______________.

 

Commission file number 000-54074

 

 

 

ADAPTIVE MEDIAS, INC.

F/K/A MIMVI, INC.

(Exact name of Registrant as specified in its charter)

 

Nevada   26-0685980
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
incorporation or organization)    

 

16795 Von Karman Avenue, Suite 240

Irvine, CA 92606

(Address of principal executive offices - Zip Code)

 

Registrant's telephone number, including area code: 949-525-4634

 

Securities registered pursuant to Section 12(b) of the Act:   NONE

 

Securities registered pursuant to Section 12(g) of the Act:   Common Stock

 

Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ¨     No x

 

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 ¨     No x

 

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 x     No ¨

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x     No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the Registrant is a 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 ¨ Accelerated filer ¨  
       
  Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x  

 

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ¨     No x

 

 

As of May 12, 2014, there were 179,650,171shares of the Registrant's common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

1
 

 

ADAPTIVE MEDIAS, INC.

Table of Contents

 

    Page
PART I – FINANCIAL INFORMATION   3
Item 1. Financial Statements — Unaudited Financial Statements   3
Condensed Consolidated Balance Sheets   3
Condensed Consolidated Statements of Operations   4
Condensed Consolidated Statement of Stockholders' Equity (Deficit)   5
Condensed Consolidated Statements of Cash Flows   6
Notes to Condensed Consolidated Financial Statements   7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations   14
Item 3. Quantitative and Qualitative Disclosures About Market Risk   18
Item 4. Controls and Procedures   18
PART II – OTHER INFORMATION   19
        Item 1. Legal Proceedings   19
Item 1A. Risk Factors   19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   19
Item 3. Defaults Upon Senior Securities   19
Item 4. Mine Safety Disclosures   19
Item 5. Other Information   19
Item 6. Exhibits   20
SIGNATURES   20

 

2
 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

 

ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.

Condensed Consolidated Balance Sheets

(Unaudited) 

 

   March 31,   December 31, 
   2014   2013 
Assets          
Current assets          
Cash  $174,533   $22,188 
Accounts receivable, net of allowance of $47,874 and $15,393   665,293    609,993 
Prepaid expenses   189,978    126,321 
Total current assets   1,029,804    758,502 
Furniture and fixtures, net   2,606    2,044 
Other assets:          
Intangible assets, net   2,759,067    2,878,440 
Deposits   66,842    5,793 
Total other assets   2,825,909    2,884,233 
Total assets  $3,858,319   $3,644,779 
Liabilities and Stockholders' Equity          
Current liabilities          
Accounts payable and accrued expenses  $1,925,306   $1,711,179 
Convertible notes payable   -    300,000 
Other liabilities   4,347    - 
Total current liabilities   1,929,653    2,011,179 
Other liabilities   16,455    - 
Total non-current liabilities   16,455    - 
Total liabilities   1,946,108    2,011,179 
Stockholders' equity          
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none outstanding   -    - 
Common stock, $0.001 par value, 300,000,000 shares authorized; 166,713,919 and   166,712    148,889 
148,888,723 shares issued and outstanding at March 31, 2014 and December 31, 2013          
Additional paid in capital   24,277,104    22,799,076 
Common stock payable   8,625    8,625 
Accumulated deficit   (22,540,230)   (21,322,990)
Total stockholders' equity   1,912,211    1,633,600 
Total liabilities and stockholders' equity  $3,858,319   $3,644,779 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3
 

 

ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

   Three Months Ended 
   March 31, 
   2014   2013 
         
Revenue  $731,604   $15,000 
Cost of revenue   444,360    - 
           
Gross profit   287,244    15,000 
           
Operating expenses          
Stock compensation expense   319,304    1,207,674 
Legal and  professional fees   122,816    199,519 
Selling expenses   188,625    37,500 
Research and development   139,888    139,943 
General and administrative expenses   656,931    522,470 
Total operating expenses   1,427,564    2,107,106 
           
Loss from operations   (1,140,320)   (2,092,106)
           
Other expense (income)          
Loss on settlement of debt   79,014    33,767 
Interest expense   -    1,000 
Other income   (2,094)   - 
Total other expense (income)   76,920    34,767 
           
Net loss  $(1,217,240)  $(2,126,873)
           
Weighted average number of common shares outstanding – basic and diluted   158,546,654    67,978,229 
           
Net loss per share – basic and diluted  $(0.01)  $(0.03)

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

 ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.

Condensed Consolidated Statement of Stockholders' Equity (Deficit)

(Unaudited)

 

 

       Additional   Common       Total 
   Common Stock   Paid-in   Stock   Accumulated   Stockholders’ 
   Shares   Amount   Capital   Payable   Deficit   Equity (Deficit) 
                         
Balance, December 31, 2013  $148,888,723   $148,889   $22,799,076   $8,625   $(21,322,990)  $1,633,600 
Stock-based compensation / common shares issued for services  4,455,283    4,455    481,516    -    -    485,971 
Common shares issued for cash   11,799,998    11,798    873,202    -    -    885,000 
Common shares issued for conversion/debt   1,400,000    1,400    103,600    -    -    105,000 
Common shares issued for settlement of accounts payable   169,915    170    19,710    -    -    19,880 
Net Loss   -    -    -    -    (1,217,240)   (1,217,240)
Balance, March 31, 2014  $166,713,919   $166,712   $24,277,104   $8,625   $(22,540,230)  $1,912,211 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5
 

 

ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   For the three months 
   March 31, 
   2014   2013 
         
Cash flows from operating activities:          
Net loss  $(1,217,240)  $(2,126,873)
Adjustments to reconcile net loss          
to net cash used in operating activities:          
Depreciation   239    - 
Allowance for bad debts   32,481    - 
Amortization of intangibles   119,373    - 
Loss on extinguishment of debt   79,014    33,767 
Common stock issued for services   319,304    1,387,917 
(Increase) decrease in operating assets:          
Accounts receivable   (87,781)   - 
Prepaid expenses   103,010    - 
Deposits   (61,050)   8,000 
Increase (decrease) in operating liabilities:   -      
Accounts payable and accrued expenses   234,993    150,903 
Due to related parties   -    (4,923)
Other liabilities   20,802    - 
Net cash flows used in operating activities   (456,855)   (551,209)
Cash flows from investing activities:          
Proceeds from acquisition of Lone Wolf   -    6,057 
Purchase of property and equipment   (800)   - 
Net cash flows provided by (used in) investing activities   (800)   6,057 
           
Cash flows from financing activities:          
Proceeds from issuance of common stock   885,000    485,000 
Proceeds from notes payable   -    20,000 
Payments of  notes payable   -    (20,000)
Payments of convertible notes payable   (275,000)   - 
Net cash flows provided by financing activities   610,000    485,000 
           
Net increase in cash   152,345    (60,152)
           
Cash, beginning of period   22,188    63,286 
           
Cash, end of period  $174,533   $3,134 
           
Supplemental disclosure of cash flow information:          
Cash paid during the period for:          
Interest  $986   $1,000 
Income taxes  $-   $- 
Supplemental disclosure of non-cash investing and financing activities:          
Common stock payable for merger consideration  $-   $265,936 
Increase in prepaid common stock compensation  $166,667   $210,000 
Common stock issued to satisfy accounts payable  $19,880   $74,759 
Issuance of common stock for repayment of convertible notes payable  $105,000   $- 
           

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6
 

 

ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
(Unaudited)

 

Note 1 – Organization and Nature of Business

 

Adaptive Medias, Inc. (f/k/a Mimvi, Inc.) (the “Company”) was formed on August 7, 2007 under the laws of the State of Nevada. The Company, through its core content monetization platform and technology, provides app developers, publishers and video content developers one of the only end-to-end monetization platforms driven by programmatic algorithms. The Company provides these unique capabilities to monetize content efficiently across multiple marketing channels, including mobile, video and online display advertising.

 

Pursuant to votes of the majority of the Board of Directors and shareholders, effective on November 6, 2013, the Company changed its name to Adaptive Medias, Inc. in order to better and more fully demonstrate the Company’s emphasis on providing a supply-side platform for mobile, video and online display advertising. In connection with the name change, effective on November 6, 2013, the Company’s ticker symbol was changed to ADTM.

 

The Company is a programmatic audience and content monetization company for website owners, app developers and video publishers who want to more effectively optimize content through advertising. Adaptive Media provides a foundation for publishers and developers looking to engage brand advertisers through a multi-channel approach that delivers integrated, engaging and impactful ads across multiple devices. Adaptive Media meets the needs of its publishers with an emphasis on maintaining user experience, while delivering timely and relevant ads through its multi-channel ad delivery and content platform.

 

Going Concern

 

The Company’s unaudited consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. As of March 31, 2014, the Company had an accumulated deficit of $22,540,230. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of March 31, 2014, the Company has continued to raise funds through the sale of its equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure additional equity and/or debt financing until the Company can earn revenue and realize positive cash flow from its operations. There are no assurances that the Company will be successful in earning revenue and realizing positive cash flow from its operations. Without sufficient financing it would be unlikely that the Company will continue as a going concern.

 

Based on the Company’s current rate of cash outflows, cash on hand and proceeds from the recent sale of equity securities, management believes that its current cash will not be sufficient to meet the anticipated cash needs for working capital through December 31, 2014.

 

The Company’s plans with respect to its liquidity issues include, but not limited to, the following:

 

1)Continue to raise financing through the sale of its equity and/or debt securities;

 

2)Continue to issue restricted stock for compensation due to consultants and for its legacy accounts payable in lieu of cash payments; and;

 

3)Seek additional capital in the public equity markets to continue its operations as it rolls out its current products in development, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. The Company is currently evaluating additional equity financing opportunities and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or consummate a transaction at favorable pricing.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and achieve profitable operations. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

7
 

 

ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
 (Unaudited)

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations.

 

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Form 10-K for the year ended December 31, 2013.  In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made.  Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

Principles of Consolidation

 

The unaudited consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Reclassifications

 

Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to the periods presented.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue Recognition

 

The Company recognizes revenue when earned and related costs of sales and expenses when incurred. The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 605-10-599, Revenue Recognition, Overall, SEC Materials ("Section 605-10-599"). Section 605-10-599 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Cost of revenue consists of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the Company defers revenues until the right of return expires. The Company recognizes revenue from services at the time the services are completed.

 

Net Loss Per Share Calculation

 

Net loss per share is provided in accordance with FASB ASC 260-10, Earnings per Share. Basic net loss per common share ("EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted average number of common shares outstanding for computing basic and diluted EPS for the quarter ended March 31, 2014 and 2013 were 158,546,654 and 67,978,229, respectively. Potential dilutive common share amounting to 232,646,789 and 102,111,979 for the quarterly periods ended March 31, 2014 and 2013, respectively, were not used in the calculation of diluted EPS as the impact would be anti-dilutive.

 

8
 

 

ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Notes to Consolidated Financial Statements
March 31, 2014
 (Unaudited)

 

Intangible assets

 

Intangible assets consisting of websites, customer lists, developed technology and trade names and are stated at cost. Expenditures of costs incurred to renew or extend the term of a recognized intangible asset and materially extend the useful life are capitalized. When assets are sold or otherwise written off due to asset impairment, the cost and the related accumulated amortization are removed from the accounts and any realized gain or loss is recognized at that time. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable.

 

Convertible Notes Payable

 

The Company evaluated the embedded conversion features within the convertible debt under ASC Topic 815 “Derivatives and Hedging” and determined that neither the embedded conversion feature nor the warrants qualified for derivative accounting. Additionally, the instruments were evaluated under ASC Topic 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. It was concluded that a beneficial conversion feature existed for the convertible debt due to the relative fair value of the warrants issued with the debt.

 

The fair value of the warrants granted as a portion of the placement fee in connection with the convertible debt were estimated to be $74,955 at the date of grant using the Black-Scholes option pricing model and the following assumptions: market value of the stock on the grant date was $0.1250; risk-free interest rate of 3.90%; dividend yield of 0%; volatility factor of 400% weighted average expected life of 3 years; expected forfeiture rate of 0%.

 

The total debt discount recorded on the date of issuance was $424,600 (warrant relative fair value of approximately $222,221 and the beneficial conversion feature was approximately $202,379) which was amortized to interest expense over the term of the note. The Company had amortized $424,600 to interest expense in the consolidated statements of operations for the year ended December 31, 2013.

 

On February 10, 2014, the Company and Gemini Master Fund Ltd. (“Gemini”) settled the obligations contemplated by the Stock Purchase Agreement and due under the Convertible Note and cancelled the 4,000,000 warrants in exchange for: (i) the conversion of $105,000 of note principal at $0.075 per share, for a total of 1,400,000 shares of Company common stock, pursuant to the terms of the Note; and (ii) a cash payment of $275,000. The terms of this settlement were memorialized in the Settlement and General Release Agreement which settled all outstanding obligations with Gemini.

 

Recently Issued Accounting Pronouncements

 

As of and for the three months ended March 31, 2014, the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its consolidated financial condition or consolidated results of operations.

 

Note 3 – Intangible Assets

 

The following table summarizes the intangible assets as of March 31, 2014 and December 31, 2013.

 

    Useful Lives   March 31, 2014     December 31, 2013  
                 
Websites   2 years   $ 11,296     $ 11,296  
Customer lists   1 years     306,505       306,505  
Developed technology   3 years     410,416       410,416  
Trade names   3 years     85,607       85,607  
          813,824       813,824  
Less: accumulated amortization         (325,342 )     (205,969
                     
Identifiable intangibles, net         488,482       607,855  
                     
Goodwill         2,270,585       2,270,585  
Intangible assets, net       $ 2,759,067     $ 2,878,440  

 

For the quarter ended March 31, 2014, the amortization for intangible assets was $119,373.

 

9
 

 

ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
 (Unaudited)

 

Note 4 – Income Taxes

 

The Company had net operating loss carryforwards (“NOLs”) as of December 31, 2013 of approximately $10,150,000 for both federal and state tax purposes, portions of which are expiring at various years through 2033. The Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carryforwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is possible that the utilization of the NOLs could be significantly limited. 

 

The Company has no tax provision for the three month periods ended March 31, 2014 and 2013 due to losses and full valuation allowances against net deferred tax assets.

 

Note 5 – Notes Payable

 

As of March 31, 2014, there were no outstanding notes payable. On February 10, 2014, the Company and Gemini settled the obligations contemplated by the Stock Purchase Agreement and due under the Convertible Note and cancelled the 4,000,000 warrants in exchange for: (i) the conversion of $105,000 of note principal at $0.075 per share, for a total of 1,400,000 shares of Company common stock, pursuant to the terms of the Note; and (ii) a cash payment of $275,000. The terms of this settlement were memorialized in the Settlement and General Release Agreement. This agreement settled all outstanding obligations with Gemini. In connection with this transaction, the Company recognized a loss on the settlement of the debt in the amount of $79,014.

 

During the three months ended March 31, 2013, the Company secured $20,000 in short-term note payable financing that was repaid in March 2013.

 

Note 6 – Stockholders’ Equity

  

Issuance of Common Stock

 

During the three months ended March 31, 2014, the Company issued 4,455,283 shares of its common stock to various consultants in exchange for services rendered with an aggregate fair value of $485,971 or $0.11 per share on average. The Company also issued 1,400,000 shares of its common stock in connection with the settlement of a convertible note with a fair value of $105,000 (note 5). Additionally, the Company issued and sold 11,799,998 shares of its common stock to several accredited investors for an aggregate purchase price of $885,000 or $0.08 per share on average. Finally in the three months ended March 31, 2014, the Company issued 169,915 shares of its common stock for settlement of $19,880 of accounts payable or $0.12 per share on average. The total number of shares outstanding as of March 31, 2014 was 166,713,919.

 

Note 7 – Warrants and Options

 

Stock Option Plans

 

The Company’s shareholders approved the Company’s 2010 Stock Incentive Plan (the “2010 Plan”) on November 2, 2010. The Plan provides for the grant of non-statutory or incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards to the Company’s employees, Officers, Directors or consultants. The Company’s Board of Directors administers the Plan, selects the individuals to whom options will be granted, determines the number of options to be granted, and the term and exercise price of each option. Stock options granted pursuant to the terms of the 2010 Plan generally cannot be granted with an exercise price of less than 100% of the fair market value on the date of the grant. The term of the options granted under the 2010 Plan cannot be greater than 10 years. Options vest at varying rates generally over three to five years along with performance based options.

 

In September 2013, the Company approved the increase in the number of shares issuable pursuant to the 2010 Plan to 15,000,000. In December 2013, the Company’s Board of Directors approved an amendment to the Amended and Restated 2010 Stock Incentive Plan which increased the number of shares issuable pursuant to the Plan by 15,000,000 to 30,000,000 shares. Both amendments have also been approved by the Company’s shareholders.

 

As of December 31, 2013, options for 16,561,667 shares had been granted, with 300,000 shares exercised and 16,261,667 outstanding and 13,438,833 shares available for future grant. Shares authorized under the amended 2010 Plan will be available for issuance pursuant to options or awards granted under the Plan, as amended from time to time.

 

10
 

 

ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
(Unaudited)
 

 

The following table reflects the option activity during the three months ended March 31, 2014:

 

   Options for   Weighted 
   Common   Average 
   Shares   Exercise Price 
Outstanding as of December 31, 2013   16,261,667   $0.12 
Granted   3,650,000    0.09 
Exercised   -    - 
Forfeited, cancelled, expired   (140,283)   0.09 
Outstanding as of March 31, 2014   19,771,384   $0.10 

 

For the three months ended March 31, 2014, the Company granted 3,650,000 options to purchase its common stock while recording stock compensation expense for these options of $229,144 using the Black-Scholes option pricing model based upon the following assumptions: term of 5 years, risk free interest rate ranging from 1.50% ~ 1.51%, a dividend yield of 0% and a volatility rate ranging from 143% ~ 145%. In that same period, 140,283 stock options were cancelled by certain consultants who no longer provided services to the Company.

 

Warrants

 

The following table reflects warrant activity during the three months ended March 31, 2014:

 

   Warrants for   Weighted 
   Common   Average 
   Shares   Exercise Price 
Outstanding and exercisable as of December 31, 2013   46,528,753   $0.16 
Granted   11,799,998   0.10 
Exercised – cash   -   - 
Exercised - cash-less exercise   -   - 
Forfeited, cancelled, expired   (4,000,000)  0.25 
Outstanding as of March 31, 2014   54,328,751   $0.18 

 

For the three months ended March 31, 2014, the Company issued 11,799,998 warrants to purchase its common stock. The warrants are non forfeitable as of March 31, 2014. In that same period, 4,000,000 warrants were cancelled in connection with a settlement of a note payable (see Note 5).

 

As of March 31, 2014, the Company maintained total outstanding warrants to purchase 54,328,751 shares of its common stock at an average exercise price of $0.18 per share.

 

Note 9 – Commitments and Contingencies

 

Legal Proceedings

 

In July 2013, the Company became aware that a default judgment had been entered against it in favor of Mario Armando Wilson and against the Company in the amount of $62,000. The Company is investigating the circumstances under which the judgment was entered, and reserves all rights to challenge the propriety of the judgment. As of March 31, 2014, the Company has accounted for approximately $35,000 being owed to Mr. Wilson.

 

The Company is in an arbitration case entitled Felix Chan v. Mimvi, Inc., pending in the American Arbitration Association, filed November 25, 2013. The claimant, Felix Chan, asserts that the Company is obliged to pay him $174,000 for services as an independent contractor of the Company. No discovery has taken place. The Company intends to vigorously defend the case. The outcome is uncertain.

 

In July 2013, the Company was threatened with legal action by Eric Rice, a former employee. On September 20, 2013, Mr. Rice sued the Company (Rice v. Mimvi, etc., et al., LASC No. LC100816, Van Nuys Superior Court). The complaint alleges that the Company breached Mr. Rice's employment agreement and made misrepresentations when the Company terminated Mr. Rice. The complaint does not specify the amount of alleged damages. The Company denies any breach or misrepresentation, and the Company denies that it owes Mr. Rice anything.

 

11
 

 

 ADAPTIVE MEDIAS, INC.

F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
(Unaudited)

 

The Company moved to strike portions of the complaint, and the Company's substantive response to the complaint is not yet due. The Company is exploring a counter-claim related to a prior transaction in which Mr. Rice was involved.

 

On July 29, 2013, Khoi Senderowicz filed a lawsuit against the Company and two other individuals, Andrew Linton and Kasian Franks (Senderowicz v. Franks, etc., et al., Case No. RG13689457, Alameda County Superior Court). The suit alleges breach of an oral lease and alleged damages to property. The complaint was only recently served, and the Company's response to the complaint is not yet due. The Company denies that it breached any alleged oral lease or caused any damage, and the Company denies that it owes the plaintiff anything. Discovery has not yet commenced.

 

In April of 2014, the Company became aware that a lawsuit was filed against the Company in the Superior Court of Santa Clara County, California by Amanda Besemer, who was an Advisory Board member from 2010-12. The Company's response to the complaint is not yet due. The Company denies that it owes the plaintiff anything.

 

The Company does not believe the ultimate outcome of these proceedings will have a material adverse impact on the Company’s consolidated financial statements.

 

Note 10 – Concentrations

 

The following table reflects the concentration of revenue for during the three months ended March 31, 2014 and 2013:

 

  Concentration for the
  For the three months
  March 31,
  2014   2013
Customer 1 22%     - 
Customer 2 21%    -
Customer 3 12%    -
Customer 4   100%

 

Included in accounts receivable was $340,020 and $0 from these four customers as of March 31, 2014 and December 31, 2013 respectively.

 

Note 11 – Subsequent Events

 

The Company follows the guidance in ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluate events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

 

Entry into a Material Definitive Agreement

 

On April 14, 2014, the Company submitted a letter to shareholders to provide certain information about recent Company developments and plans for the current fiscal year.  

 

On April 14, 2014, the Board of Directors and the holders of a majority of our outstanding common stock of the Company approved an amendment to the Amended and Restated Adaptive Medias, Inc. 2010 Stock Incentive Plan as follow:

 

1.The corporate name of the Company is amended to “Adaptive Medias, Inc.”; and

 

2.The maximum aggregate number of shares which may be issued pursuant to swards granted under the Plan is thirty million (30,000,000) shares.

 

12
 

 

ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2014
(Unaudited)

  

On the same date, the Board of Directors and the holders of a majority of our outstanding common stock approved an acquisition of certain assets of OneScreen, Inc., a Delaware corporation via its subsidiary, Media Graph, Inc., a Nevada corporation, in exchange for 150,000,000 shares of the Company’s common stock (on a pre-reverse split basis). Finally, on the same date, the holders of a majority of our outstanding common authorized the Board of Directors to undertake a reverse split of our issued and outstanding shares of common stock, $0.001 par value, at a ratio of up to 1-for-30. Such ratio shall be determined by our Board of Directors in its sole discretion, and will be effectuated, if at all, during the 2014 calendar year.

 

Issuance of Common Stock 

 

Between April 1, 2014 and May 12, 2014, the Company issued and sold 11,060,002 shares of its common stock for cash proceeds of $829,500 or $0.075 per share, on average. Additionally, the Company issued 1,776,250 shares of common stock to various employees and consultants for services rendered with a fair value of $190,400 or $0.107 per share on average. Finally, the Company issued 100,000 shares of common stock for settlement of $10,499 of accounts payable or $0.10 per share on average.

 

13
 

 

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis provides information to explain our results of operations and financial condition. You should also read our unaudited interim financial statements and their notes included in this Form 10-Q, and our audited financial statements and their notes, Risk Factors and other information included in our Annual Report on Form 10-K for the year ended December 31, 2013. This report contains forward-looking statements. Forward-looking statements within this Form 10-Q are identified by words such as “believes,” “anticipates,” “expects,” “intends,” “may,” “will” “plans” and other similar expressions, however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to significant risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed in, or implied by, these forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events, circumstances or developments occurring subsequent to the filing of this Form 10-Q with the U.S. Securities and Exchange Commission or for any other reason and you should not place undue reliance on these forward-looking statements. You should carefully review and consider the various disclosures the Company makes in this report and our other reports filed with the U.S. Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.

 

Overview

 

The Company, through its core content monetization platform and technology, provides app developers, publishers and video content developers one of the only end-to-end monetization platforms driven by programmatic algorithms. The Company provides these unique capabilities to monetize content efficiently across multiple marketing channels and devices, including mobile, video and online display advertising.

 

Pursuant to votes of the majority of the Board of Directors and shareholders, effective on November 6, 2013, the Company changed its name to Adaptive Medias, Inc. in order to better and more fully demonstrate the Company’s emphasis on providing a supply-side platform for mobile, video and online display advertising. In connection with the name change, effective on November 19, 2013, the Company’s ticker symbol was changed to ADTM.

 

The Company is a programmatic audience and content monetization company for website owners, app developers and video publishers who want to more effectively optimize content through advertising. The Company provides a foundation for publishers and developers looking to engage brand advertisers through a multi-channel approach that delivers integrated, engaging and impactful ads across multiple devices. Adaptive Media meets the needs of its publishers with an emphasis on maintaining user experience, while delivering timely and relevant ads through its multi-channel ad delivery and content platform. Our corporate headquarters as of May 12, 2014 are located at 16795 Von Karman Avenue, Suite 240, Irvine, California 92606. Our website address is www.adaptivem.com.

 

Business Overview

 

The Company, through its core audience and content monetization platform, provides web publishers, app developers and video content providers one of the only end-to-end monetization platforms driven by programmatic algorithms. We are a leader in programmatic, real time bidding (“RTB”) advertising across mobile, video and display, as well as, a provider of a business-to-business digital video content management platform SaaS.

 

On the supply side, the Company provides each publishing client on the supply side with unique capabilities to distribute and monetize their content across multiple channels or operating systems, where they can serve a piece of content on a laptop, a tablet and a phone without any additional cost or license. The optimization modules in our technology can be deployed across multiple channels on the platform to provide capabilities such as ad serving, RTB, ad revenue waterfall management and video content management, and enabling necessities like the video player itself. We help mobile app developers, publishers and video content developers monetize their ad inventory through our proprietary ad-delivery and optimization platform. The Company provides these unique capabilities to monetize content efficiently across multiple marketing channels, including mobile, video and online display advertising. Our relationships span across health, sports, entertainment, auto, fashion, news, tech and luxury verticals. 

 

The Company provides a foundation for publishers and developers looking to engage brand advertisers through a multi-channel approach that delivers integrated, engaging and impactful ads across multiple devices. It meets the needs of its publishers with an emphasis on maintaining user experience, while delivering timely and relevant ads through its multi-screen, multi-channel ad delivery and content platform.

 

In short, Adaptive Media is a “one-stop-shop” when it comes to digital monetization. From licensing video content, to managing digital advertising, to connecting with leading publishers in target markets, Adaptive Media offers a complete digital technology stack to support content owners and producers.

 

14
 

 

On the demand side, The Company’s programmatic technology stack is advertiser-friendly; the platform provides advertisers with a brand-safe and transparent marketplace for buying media across mobile, video and display. This is essential for big brand advertisers and brand-direct ecommerce companies who require a high level of safety, context and relevance for their advertisements.

 

Launching in 2014, the Company marketplace will enable publishers a seemingly simple marriage of quality content, users and monetization opportunities side-by-side with advertising partners who drive demand. This is accomplished through a complex set of discovery technology solutions, driven by patents, and efficient algorithmic data that cohesively interact in any digital marketing environment where advertising, audience and content must come together.

 

Competition

 

There are many fractional players in this space. There are those who provide video players like Ooyala, BrightCove and Kaltura. Others provide advertising network services like BrightRoll, Grab and TubeMogul. A final group provides ad serving and demand services including RocketFuel, LiveRail or FreeWheel. These providers and their fragmented solutions only complicate the choices that a publisher, app developer or video content provider must make to participate in today’s market for audiences and advertising revenue. AOL is the only other company who can claim to provide an end-to-end solution. They have a video player and ad serving capabilities through Adap.tv, CMS and CDN capabilities through 5min Media and a wealth of inventory and demand through legacy AOL properties and exchange integration.

 

Despite AOL’s size, we have several significant advantages that give us confidence to compete in this space. The first main area of competitive advantage pertains to AOL’s legacy inventory source. While they benefit from many domains under their control, they are also hampered by the responsibility to fill advertising through these domains first. Our advantage is that we are inventory agnostic. If advertisers want and can benefit from our direct publisher inventory, we are happy to provide it. If advertisers want to take advantage of efficiencies through RTB exchange inventory, we can provide that as well. The Company is less restricted and can provide better optimization choices than AOL.

 

The second area of competitive advantage is in pricing. AOL’s legacy properties have high floor inventory costs. While they address this issue by explaining that their inventory is “premium”, the statement often falls on deaf ears as advertisers are hearing the same argument from all inventory sources. Our inventory flexibility and existing monetization contracts allow us to deliver advertising with the same quality as AOL at a lower cost per impression. This allows us an edge in negotiating onto advertising campaigns where we don’t have an existing track record.

 

Business Development

 

Our business development efforts are focused on three main areas. The first is signing content providers to syndication and monetization deals. The second is signing publishers onto our platform. The third area of focus is driving advertising demand or fulfillment through our platform. In 2013 we added approximately 50 publishers. Our overall content contracted in 2013 as we began to remove underperforming partners and categories. We expect all categories to grow in 2014 as we move toward stabilization of our platform and expansion of our technical capabilities.

 

Today our demand is consistently fulfilling at sustainable rates for our publishers. We have over 350,000 rights cleared pieces of video content across all interest categories. We have recently signed a contract with Beanstock Media which increases our publisher base with some high profile publishers including Ask.com, ChristianMingle, Dictionary.com, MeetMe, Slacker, TheDailyBeast, and ZipRealty.

 

In 2014, we are making a major push to penetrate the comScore top 1000 publisher accounts. Engaging these publishers will increase our platform utilization and SaaS income. It will increase the consumption and utilization of our content partners resulting in higher income. It will also allow for greater reach for our demand partners and advertising agencies leading to higher advertising revenues.

 

In addition to traditional digital publishers, we are making a push to penetrate select top TV properties and engage them in bridging the gap between legacy TV consumption and video advertising in digital. This will be enabled by our proprietary technology that is currently developing with the support of our adviser.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. There were no significant changes to our significant accounting policies during the three months ended March 31, 2014.  

 

15
 

 

Three Months Ended March 31, 2014 compared with Three Months Ended March 31, 2013

 

Revenue

 

For the three months ended March 31, 2014, we recognized revenue of $731,604 compared to $15,000 in the comparable period of 2013, an increase of $716,604 or 4,777%. The increase was primarily due to the acquisition of Adaptive Media and Ember made in July 2013 and December 2013, respectively. Additionally, this increase in revenue is attributable to both increased spending by existing customers and an increase in the number of active customers adopting our solution. The number of active customers increased from one as of March 31, 2013 to 60 as of March 31, 2014. Over the last quarter we invested in sales and marketing resources and expect revenue growth to materialize from this investment over the next several years. We operate in a market with seasonal fluctuations in revenue. Historically, the fourth quarter of the year reflects our highest level of advertising activity and the first quarter reflects the lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole. The Company is actively working to mitigate these fluctuations by proactive planning and upfronts.

 

Cost of Revenue

 

For the three months ended March 31, 2014, our cost of revenue increased to $444,360 compared to $0 in the comparable period of 2013, an increase of $444,360 or 100%. The increase was primarily due to the acquisition of Adaptive Media and an increase in media costs to support our increased revenue. We anticipate that our cost of revenue will increase in absolute dollars as our revenue increases.

 

Operating Expenses

 

For the three months ended March 31, 2014, our operating expenses decreased to $1,427,564, compared to $2,107,106 in the comparable period of 2013, a decrease of $679,542 or 32%.

 

For the three months ended March 31, 2014, stock compensation expense decreased to $319,604 from $1,207,674 in the comparable period of 2013, a decrease of $888,370 or 74%. .The decrease was primarily due to a decline in the number of options issued during the three months ended March 31, 2014. Additionally, the volatility of the stock decreased from 400% to a rate ranging from 143% ~ 145% for the three months ended March 31, 2014, determining a reduction in the fair market value of the options calculated with the Black-Scholes option pricing model.

 

For the three months ended March 31, 2014, legal and professional fees decreased to $122,816 from $199,519 in the comparable period of 2013, a decrease of $76,703 or 38%. The decrease was primarily due to a more efficient allocation of internal resources and a better management of current open litigation matters, financial matters, equity issues and other activities.

 

For the three months ended March 31, 2014, our selling expenses that we incurred increased to $188,625 from $37,500 in the comparable period of 2013, an increase of $151,125 or 403%. The increase was primarily due to an expansion of our sales and marketing personnel and related costs. We expect sales and marketing expenses to increase in absolute dollars in future periods, but at a slower growth rate.

 

For the three months ended March 31, 2014, the research and development costs that we incurred decreased slightly to $139,888 from $139,943. We believe that continued investment in technology is critical to attaining our strategic objectives, and, as a result, we expect research and development expenses to increase in absolute dollars in future periods.

 

For the three months ended March 31, 2014, the general and administrative expenses that we incurred increased to $656,931 from $522,470 in the comparable period of 2013, an increase of $134,461 or 26%. The increase was primarily due to the overall increase in our operations, specifically investor relations expenses and personnel expenses. We expect general and administrative expenses to increase in absolute dollars in future periods.

 

For the three months ended March 31, 2014, the loss on settlement of debt that we incurred increased to $79,014 from $33,767 in the comparable period of 2013. The increase was primarily due to the fair value measurement of restricted common stock issued to settle the convertible note payable in February 2014.

 

Net Loss

 

For the three months ended March 31, 2014, we incurred a loss of $1,217,240, or $0.01 basic and diluted loss per share compared to a loss of $2,126,873, or $0.03 basic and diluted loss per share for the three months ended March 31, 2013. The increase in the net loss is described above.

 

16
 

 

Liquidity and Capital Resources

 

As of March 31, 2014, we had total current assets of $1,029,804 consisting of $174,533 cash, $665,293 accounts receivable, net of allowance of $47,874, and $189,978 prepaid expenses. We had total current liabilities of $1,929,653 consisting of accounts payable and accrued expenses of $1,925,306 and other current liabilities of $4,347. We also had non-current liabilities totaling $16,455 at March 31, 2014.

 

We currently have limited funds to pay our currently due debts and liabilities. Should one or more of our creditors seek or demand payment, we are not likely to have the resources to pay or satisfy any such claims. Thus, we face risk of defaulting on our obligations to our creditors with consequential legal and other costs which would adversely impact our ability to continue our existence as a corporate enterprise.

 

Our insolvent financial condition also may create a risk that we may be forced to file for protection under applicable bankruptcy laws or state insolvency statutes. We also may face the risk that a receiver may be appointed. We face that risk and other risks resulting from our current financial condition.

 

For these and other reasons, we anticipate that unless we can obtain sufficient capital from outside sources and do so in the very near future, we may be unable to continue to operate as a corporation, continue to meet our filing obligations under the Securities Exchange Act of 1934, or otherwise satisfy our obligations to our stock transfer agent, our accountants, our legal counsel, our EDGAR filing agent, and many others.

 

For these and other reasons, our management recognizes the adverse difficulties and continuing severe challenges we face. Apart from the funds that we have recently received, there can be no assurance that we will receive any additional financing or funding from any source or if any financing should be obtained, that existing shareholders will not incur substantial, immediate, and permanent dilution of their existing investment.

 

The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the three months ended March 31, 2014 and 2013:

 

For the Three Months Ended
   March 31, 2014   March 31, 2013 
Net cash (used in) operating activities  $(456,855)  $(551,209)
Net cash (used in) provided by investing activities  $(800)  $6,057 
Net cash provided by financing activities  $610,000   $485,000 
Net increase (decrease) in cash  $152,345   $(60,152)
Cash - beginning of period  $22,188   $63,286 
Cash - end of period  $174,533   $3,134 

 

Going Concern Uncertainties

 

As of March 31, 2014, we do not have an adequate source of operating revenue to cover our operating costs, and have only limited working capital with which to pursue our business plan. The amount of capital required to sustain operations until we achieve positive cash flow from operations is subject to future events and uncertainties. It will be necessary for us to secure additional working capital through sales of our common stock and/or debt financing, and there can be no assurance that such funding will be available in the future. These conditions raise substantial doubt about our ability to continue as a going concern.

 

Our auditor has issued a going concern qualification as part of their opinion in their audit report contained in Form 10-K filed with the SEC for the years ended December 31, 2013 and 2012.

 

Capital Expenditures

 

For the three months ended March 31, 2014, we have not incurred any material capital expenditures.

 

Commitments and Contractual Obligations

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

Off-Balance Sheet Arrangements

 

We have not entered into any 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 would be considered material to investors.

 

17
 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and our Principal Accounting Officer, carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and our Principal Accounting Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

  

Remediation

 

To remediate the material weaknesses, as identified above, in internal control over financial reporting, management has taken or will take the following actions as the financial resources become available:

 

·

We have retained additional accounting personnel, and continue to enhance our internal finance and accounting organizational structure.

   
· We have hired a third party consultant who has the required background and experience in accounting principles generally accepted in the United States of America and with SEC rules and regulations.

 

· We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.

 

·

We are in the process of strengthening our internal policies and enhancing our processes for ensuring consistent treatment and recording of reserve estimates and that validation of our conclusions regarding significant accounting policies and their application to our business transactions are carried out by personnel with an appropriate level of accounting knowledge, experience and training.

   
· We will build our procedures to effectively control our closing activities.
   
· We will improve and automate the preparation of our audit schedules to include a systematic audit of all the figures presented in the financial statements.

 

We believe that the foregoing actions will improve our internal control over financial reporting, as well as our disclosure controls and procedures. We intend to perform such procedures and commit such resources as they become available and necessary to continue to allow us to overcome or mitigate the material weaknesses such that we can make timely and accurate quarterly and annual financial filings until such time as the material weaknesses are fully addressed and remediated.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

18
 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

In July 2013, the Company became aware that a default judgment had been entered against it in favor of Mario Armando Wilson and against the Company in the amount of $62,000. The Company is investigating the circumstances under which the judgment was entered, and reserves all rights to challenge the propriety of the judgment. As of March 31, 2014, the Company has accounted for approximately $35,000 being owed to Mr. Wilson.

 

The Company is in an arbitration case entitled Felix Chan v. Mimvi, Inc., pending in the American Arbitration Association, filed November 25, 2013. The claimant, Felix Chan, asserts that the Company is obliged to pay him $174,000 for services as an independent contractor of the Company. No discovery has taken place. The Company intends to vigorously defend the case. The outcome is uncertain.

 

In July 2013, the Company was threatened with legal action by Eric Rice, a former employee. On September 20, 2013, Mr. Rice sued the Company (Rice v. Mimvi, etc., et al., LASC No. LC100816, Van Nuys Superior Court). The complaint alleges that the Company breached Mr. Rice's employment agreement and made misrepresentations when the Company terminated Mr. Rice. The complaint does not specify the amount of alleged damages. The Company denies any breach or misrepresentation, and the Company denies that it owes Mr. Rice anything. The Company moved to strike portions of the complaint, and the Company's substantive response to the complaint is not yet due. The Company is exploring a counter-claim related to a prior transaction in which Mr. Rice was involved.

 

On July 29, 2013, Khoi Senderowicz filed a lawsuit against the Company and two other individuals, Andrew Linton and Kasian Franks (Senderowicz v. Franks, etc., et al., Case No. RG13689457, Alameda County Superior Court). The suit alleges breach of an oral lease and alleged damages to property. The complaint was only recently served, and the Company's response to the complaint is not yet due. The

 

Company denies that it breached any alleged oral lease or caused any damage, and the Company denies that it owes the plaintiff anything. Discovery has not yet commenced.

 

In April of 2014, the Company became aware that a lawsuit was filed against the Company in the Superior Court of Santa Clara County, California by Amanda Besemer, who was an Advisory Board member from 2010-12. The Company's response to the complaint is not yet due. The Company denies that it owes the plaintiff anything.

 

The Company does not believe the ultimate outcome of these proceedings will have a material adverse impact on the Company’s consolidated financial statements.

 

There are presently no other material pending legal proceedings to which the Company, any executive officer, any owner of record or beneficially of more than five percent of any class of voting securities is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information.

 

None.

 

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Item 6. Exhibits

 

Number   Exhibit
31.1   Certification of the Company’s Principal Executive Officer pursuant to 15d-15(e), under the Securities and Exchange Act of 1934.
     
31.2   Certification of the Company’s Principal Financial Officer pursuant to 15d-15(e), under the Securities and Exchange Act of 1934.
     
32.1   Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

 

 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.

 

  ADAPTIVE MEDIAS, INC.
   
May 12, 2014 /s/ Qayed Shareef
  Qayed Shareef
  Chief Executive Officer
  (Duly Authorized Officer and Principal Executive Officer)
   
May 12, 2014 /s/ Abdul Parmach
  Abdul Parmach
  Acting Chief Financial Officer

 

(Duly Authorized Officer and Principal Accounting Officer)

 

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