Filed by Bowne Pure Compliance
UNITED STATES
SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2008
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to
Commission file number: 000-26073
IMMEDIATEK, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Nevada
|
|
86-0881193 |
|
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(IRS Employer Identification No.) |
|
320 South Walton
Dallas, Texas
|
|
75226 |
|
|
|
(Address of principal executive offices)
|
|
(Zip code) |
(214) 744-8801
(Issuers telephone
number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
þ No o
Indicate by check mark whether the registrant 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.
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company þ |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act) Yes o No þ
As of May 15, 2008, the issuer had 535,321 shares of common stock outstanding.
IMMEDIATEK, INC.
TABLE OF CONTENTS
i
INTRODUCTION
Unless the context otherwise indicates, all references in this Quarterly Report on Form 10-Q
to the Company, Immediatek, DiscLive, IMKI Ventures, we, us, our or ours or
similar words are to Immediatek, Inc. and its direct, wholly-owned subsidiaries, DiscLive, Inc. or
IMKI Ventures, Inc. Accordingly, there are no separate financial statements for DiscLive, Inc. or
IMKI Ventures, Inc.
TRADEMARKS AND SERVICE MARKS
This Quarterly Report on Form 10-Q contains registered trademarks and servicemarks owned or
licensed by entities and persons other than us.
MARKET AND INDUSTRY DATA AND FORECASTS
Market and industry data and other statistical information and forecasts used throughout this
Quarterly Report on Form 10-Q are based on independent industry publications, government
publications and reports by market research firms or other published independent sources. Some
data also is based on our good faith estimates, which are derived from our review of internal
surveys, as well as independent sources. Forecasts are particularly likely to be inaccurate,
especially over long periods of time.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and the materials incorporated by reference into this
Quarterly Report on Form 10-Q include forward-looking statements intended to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified as such because the context of the statement
includes words such as may, estimate, intend, plan, believe, expect, anticipate,
will, should or other similar expressions. Similarly, statements in this Quarterly Report on
Form 10-Q that describe our objectives, plans or goals also are forward-looking statements. These
statements include those made on matters such as our financial condition, litigation, accounting
matters, our business, our efforts to grow our business and increase efficiencies, our efforts to
use our resources judicially, our efforts to implement new financial software, our liquidity and
sources of funding and our capital expenditures. All forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. The forward-looking statements included in this Quarterly Report
on Form 10-Q are made only as of the date of this report. We assume no obligation to update any
forward-looking statements. Certain factors that could cause actual results to differ include,
among others:
|
|
|
our inability to continue as a going concern; |
|
|
|
|
our history of losses, which are likely to continue; |
|
|
|
|
our inability to utilize the funds received in a manner that is accretive; |
|
|
|
|
our inability to generate sufficient funds from operating activities to fund
operations; |
|
|
|
|
difficulties in developing and marketing new products; |
|
|
|
|
inability to locate lines of business to acquire or, if acquired, to integrate
them; |
|
|
|
|
inability to execute our growth and acquisition strategy; |
|
|
|
|
dependence on third-party contractors and third-party platforms and websites; and |
|
|
|
|
changes in conditions affecting the economy generally. |
For a discussion of these and other risks and uncertainties that could cause actual results to
differ materially from those contained in our forward-looking statements, please refer to Risk
Factors in the Companys Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007,
which was filed with the Securities and Exchange Commission, or SEC, on March 28, 2008.
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Immediatek, Inc.
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
348,986 |
|
|
$ |
589,787 |
|
Accounts receivable (including $7,525 due from a related party at March 31, 2008) |
|
|
7,578 |
|
|
|
3,575 |
|
Prepaid expenses and other current assets |
|
|
12,572 |
|
|
|
3,088 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
369,136 |
|
|
|
596,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net |
|
|
10,675 |
|
|
|
13,230 |
|
Capitalized website development costs, net |
|
|
84,735 |
|
|
|
89,442 |
|
Assets held for sale |
|
|
68,252 |
|
|
|
68,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
532,798 |
|
|
$ |
767,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Preferred Stock and Stockholders Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable (including $0 and $23,976 due to related parties at
March 31, 2008 and December 31, 2007, respectively) |
|
$ |
60,049 |
|
|
$ |
24,026 |
|
Accrued liabilities |
|
|
4,860 |
|
|
|
3,064 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
64,909 |
|
|
|
27,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock (conditionally redeemable); $0.001 par value
4,392,286 authorized, issued and outstanding at March 31, 2008 and
December 31, 2007; redemption/liquidation value of $3,000,000 |
|
|
3,000,000 |
|
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
Stockholders deficit: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 500,000,000 shares
authorized, 535,321 shares issued and outstanding
at March 31, 2008 and December 31, 2007 |
|
|
535 |
|
|
|
535 |
|
Additional paid in capital |
|
|
89,602 |
|
|
|
79,102 |
|
Accumulated deficit |
|
|
(2,622,248 |
) |
|
|
(2,339,301 |
) |
|
|
|
|
|
|
|
Total stockholders deficit |
|
|
(2,532,111 |
) |
|
|
(2,259,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Preferred Stock and Stockholders Deficit |
|
$ |
532,798 |
|
|
$ |
767,426 |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
2
Immediatek, Inc.
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Revenues, net |
|
$ |
|
|
|
$ |
13,603 |
|
Cost of sales |
|
|
|
|
|
|
12,114 |
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
1,489 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services |
|
|
13,100 |
|
|
|
2,474 |
|
Consulting expense related party |
|
|
10,500 |
|
|
|
10,500 |
|
Professional fees |
|
|
86,182 |
|
|
|
53,652 |
|
Salaries and benefits |
|
|
159,703 |
|
|
|
65,778 |
|
Depreciation and amortization |
|
|
7,262 |
|
|
|
12,375 |
|
(Gain) loss on sale of assets held for sale |
|
|
(687 |
) |
|
|
1,080 |
|
Other general and administrative expenses |
|
|
15,207 |
|
|
|
11,953 |
|
|
|
|
|
|
|
|
Total expenses |
|
|
292,864 |
|
|
|
157,812 |
|
|
|
|
|
|
|
|
Net operating loss |
|
|
(292,864 |
) |
|
|
(156,323 |
) |
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
Other income related party |
|
|
7,525 |
|
|
|
|
|
Interest income |
|
|
2,392 |
|
|
|
8,026 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(282,947 |
) |
|
$ |
(148,297 |
) |
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding basic and fully diluted |
|
|
535,321 |
|
|
|
474,807 |
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
(0.53 |
) |
|
$ |
(0.31 |
) |
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
3
Immediatek, Inc.
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(282,947 |
) |
|
$ |
(148,297 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,262 |
|
|
|
12,375 |
|
Consulting fees related party |
|
|
10,500 |
|
|
|
10,500 |
|
(Gain) loss on sale and disposal of assets held for sale |
|
|
(687 |
) |
|
|
1,080 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(4,003 |
) |
|
|
5,702 |
|
Prepaid expenses and other current assets |
|
|
(9,485 |
) |
|
|
1,412 |
|
Accounts payable |
|
|
36,023 |
|
|
|
19,508 |
|
Accrued liabilities |
|
|
1,796 |
|
|
|
6,922 |
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(241,541 |
) |
|
|
(90,798 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
|
|
|
|
|
(3,549 |
) |
Proceeds from the sale of assets held for sale |
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
740 |
|
|
|
(3,549 |
) |
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(240,801 |
) |
|
|
(94,347 |
) |
Cash at the beginning of the period |
|
|
589,787 |
|
|
|
1,052,559 |
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
$ |
348,986 |
|
|
$ |
958,212 |
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
|
|
|
$ |
|
|
Income taxes paid |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
4
IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
(Unaudited)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
Description of Business: Prior to October 1, 2007, Immediatek, through its wholly-owned, operating
subsidiary, DiscLive, Inc., recorded live content, such as concerts and conferences, and made the
recorded content available for delivery to attendees within fifteen minutes after the conclusion of
a live event. On October 1, 2007, DiscLive, Inc. ceased retail sales of its products in conjunction
with the decision not to further pursue that line of business.
On August 29, 2007, Immediatek formed a wholly-owned subsidiary, IMKI Ventures, Inc. IMKI
Ventures, Inc. acquired certain assets from a related party on August 31, 2007. The consideration
paid for the acquired assets was 60,514 shares of Immediatek common stock. Those acquired assets
were developed into our e-commerce product called RadicalBuy, which was launched in part on
October 23, 2007. RadicalBuy is an online marketplace that, in addition to providing buyers and
sellers an online forum to buy and sell items, allows seller-approved third-parties to sell items
on the sellers behalf and earn a commission and enables sellers to list their items across various
internet platforms such as their Facebook® page, MySpace® page, blog or personal web page.
Going Concern: The accompanying condensed consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of the assets of the Company and the
satisfaction of its liabilities and commitments in the normal course of business. See Note 3 for a
discussion of the Companys ability to continue as a going concern and its plans for addressing
those issues. The inability to obtain additional financing during 2008, when required, could have
a material adverse effect on the operations and financial condition of the Company.
Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Certain information and formatted disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles have been omitted
pursuant to SEC rules and regulations. These condensed consolidated financial statements include
the accounts of the Companys wholly-owned subsidiaries, DiscLive, Inc. and IMKI Ventures, Inc.
(collectively, the Company). All significant intercompany accounts and transactions have been
eliminated in these condensed consolidated financial statements.
The Companys condensed consolidated balance sheet at March 31, 2008 and condensed
consolidated statements of operations and condensed consolidated statements of cash flows for the
three months ended March 31, 2008 and 2007are unaudited. Certain accounts have been reclassified
to conform to the current periods presentation. In the opinion of management, these financial
statements have been prepared on the same basis as the audited consolidated financial statements
and include all adjustments necessary for the fair presentation of the Companys financial
position, results of operations and cash flows. These adjustments were of a normal, recurring
nature. The results of operations for the periods presented in this Quarterly Report on Form 10-Q
are not necessarily indicative of the results that may be expected for the entire year. Additional
information is contained in the Companys Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2007, which was filed with the SEC on March 28, 2008 and should be read in conjunction
with this Quarterly Report on Form 10-Q.
Management Estimates and Significant Risks and Uncertainties: The preparation of the condensed
consolidated financial statements, in conformity with accounting principles generally accepted in
the United States of America, requires management of the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets
and liabilities, at the dates of the financial statements and the reported amounts of revenues and
expenses during such reporting periods. Actual results could differ from these estimates.
5
IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
MARCH 31, 2008
(Unaudited)
The Company is subject to a number of risks and can be affected by a variety of factors.
Management of the Company believes that the following factors, as well as others, could have a
significant negative effect on the Companys future financial position, results of operations or
cash flows:
|
|
|
our inability to continue as a going concern; |
|
|
|
|
our history of losses, which are likely to continue; |
|
|
|
|
our inability to utilize the funds received in a manner that is accretive; |
|
|
|
|
our inability to generate sufficient funds from operating activities to fund
operations; |
|
|
|
|
difficulties in developing and marketing new products; |
|
|
|
|
inability to locate lines of business to acquire or, if acquired, to integrate them; |
|
|
|
|
inability to execute our growth and acquisition strategy; |
|
|
|
|
dependence on third-party contractors and third-party platforms and websites; and |
|
|
|
|
changes in conditions affecting the economy generally. |
Business Segments: Prior to August 31, 2007, the Company primarily operated only in one segment,
the production and sale of live recordings of events. On August 31, 2007, IMKI Ventures, a newly
created, wholly-owned subsidiary of the Company, acquired certain assets that it used to launch a
new business on October 23, 2007. On October 1, 2007, DiscLive ceased retail sales of its products
in connection with its determination not to further pursue the production and sale of live event
recordings. Accordingly, going forward, the Company anticipates that it will primarily operate in
the e-commerce line of business.
Net Loss per Share: Net loss attributable to common stockholders was used in the calculation of
both basic and diluted loss per share. The weighted average number of shares of common stock
outstanding was the same for calculating both basic and diluted loss per share. Options to
purchase 1,625 shares of common stock and Series A Convertible Preferred Stock convertible into
10,171,099 shares of common stock outstanding at March 31, 2008, were not included in the
computation of diluted loss per share, as the effect of including the options and Series A
Convertible Preferred Stock in the calculation would be anti-dilutive. Options to purchase 1,625
shares of common stock, warrants to purchase 3,500 shares of common stock and Series A convertible
Preferred Stock convertible into 9,021,333 shares of common stock outstanding at March 31, 2007
were not included in the computation of diluted loss per share as the effect of including the
options and Series A Convertible Preferred Stock in the calculation would be anti-dilutive.
Comprehensive Loss: For all periods presented, comprehensive loss is equal to net loss.
Recently Issued Accounting Pronouncements: In March 2008, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about
Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (SFAS 161).
SFAS 161 is intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better understand their effects
on an entitys financial position, financial performance, and cash flows. SFAS 161 is effective
for financial statements issued for fiscal years and interim periods beginning after November 15,
2008. The Company believes that this new pronouncement will not have an effect on the Companys
consolidated results of operations, consolidated financial position or consolidated cash flows.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not
require any new fair value measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy used to classify the source of the information. SFAS 157 is
effective for fiscal years beginning after November 15, 2007.
6
IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
MARCH 31, 2008
(Unaudited)
In February 2008, FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB Statement
No. 157 (FSP 157-2), was issued. FSP 157-2 defers the effective date of SFAS 157 to fiscal years
beginning after December 15, 2008 for all nonfinancial assets and liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a recurring basis (at
least annually). Examples of items within the scope of FSP 157-2 are nonfinancial assets and
liabilities initially measured at fair value in a business combination (but not measured at fair
value in subsequent periods), and long-lived assets, such as property, plant and equipment and
intangible assets measured at fair value for an impairment assessment under SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
The partial adoption of SFAS 157 on January 1, 2008 with respect to financial assets and
financial liabilities recognized or disclosed at fair value in the financial statements on a
recurring basis is not expected to have a material impact on our consolidated financial statements.
We are in the process of analyzing the potential impact of SFAS 157 relating to our planned
January 1, 2009 adoption of the remainder of the standard.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities including an Amendment of FASB Statement No. 115 (SFAS 159), which allows
an entity to choose to measure certain financial instruments and liabilities at fair value.
Subsequent measurements for the financial instruments and liabilities an entity elects to fair
value will be recognized in earnings. SFAS 159 also establishes additional disclosure requirements.
SFAS 159 is effective for us beginning January 1, 2008. The Company believes that this new
pronouncement will not have an effect on the Companys consolidated results of operations,
consolidated financial position or consolidated cash flows.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS 141R). SFAS 141R establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the
business combination. SFAS 141R is effective for us beginning January 1, 2009. SFAS 141R will be
applied prospectively to business combinations with an acquisition date on or after the effective
date.
NOTE 2 GOING CONCERN
As shown in the accompanying condensed consolidated financial statements, as of March 31,
2008, the Company had an accumulated deficit of $2,622,248 and during the three months ended March
31, 2008, the Company incurred a net loss of $282,947 and used cash in operations of $241,541. The
Companys historical and continuing losses raise substantial doubt about the Companys ability to
continue as a going concern.
As of March 31, 2008, we had $348,986 of operating funds, which management anticipates will
sustain our operations, as presently conducted, until the third quarter of 2008. At the end of the
third quarter of 2008, we anticipate that our operating activities will not generate sufficient
cash to fund our future operations and that we will be required to seek additional funds at that
time.
Further, the Company may identify and pursue additional acquisitions. In the event that the
Company consummates an additional acquisition, it may require additional funds prior to the end of
the third quarter of 2008. No assurances, however, can be given that those opportunities can be
realized upon, if available.
The accompanying consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
7
IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
MARCH 31, 2008
(Unaudited)
NOTE 3 RELATED PARTY TRANSACTIONS
Office Space: On February 28, 2008, we entered into a letter agreement amending our Sublease with
HDNet LLC, an affiliate of Radical Holdings LP, for our current office space. The letter agreement
extends the term of the Sublease until December 31, 2009. The rent is $900 per month, utilities
included. HDNet LLC leases this office space from Radical Computing, Inc., another affiliate of
Radical Holdings LP.
Consulting Agreement: On February 28, 2008, we entered into an Agreement for Project Staffing
Services with HDNet Fights, Inc., an affiliate of Radical Holdings LP. The Agreement for Project
Staffing Services provides that we will provide personnel, as independent contractors on an
hourly-fee basis, to perform computer software programming, system analysis, design, project
management, consulting, and education and training for HDNet Fights, Inc. Total revenue from this
agreement was $7,525 during the three months ended March 31, 2008. Amounts due to the Company from
HD Net Fights, Inc. totaled $7,525 at March 31, 2008.
8
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following Managements Discussion and Analysis, or MD&A, is intended to aid the reader in
understanding us, our operations and our present business environment. MD&A is provided as a
supplement to, and should be read in conjunction with, our consolidated financial statements and
the notes accompanying those financial statements, which are included in this Quarterly Report on
Form 10-Q. MD&A includes the following sections:
|
|
|
Recent Developments a description of important events that have recently
occurred. |
|
|
|
|
Our Business a general description of our business, our objectives, our areas of
focus and the challenges and risks of our business. |
|
|
|
|
Critical Accounting Policies and Estimates a discussion of accounting policies
that require critical judgments and estimates. |
|
|
|
|
Operations Review an analysis of our consolidated results of operations for the
periods presented in this Quarterly Report on Form 10-Q. |
|
|
|
|
Liquidity, Capital Resources and Financial Position an analysis of our cash flows
and debt and contractual obligations; and an overview of our financial condition. |
Recent Developments
Action by written consent in lieu of annual meeting. By written consent, dated April 18,
2008, Radical Holdings LP, the holder of 97.1% of our outstanding voting stock authorized or
approved the following actions: the election of Darin Divinia and Robert Hart as directors for one
year terms; and the ratification of the appointment of KBA Group LLP as our independent registered
public accounting firm.
Our Business
General
Our principal executive offices are located at 320 South Walton, Dallas, Texas 75226, and our
telephone number at that address is (214) 744-8801.
Prior to October 1, 2007, Immediatek, through its wholly-owned, operating subsidiary,
DiscLive, recorded live content, such as concerts and conferences, and made the recorded content
available for delivery to attendees within fifteen minutes after the conclusion of a live event.
As of October 1, 2007, Immediatek ceased retail sales of DiscLive products in conjunction with
its decision not to further pursue that line of business. As previously disclosed, management
commenced an evaluation of the DiscLive business and its prospects in early August 2007. Based upon
this evaluation, it was determined that not pursuing this line of business was in the best interest
of Immediateks stockholders.
On August 29, 2007, Immediatek formed a wholly-owned subsidiary, IMKI Ventures, Inc. IMKI
Ventures acquired certain assets from a related party on August 31, 2007. The consideration paid
for the acquired assets was 60,514 shares of Immediatek common stock. Those acquired assets were
developed into our e-commerce product called RadicalBuy, which was launched in part on October 23,
2007. RadicalBuy is a new online marketplace, which, in addition to providing buyers and sellers
an online forum to buy and sell items, allows seller-approved third-parties to sell items on the
sellers behalf and earn a commission. Currently, RadicalBuy is available on the social networking
site Facebook.
9
Using RadicalBuy, sellers can list an item and have it visible to all Facebook users
instantly. RadicalBuy takes advantage of the social networks that Facebook is built on to increase
the likelihood that an
item will be sold based on the premise that a buyer might be more comfortable buying something
from a seller located in their own circle of friends instead of a stranger using other classified
advertising avenues. Additionally, users are able to list their RadicalBuy items on additional
platforms, such as their MySpace page, blog or personal web page, using a widget that is
currently available from our RadicalBuy website.
After an item is listed, others can post the listing on their Facebook page to earn a
commission. The amount of commission paid is at the discretion of the seller. If a user has
nothing to sell, RadicalBuy allows all users to list other users items to earn commission. Users
can leave feedback about sellers and buyers, and read others comments before buying or selling
anything on the RadicalBuy platform.
RadicalBuy does not currently charge a fee for listing items for sale; it only charges a
commission-based fee upon the sale of items that are listed. The final value selling fee is based
on a tiered platform. The fee schedule is 5% of the first $25 in value, plus 3% of the value from
$25-1000, plus 1.5% of the value over $1000. The maximum final selling value fee is $500 per item.
History of Operating Losses
The following table presents our net loss and cash used in operating activities for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(282,947 |
) |
|
$ |
(148,297 |
) |
Net cash used in operating activities |
|
$ |
(241,541 |
) |
|
$ |
(90,798 |
) |
Our existence and operations are dependent upon our ability to generate sufficient funds from
operations to fund operating activities.
The report of our independent registered public accounting firm on our financial statements
for the year ended December 31, 2007 includes an emphasis paragraph, in addition to their audit
opinion, stating that our recurring losses from operations and substantial accumulated deficit
raise substantial doubt about our ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible effects on recoverability and classification
of assets or the amounts and classification of liabilities that may result from our inability to
continue as a going concern.
We funded our operations during the three months ended March 31, 2008, primarily from the
proceeds generated by the sale of the Series A Convertible Preferred Stock in 2006.
Our Objectives
At this time, our primary objectives are to successfully launch the other planned applications
and features we have for RadicalBuy and grow its user base and transaction volume.
Areas of Focus
RadicalBuy Successful Roll-Out and Improvements. Our current primary focus is launching the
other planned aspects of RadicalBuy, which includes additional features for the website and other
revenue generating features. We are attempting to create a website that is a full-service online
marketplace. We anticipate launching additional features for the website in the third quarter of
2008. In tandem with the roll-out of the website and additional features, we will continue to focus
on refining and improving the applications previously launched.
RadicalBuy Increase Users and Transactions. We also are focusing on increasing the number of
users of RadicalBuy and the number of items listed for sale through it. In that respect, we may
offer promotions to new and existing users to list their items for sale through RadicalBuy.
10
Acquisitions. We may also identify and pursue additional potential acquisition candidates. No
assurances can be given, however, that we will be successful in identifying any potential targets
and, when identified, consummating their acquisition.
Challenges and Risks
Operating in this area provides unique opportunities; however, challenges and risks accompany
those opportunities. Our management has identified the following material challenges and risks that
will require substantive attention from our management (see Liquidity and Capital Resources and
Financial PositionLiquidity beginning on page 14).
Utilizing Funds on Hand in a Manner that is Accretive. If we do not manage our assets
aggressively and apply the available capital judicially, we may not generate sufficient cash from
our operating activities to fund our operations going forward, which would require us to seek
additional funding in the future.
Dependence on Third-Party Platforms. Currently, RadicalBuy is highly dependent on the Facebook
platform. Any change, or issues related to that platform will likely affect us, as well. We are
constantly monitoring that platform in order to be able to plan and take appropriate actions in the
event that we are affected.
Growing Users and Listed Items. In order to be successful with the RadicalBuy application, we
will be required to grow the number of users and items listed for sale. In addition, we will need
to ensure that the users are actively utilizing the application and transactions are occurring. We
are considering the use of incentives or promotions to attract users and transactions.
Competition. There are companies in this industry that have far more financial resources and a
larger market share than us. In order to compete with these companies, we will be required to be
innovative and create more attractive functions and features.
Additionally, see Risk Factors in the Companys Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2007, which was filed with the SEC on March 28, 2008.
Challenges and risks, including those described above, if not properly addressed or managed,
may have a material adverse effect on our business. Our management, however, is endeavoring to
properly manage and address these challenges and risks.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America, which requires management to make
estimates, judgments and assumptions with respect to the amounts reported in the condensed
consolidated financial statements and in the notes accompanying those financial statements. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, however, have been condensed or omitted
pursuant to the rules and regulations promulgated by the SEC. We believe that the most critical
accounting policies and estimates relate to the following:
|
|
|
Recoverability of Long-Lived Assets. We have certain non-current assets. Management
considers the useful life of the assets on an annual basis, or more periodically as
circumstances dictate, and assesses whether or not there is an impairment. An
assessment of recoverability involves comparing the carrying value of the asset with
its recoverable amount, typically the estimated future cash flows expected to result
from the use of the assets, including cash flows from disposition. If the expected
cash flows from a non-current asset were determined to be less than its carrying
value, an impairment would be charged to the income statement. During the three months
ended March 31, 2008, there was no impairment of long-lived assets. |
|
|
|
|
Convertible Securities. From time to time, we have issued, and in the future may
issue, convertible securities with beneficial conversion features. We account for
these convertible securities in accordance with Emerging Issues Task Force, or EITF,
Issue No. 98-5,
Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios (EITF 98-5) and EITF 00-27, Application
of Issue No. 98-5 to Certain Convertible Instruments. |
11
|
|
|
Revenue Recognition. With respect to RadicalBuy, revenues are recognized when
evidence of an arrangement exists, the fee is fixed and determinable, no significant
obligation remains and collection of the receivable is reasonably assured. RadicalBuy
generates transaction revenues from final value and feature fees. Feature fee revenues
are recognized ratably over the estimated period of the feature, while revenues
related to final value fees are recognized at the time that the transaction is
successfully concluded. A transaction is considered successfully concluded when at
least one buyer has offered to purchase the item. DiscLive primarily delivered
products sold by it through shipment to the customer. Revenue was recognized upon
shipment of the product to the customer. A smaller percentage of revenues were
recognized at the point of sale at the event being recorded. Certain customers
purchased and accepted hand delivery of the product on-site at the event. |
While our estimates and assumptions are based upon our knowledge of current events and actions we
may undertake in the future, actual results may ultimately differ from those estimates and
assumptions. For a discussion of our significant accounting policies, see Note 1 Summary of
Significant Accounting Policies and Procedures commencing on
page 5.
Recent Accounting Standards and Pronouncements
Refer to Note 1 Summary of Significant Accounting Policies and Procedures accompanying the
consolidated financial statements commencing on page 5 for a discussion of recent accounting
standards and pronouncements.
Operations Review
The Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
2008 vs. 2007 |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
% Change |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
13,603 |
|
|
$ |
(13,603 |
) |
|
|
(100 |
)% |
Cost of revenues |
|
|
|
|
|
|
12,114 |
|
|
|
(12,114 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
1,489 |
|
|
|
(1,489 |
) |
|
|
(100 |
)% |
Gross margin percentage |
|
|
0 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting expense related party |
|
|
13,100 |
|
|
|
2,474 |
|
|
|
10,626 |
|
|
|
430 |
|
Professional fees |
|
|
86,182 |
|
|
|
53,652 |
|
|
|
32,530 |
|
|
|
61 |
|
Salaries and benefits |
|
|
159,703 |
|
|
|
65,778 |
|
|
|
93,925 |
|
|
|
143 |
|
Non-cash consulting expense |
|
|
10,500 |
|
|
|
10,500 |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,262 |
|
|
|
12,375 |
|
|
|
(5,113 |
) |
|
|
(41 |
) |
(Gain) loss on sale and disposal of assets held for sale |
|
|
(687 |
) |
|
|
1,080 |
|
|
|
(1,767 |
) |
|
|
(164 |
) |
Other general and administrative expenses |
|
|
16,804 |
|
|
|
11,953 |
|
|
|
4,851 |
|
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss |
|
$ |
(292,864 |
) |
|
$ |
(156,323 |
) |
|
|
136,541 |
|
|
|
87 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income related party |
|
|
7,525 |
|
|
|
|
|
|
|
7,525 |
|
|
|
100 |
|
Interest income |
|
|
2,392 |
|
|
|
8,026 |
|
|
|
(5,634 |
) |
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(282,947 |
) |
|
$ |
(148,297 |
) |
|
|
134,650 |
|
|
|
91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding basic and fully diluted |
|
|
535,321 |
|
|
|
474,807 |
|
|
|
60,514 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
(0.53 |
) |
|
$ |
(0.31 |
) |
|
$ |
0.22 |
|
|
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Revenues. The decrease in revenues is attributable to the discontinuation of the DiscLive
business. No live events were recorded and there were no product sales, during the three months
ended March 31, 2008. As of March 31, 2008, revenues generated from RadicalBuy have been minimal.
We expect revenues for the remainder of 2008 to increase as we continue to implement
RadicalBuy and attract users. Since RadicalBuy is a new line of business, revenues are difficult
to anticipate until we achieve a consistent user base. We are actively working on additions and
improvements to RadicalBuy that should result in increased users and, consequently, increased sales
through the RadicalBuy application. No assurances, however, can be given that we will be able to
attract a significant number of additional users or sales.
Cost of Revenues. Costs of revenues decreased due to the discontinuation of DiscLive
operations. We anticipate that costs of revenues will increase proportionately with revenues in
regards to RadicalBuy. Cost of revenues consists principally of merchant fees, which we believe
will initially increase proportionately with revenue.
Consulting Services. Costs for consulting services increased during the three month period
ended March 31, 2008 as compared to the three month period ended March 31, 2007, due to the
retention of an outside consultant related to the launch of a feature on our website. We expect
that consulting services expense should decrease for the 2008 fiscal year compared to the 2007
fiscal year as the services of Darin Divinia, Steve Watkins and Adam Greenspan will no longer be
provided through a management services agreement. These individuals became employees of the
Company in January of 2008.
Professional Fees. The increase in professional fees for the three month period ended March
31, 2008 as compared to the three month period ended March 31, 2007, is attributable to higher
professional fees incurred in connection with increases in audit fees, legal fees and other
professional fees incurred as we attempt to expand our operations.
Salaries and Benefits. The increase in salaries and benefits expense for the three month
period ended March 31, 2008, as compared to the three month period ended March 31, 2007, is
attributable to the employment of Darin Divinia, Steve Watkins and Adam Greenspan in January of
2008.
Other Income Related Party. On February 28, 2008, we entered into an Agreement for Project
Staffing Services with HDNet Fights, Inc., an affiliate of Radical Holdings LP. The Agreement for
Project Staffing Services provides that we will provide personnel, as independent contractors on an
hourly-fee basis, to perform computer software programming, system analysis, design, project
management, consulting, and education and training for HDNet Fights, Inc. For the three month
period ended March 31, 2008, we earned $7,525 under this agreement.
Interest Income. Interest income decreased during the three months ended March 31, 2008, as
compared to the same period in 2007, due to decreased cash balances.
Other General and Administrative Expense. General and administrative expense increased for
the three month period ended March 31, 2008, as compared to the three month period ended March 31,
2007. The difference was a result of supplies purchased in support of the RadicalBuy application.
Liquidity and Capital Resources and Financial Position
General
As of March 31, 2008, we had $348,986 of operating funds, which management anticipates will
sustain our operations, as presently conducted, until the third quarter of 2008. At the end of the
third quarter of 2008, we anticipate that our operating activities will not generate sufficient
cash to fund our future operations and that we will be required to seek additional funds at that
time.
On October 1, 2007, we ceased retail sales of the DiscLive product after a comprehensive
evaluation of the DiscLive business. On October 23, 2007, however, we launched RadicalBuy, a new
online marketplace, and will direct our funds available to the operation and growth of that
business. Our goal is to grow the use of
RadicalBuy, which will generate revenue to support our operations. We intend to continue to
improve and expand our website and roll-out other features to support its growth. No assurances,
however, can be given that this line of business will generate sufficient operating funds to
support our operating activities.
13
We may also pursue various acquisition targets that could provide us with operating funds to
support our activities. In the event that we acquire a target, depending on the nature of that
target, we may require additional funds to consummate the acquisition or support our operations
going forward. No assurances, however, can be given that we will be able to identify a potential
target, consummate the acquisition of the target and, if consummated, integrate the target company
and realize funds from operations.
Operating Activities. Cash used in operations was $241,541 in the three months ended March 31,
2008, as compared to $90,798 for the three months ended March 31, 2007. As of March 31, 2008, we
had $348,986 of operating funds, which management anticipates will sustain our operations, as
presently conducted, until the third quarter of 2008. At the end of the third quarter of 2008, we
anticipate that our operating activities will not generate sufficient cash to fund our future
operations and that we will be required to seek additional funds at that time.
Investing Activities. Cash provided by investing activities for the three months ended March 31,
2008 was $740, as compared to $3,549 used in investing activities for the three months ended March
31, 2007.
Financing Activities. No cash was provided by financing activities for the three months ended
March 31, 2008 or the three months ended March 31, 2007.
Indebtedness
At March 31, 2008, we did not have any outstanding indebtedness for borrowed money.
Contractual Obligations and Commercial Commitments
The following table highlights, as of March 31, 2008, our contractual obligations and
commitments by type and period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
Contractual Obligations |
|
Total |
|
|
Less than 1 year |
|
|
1-3 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sublease (a) |
|
$ |
18,900 |
|
|
$ |
10,800 |
|
|
$ |
8,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
$ |
18,900 |
|
|
$ |
10,800 |
|
|
$ |
8,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On February 21, 2007, we entered into a Sublease with HDNet LLC for $900 per month,
utilities included, that commenced on March 1, 2007. This sublease was renewed in
February 2008 and expires December 31, 2009. |
Liquidity
We currently believe that the funds received from the consummation of the issuance and sale of
the Series A Convertible Preferred Stock on June 8, 2006, will provide us with the necessary funds
to operate our business until the third quarter of 2008. We had initially estimated that these
funds would be available through the second quarter of 2008. Based upon the full operating results
for the first quarter and the implementation of other cost-saving measures, we have revised our
estimate to the third quarter of 2008. Because our main line of business, RadicalBuy, has a short
operating history, we anticipate that our operating activities will not generate a material amount
of cash in the near term. While we are undertaking various plans and measures, which we believe
will increase funds generated from operating activities, no assurances can be given that those
plans and measures will be successful in increasing funds generated from operating activities.
Accordingly, we anticipate that we will be required to seek additional funds at the end of the
third quarter of 2008 to fund our future operating activities.
14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our excess cash and cash equivalents consist principally of amounts held in demand deposit
accounts and amounts invested in financial instruments with initial maturities of three months or
less at the time of purchase. The Company places its temporary cash investments with quality
financial institutions. At times, such investments may be in excess of the Federal Deposit
Insurance Corporation insurance limit. The Company does not believe that it is exposed to any
significant credit risk on cash. We do not have any direct investments in auction-rate securities
or securities that are collateralized by assets that include mortgages or subprime debt. If a 10
percent change in interest rates were to have occurred on March 31, 2008, this change would not
have had a material effect on the fair value of our cash and cash equivalents as of that date.
Item 4T. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our chief executive officer and president (our Principal Executive Officer and Principal
Financial Officer) is responsible for establishing and maintaining disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
Act of 1934) for us. Our existing disclosure controls and procedures were designed and implemented
prior to the appointment of our current chief executive officer and president. We regularly
evaluate the effectiveness of our disclosure controls and procedures and report our conclusions
about the effectiveness of the disclosure controls and procedures quarterly on our Quarterly
Reports on Forms 10-Q and annually on our Annual Reports on Forms 10-K. Factors that our chief
executive officer and president reviewed and analyzed are as follows:
|
|
|
the timeliness of the disclosures made by us since the change in control of us and
retention of new management personnel; |
|
|
|
|
the effectiveness of our disclosure policy, which encourages open and timely
disclosure of material events, and the procedures established to implement that
policy; |
|
|
|
|
the limited number of people within our organization, which provides for detail
knowledge of our activities and issues, and the amount and pattern of communications
among them; |
|
|
|
|
the tone established for compliance with all disclosure requirements within our
organization; |
|
|
|
|
all constructive comments received from, or suggested by, legal counsel and
investors concerning our disclosures and activities have been timely and adequately
addressed; |
|
|
|
|
management has addressed all disclosure issues encountered during the most recent
year; and |
|
|
|
|
our Code of Business Conduct and Ethics provides methods to report violations of
our disclosure policies. |
The effectiveness of our disclosure controls and procedures also was considered in light of
the prior conclusion that we had ineffective internal controls over financial reporting, which
conclusion was based in large part upon the restatement of our financial statements for the period
ended June 30, 2006 and our limited number of personnel (see Managements Annual Report on
Internal Control Over Financial Reporting contained in our Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2007, which was filed with the SEC on March 28, 2008). The chief
executive officer and president considered the underlying reasons for the restatement, which were
different interpretations of certain provisions of several complex accounting policies, including
push-down accounting. In addition, we have a limited number of personnel within our
organization, which we believe prevents us from meeting the criteria set forth by forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Nevertheless, based upon
a number of factors, including the revisions to our previously issued financial statements, our
plan for remediation (as described below) and other procedures designed to assist us in ensuring
the reliability of our financial
statements, our management believes that the consolidated financial statements included in
this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial condition,
results of operations and cash flows for the periods presented in conformity with generally
accepted accounting principles in the United States of America.
15
Based upon the evaluation for the period ended March 31, 2008, including the factors and
matters described immediately above, our chief executive officer and president concluded that our
disclosure controls and procedures were effective, as of the end of the period covered by this
Quarterly Report on Form 10-Q (March 31, 2008), in ensuring that material information relating to
us required to be disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms and that such information is accumulated and communicated to management,
including the chief executive officer and the president, as appropriate, to allow timely decisions
regarding required disclosure.
Plan for Remediation of Material Weaknesses
As a result of our conclusion that our internal control over financial reporting was
ineffective, during 2007, we retained an outside consulting firm to assist us in reviewing our
internal controls and to assist in designing and implementing effective controls. Working with
this consultant, we have identified several key challenges facing the Company:
|
|
|
limited resources dedicated to internal control compliance and little or no
internal expertise or experience; |
|
|
|
|
maintaining Company focus on risk and control; |
|
|
|
|
our ability to rely on monitoring (e.g. direct entity level) controls; |
|
|
|
|
properly leveraging high impact controls and optimizing the compliance process to
achieve proper balance between costs and benefits; and |
|
|
|
|
ensuring knowledge transfer takes place, ensuring sustainability and efficiency in
future years. |
Based on information received from our consultant, we are drafting policies and procedures
that we believe will, once implemented, substantially improve our internal control over financial
reporting.
Changes in Internal Controls
There were no changes in our internal controls during the last fiscal quarter that materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting; however, changes in our internal controls are currently being designed and will be
implemented on an ongoing basis as designed.
Limitations on the Effectiveness of Controls
Our management, including our chief executive officer and president, does not expect that our
disclosure controls and internal controls will prevent all error and all fraud. Any control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Due to the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within our Company have been detected. These inherent limitations include the
realities that judgments in decision making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the control.
16
The design of any system of controls also is based in part upon certain assumptions about the
likelihood of future events occurring. There can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, a control may become
inadequate because of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Due to the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
PART II OTHER INFORMATION
Item 6. Exhibits.
The following exhibits are filed in accordance with the provisions of Item 601 of
Regulation S-B.
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act. |
|
|
|
|
|
|
32.1 |
|
|
Certification Required by 18 U.S.C. Section 1350 (as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). |
17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
Date: May 15, 2008 |
IMMEDIATEK, INC.,
a Nevada corporation
|
|
|
By: |
/s/ DARIN DIVINIA
|
|
|
|
Name: |
Darin Divinia |
|
|
|
Title: |
Chief Executive Officer
(On behalf of the Registrant and as Principal
Executive Officer) |
|
|
S-1
INDEX TO EXHIBITS
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act. |
|
|
|
|
|
|
32.1 |
|
|
Certification Required by 18 U.S.C. Section 1350 (as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). |
Exhibit Index