NEVADA
|
68-0576847
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
5700
W. Plano Parkway, Suite 2600, Plano, Texas
|
75093
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
FORM
10-Q/A
|
||||
CONTENTS
|
||||
PART
I — FINANCIAL INFORMATION (Unaudited)
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PAGE
|
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Item
1
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—
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2
|
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3
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||||
4
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||||
5
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||||
Item
2
|
—
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18
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||
Item
3
|
—
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21
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||
Item
4
|
—
|
21
|
||
PART
II — OTHER INFORMATION
|
||||
Item
1
|
—
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21
|
||
Item
1A
|
—
|
22
|
||
Item
2
|
—
|
22
|
||
Item
3
|
—
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22
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||
Item
4
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—
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22
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||
Item
5
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—
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22
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||
Item
6
|
—
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22
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||
23
|
||||
EX-31.1
Section 302 Certification
|
||||
EX-31.2
Section 302 Certification
|
||||
EX-32.1
Section 906 Certification
|
||||
EX-32.2
Section 906 Certification
|
|
June
30,
|
September
30,
|
||||||
2008
|
2007
|
|||||||
(Unaudited)
(as Restated)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 703,034 | $ | 3,850,666 | ||||
Accounts
receivable, net
|
52,750 | 251,050 | ||||||
Prepaid
expenses and advances
|
50,373 | 34,564 | ||||||
Total
current assets
|
806,157 | 4,136,280 | ||||||
Equipment,
net
|
348,429 | 296,758 | ||||||
Intangible
assets, net
|
77,121 | 73,191 | ||||||
Loans
to related parties
|
60,432 | 69,432 | ||||||
Other
assets
|
123,975 | 97,292 | ||||||
Total
assets
|
$ | 1,416,114 | $ | 4,672,953 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Notes
payable to related parties
|
25,000 | 1,667,944 | ||||||
Accounts
payable and accrued expenses
|
1,307,845 | 1,449,399 | ||||||
Total
current liabilities
|
1,332,845 | 3,117,343 | ||||||
Deferred
revenue — related party
|
- | 1,000,000 | ||||||
Minority
interest
|
959,334 | 348,093 | ||||||
Stockholders’
(deficit) equity
|
||||||||
Common
shares — $0.001 par value; authorized 500,000,000 shares; and
353,782,630 and 318,522,499 shares issued and outstanding ,
respectively
|
353,782 | 318,522 | ||||||
Additional
paid-in capital
|
78,727,115 | 71,110,086 | ||||||
Stock
subscription receivable
|
(18,500 | ) | (190,000 | ) | ||||
Retained
(deficit)
|
(79,938,462 | ) | (71,031,091 | ) | ||||
Total
stockholders’ (deficit) equity
|
(876,065 | ) | 207,517 | |||||
Total
liabilities and stockholders’ equity
|
$ | 1,416,114 | $ | 4,672,953 |
Three
Months Ended June 30,
|
Nine
Months Ended June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(As
Restated)
|
(As
Restated)
|
|||||||||||||||
Revenue:
|
||||||||||||||||
Software
licensing fees
|
$ | 1,000,000 | $ | 150,000 | $ | 2,000,000 | $ | 1,390,000 | ||||||||
Custom
engineering fees
|
37,116 | 92,500 | 512,742 | 497,700 | ||||||||||||
Other
|
(35,576 | ) | 20,656 | 27,554 | 126,764 | |||||||||||
Total
revenue
|
1,001,540 | 263,156 | 2,540,296 | 2,014,464 | ||||||||||||
Expenses:
|
||||||||||||||||
General,
administrative and selling expenses
|
4,073,240 | 1,535,665 | 8,552,070 | 3,990,052 | ||||||||||||
General,
administrative and selling expenses stock based
compensation
|
457,029 | 2,646,051 | 1,998,827 | 5,656,459 | ||||||||||||
Research
and development
|
163,471 | 692,995 | 2,487,191 | 878,595 | ||||||||||||
Amortization
and depreciation
|
57,770 | 31,615 | 115,443 | 78,361 | ||||||||||||
Total
operating expenses
|
4,751,510 | 4,906,326 | 13,153,531 | 10,603,467 | ||||||||||||
Loss
from operations
|
(3,749,970 | ) | (4,643,170 | ) | (10,613,235 | ) | (8,589,003 | ) | ||||||||
Interest
income
|
6,708 | 1,342 | 42,738 | 311 | ||||||||||||
Interest
expense
|
(3,503 | ) | (1,956 | ) | (1,928 | ) | (11,640 | ) | ||||||||
Net
loss before minority interest
|
(3,746,765 | ) | (4,643,784 | ) | (10,572,425 | ) | (8,600,332 | ) | ||||||||
Minority
interest
|
754,376 | 68,693 | 1,665,054 | 129,354 | ||||||||||||
Net
(loss)
|
$ | (2,992,389 | ) | $ | (4,575,091 | ) | $ | (8,907,371 | ) | $ | (8,470.978 | ) | ||||
Basic
and diluted net loss per share
|
$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||
Weighted
average shares outstanding, basic and diluted
|
342,487,914 | 232,546,146 | 331,337,944 | 216,455,124 |
2008
|
2007
|
|||||||
(As
Restated)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss) for period
|
$ | (8,907,371 | ) | $ | (8,470,978 | ) | ||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Stock
and options issued for services
|
1,356,685 | - | ||||||
Stock
based compensation
|
1,998,827 | 5,656,459 | ||||||
Amortization
and depreciation
|
115,443 | 78,361 | ||||||
Minority
interest
|
(1,665,054 | ) | (129,354 | ) | ||||
Changes
in assets and liabilities:
|
||||||||
Deferred
revenue
|
(1,000,000 | ) | 1,150,000 | |||||
Accounts
receivable
|
198,300 | (390,020 | ) | |||||
Prepaid
expenses
|
(15,809 | ) | 4,399 | |||||
Other
assets
|
(26,682 | ) | (36,120 | ) | ||||
Accounts
payable and accrued expenses
|
(141,554 | ) | 178,566 | |||||
Total
cash used in operating activities
|
(8,087,215 | ) | (1,958,687 | ) | ||||
Net
cash used in investing activities:
|
||||||||
Purchase
of equipment
|
(115,213 | ) | (54,035 | ) | ||||
Purchase
of intangible assets
|
(55,832 | ) | (197,230 | ) | ||||
Loan
to affiliate
|
9,000 | (50,000 | ) | |||||
Net
cash used in investing activities
|
(162,045 | ) | (301,265 | ) | ||||
Cash
flows provided by financing activities:
|
||||||||
Payments
on notes payable to related parties
|
(100,000 | ) | 32,956 | |||||
Proceeds
from sale of stock
|
2,925,333 | 2,455,050 | ||||||
Minority
capital raised
|
2,276,295 | 376,721 | ||||||
Net
cash provided (used in) by financing activities
|
5,101,628 | 2,864,727 | ||||||
Net
(decrease)/increase in cash
|
(3,147,632 | ) | 604,775 | |||||
Cash,
beginning of period
|
3,850,666 | 291,426 | ||||||
Cash,
end of period
|
$ | 703,034 | $ | 896,201 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | - | $ | - | ||||
Non-cash
transactions:
|
||||||||
Issuance
of common stock to retire debt
|
$ | 1,542,943 | $ | 619,000 |
reclassifications
|
||||||||||||
as
previously
|
and
|
|||||||||||
reported
|
adjustment
|
as
restated
|
||||||||||
ASSETS
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
|
$ | 703,033 | $ | 1 | $ | 703,034 | ||||||
Accounts
receivable
|
52,750 | - | 52,750 | |||||||||
Prepaid
expenses and advances
|
50,373 | - | 50,373 | |||||||||
Total
current assets
|
806,156 | 1 | 806,157 | |||||||||
Equipment,
net
|
348,429 | - | 348,429 | |||||||||
Intangible
assets, net
|
77,121 | - | 77,121 | |||||||||
Loans
to related parties
|
60,432 | - | 60,432 | |||||||||
Other
assets
|
123,975 | - | 123,975 | |||||||||
Total
assets
|
$ | 1,416,113 | $ | 1 | $ | 1,416,114 | ||||||
LIABILITIES
AND STOCKHOLDERS' (DEFICIT) EQUITY
|
||||||||||||
Current
liabilities:
|
||||||||||||
Notes
payable to related parties
|
$ | 25,000 | $ | - | $ | 25,000 | ||||||
Accounts
payable and accrued expenses
|
1,303,988 | 3,857 | 1,307,845 | |||||||||
Total
current liabilities
|
1,328,988 | 3,857 | 1,332,845 | |||||||||
Minority
interest
|
959,334 | - | 959,334 | |||||||||
Stockholders'
(deficit) equity
|
||||||||||||
Common
stock
|
354,232 | (450 | ) | 353,782 | ||||||||
Additional
paid in capital
|
78,712,970 | (15,840 | ) | 78,727,115 | ||||||||
Stock
subscription receivable
|
(18,500 | ) | (18,500 | ) | ||||||||
Retained
(deficit)
|
(79,920,911 | ) | 12,434 | (79,938,462 | ) | |||||||
(872,209 | ) | (3,856 | ) | (876,065 | ) | |||||||
Total
liabilities and stockholders' (deficit) equity
|
$ | 1,416,113 | $ | 1 | $ | 1,416,114 |
Three
months ended June 30, 2008
|
Nine
months ended June 30, 2008
|
|||||||||||||||||||||||
reclassifications
|
reclassifications
|
|||||||||||||||||||||||
as
previously
|
and
|
as
previously
|
and
|
|||||||||||||||||||||
reported
|
adjustment
|
as
restated
|
reported
|
adjustment
|
as
restated
|
|||||||||||||||||||
Revenue:
|
||||||||||||||||||||||||
Software
licensing fees
|
$ | 1,000,000 | $ | - | $ | 1,000,000 | $ | 2,000,000 | $ | - | $ | 2,000,000 | ||||||||||||
Custom
engineering fees
|
1,750 | 35,366 | 37,116 | 512,742 | - | 512,742 | ||||||||||||||||||
Other
|
- | (35,576 | ) | (35,576 | ) | 27,554 | - | 27,554 | ||||||||||||||||
Total
revenue
|
1,001,750 | (210 | ) | 1,001,540 | 2,540,296 | - | 2,540,296 | |||||||||||||||||
Expenses:
|
||||||||||||||||||||||||
General,
administrative and selling expenses
|
3,111,176 | 962,064 | 4,073,240 | 8,645,670 | (93,600 | ) | 8,552,070 | |||||||||||||||||
General,
administrative and selling expenses
|
- | - | ||||||||||||||||||||||
stock
based compensation
|
- | 457,029 | 457,029 | 1,891,532 | 107,295 | 1,998,827 | ||||||||||||||||||
Research
and development
|
664,079 | (500,608 | ) | 163,471 | 2,487,191 | - | 2,487,191 | |||||||||||||||||
Amortization
and depreciation
|
32,719 | 25,051 | 57,770 | 115,443 | - | 115,443 | ||||||||||||||||||
Total
operating expenses
|
3,807,974 | 943,536 | 4,751,510 | 13,139,836 | 13,695 | 13,153,531 | ||||||||||||||||||
- | - | |||||||||||||||||||||||
Loss
from operations
|
(2,806,224 | ) | (943,746 | ) | (3,749,970 | ) | (10,599,540 | ) | (13,695 | ) | (10,613,235 | ) | ||||||||||||
Interest
income
|
2,661 | 4,047 | 6,708 | 42,738 | - | 42,738 | ||||||||||||||||||
Interest
expense
|
(1,254 | ) | (2,249 | ) | (3,503 | ) | (1,928 | ) | - | (1,928 | ) | |||||||||||||
Net
loss before minority interest
|
(2,804,817 | ) | (941,948 | ) | (3,746,765 | ) | (10,558,730 | ) | (13,695 | ) | (10,572,425 | ) | ||||||||||||
Minority
interest
|
754,376 | - | 754,376 | 1,665,054 | - | 1,665,054 | ||||||||||||||||||
Net
income (loss)
|
$ | (2,050,441 | ) | $ | (941,948 | ) | $ | (2,992,389 | ) | $ | (8,893,676 | ) | $ | (13,695 | ) | $ | (8,907,371 | ) | ||||||
Basic
and diluted net loss per share
|
$ | (0.01 | ) | $ | (0 | ) | (0.01 | ) | $ | (0.03 | ) | $ | (0 | ) | $ | (0.03 | ) | |||||||
Weighted
average shares outstanding basic and diluted
|
342,487,914 | - | 342,487,914 | 331,337,944 | - | 331,337,944 |
reclassifications
|
||||||||||||
as
previously
|
and
|
|||||||||||
reported
|
adjustment
|
as
restated
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss) for period
|
$ | (8,889,820 | ) | $ | (17,551 | ) | $ | (8,907,371 | ) | |||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Stock
and options issued for services
|
1,356,685 | - | 1,356,685 | |||||||||
Stock
based compensation
|
1,891,532 | 107,295 | 1,998,827 | |||||||||
Amortization
and depreciation
|
115,443 | - | 115,443 | |||||||||
Minority
interest
|
(1,665,054 | ) | - | (1,665,054 | ) | |||||||
Changes
in assets and liabilities:
|
||||||||||||
Deferred
revenue
|
(1,000,000 | ) | - | (1,000,000 | ) | |||||||
Accounts
receivable
|
198,300 | - | 198,300 | |||||||||
Prepaid
expenses
|
(15,809 | ) | - | (15,809 | ) | |||||||
Other
assets
|
(26,683 | ) | 1 | (26,682 | ) | |||||||
Accounts
payable and accrued expenses
|
(145,410 | ) | 3,856 | (141,554 | ) | |||||||
Total
cash used in operating activities
|
(8,180,816 | ) | 93,600 | (8,087,215 | ) | |||||||
Net
cash used in investing activities:
|
||||||||||||
Purchase
of equipment
|
(115,213 | ) | - | (115,213 | ) | |||||||
Purchase
of intangible assets
|
(55,832 | ) | - | (55,832 | ) | |||||||
Loan
to affiliate
|
9,000 | - | 9,000 | |||||||||
Net
cash used in investing activities
|
(162,045 | ) | - | (162,045 | ) | |||||||
Cash
flows provided by financing activities:
|
||||||||||||
Payments
on notes payable to related parties
|
(100,000 | ) | - | (100,000 | ) | |||||||
Proceeds
from sale of stock
|
3,018,933 | (93,600 | ) | 2,925,333 | ||||||||
Minority
capital raised
|
2,276,295 | - | 2,276,295 | |||||||||
Net
cash provided (used in) by financing activities
|
5,195,228 | (93,600 | ) | 5,101,628 | ||||||||
Net
decrease in cash
|
(3,147,633 | ) | - | (3,147,632 | ) | |||||||
Cash,
beginning of period
|
3,850,666 | - | 3,850,666 | |||||||||
Cash,
end of period
|
$ | 703,033 | - | $ | 703,034 | |||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Cash
paid for interest
|
- | - | ||||||||||
Non-cash
transactions:
|
||||||||||||
Issuance
of common stock to retire debt
|
$ | 1,542,943 | - | $ | 1,542,943 |
June
30,
|
Sept.
30,
|
|||||||
2008
|
2007
|
|||||||
Contingent repurchase
agreement to Video Software Partners, secured by certain software
products, payable on February 1, 2008, interest imputed at
10%
|
$ | - | $ | 1,642,944 | ||||
Note
payable to a related individual, at 10%, due November 25, 2004, extended
year to year, unsecured
|
25,000 | 25,000 | ||||||
$ | 25,000 | $ | 1,667,944 |
June
30,
|
Sept.
30,
|
|||||||
2008
|
2007
|
|||||||
Accounts
payable - trade
|
$ | 994,444 | $ | 543,487 | ||||
Accrued
expenses - other
|
55,559 | 242,151 | ||||||
Due
to investment banker
|
- | 139,825 | ||||||
Accrued
vacation pay
|
129,673 | 76,640 | ||||||
Accrued
payroll and payroll taxes
|
39,848 | 297,296 | ||||||
Customer
advances
|
- | 150,000 | ||||||
Accrued
interest
|
64,886 | - | ||||||
Accrued
rent
|
23,434 | - | ||||||
$ | 1,307,844 | $ | 1,449,399 |
Outstanding
Stock Options
|
Exercisable
Stock Options
|
|||||||||||||||
Options
|
Weighted
Average
Exercise
Price
|
Options
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of period
|
84,404,634 | $ | .1159 | 40,767,182 | $ | .1159 | ||||||||||
Granted
|
15,100,000 | $ | .1000 | 4,169,848 | $ | .0874 | ||||||||||
Outstanding
at end of period
|
99,504,634 | $ | .1135 | 44,937,030 | $ | .1135 |
Outstanding
Stock Options
|
Exercisable
Stock Options
|
|||||||||||||||||||||||||
Exercise Price Range
|
Shares
|
Life
|
Weighted
Average exercise Price
|
Shares
|
Life
|
Weighted
Average exercise Price
|
||||||||||||||||||||
$ | 0.010 - $0.085 | 51,979,634 | 8.15 | $ | 0.08 | 23,250,012 | 815 | $ | 0.08 | |||||||||||||||||
$ | 0.100 - $0.200 | 42,045,000 | 7.53 | $ | 0.10 | 20,254,516 | 7.53 | $ | 0.10 | |||||||||||||||||
$ | 0.210 - $1.333 | 5,480,000 | 6.70 | $ | 0.54 | 1,432,502 | 6.90 | $ | 0.61 | |||||||||||||||||
99,504,634 | 44,937,030 |
Outstanding
Warrants
|
Exercisable
Warrants
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Exercise
|
Exercise
|
|||||||||||||||
Shares
|
Price
|
Shares
|
Price
|
|||||||||||||
Outstanding
at October 1, 2007
|
44,019,716 | $ | 0.10 | 44,019,716 | $ | 0.10 | ||||||||||
Granted
during period
|
6,938,272 | $ | 0.10 | 6,938,272 | $ | 0.10 | ||||||||||
Exercised
during the period
|
(2,892,858 | ) | $ | 0.10 | (2,892,858 | ) | $ | 0.10 | ||||||||
Outstanding
at June 30, 2008
|
48,065,130 | $ | 0.10 | 48,065,130 | $ | 0.10 |
June
30,
|
September 30,
|
|||||||
2008
|
2007
|
|||||||
Net
operating loss
|
$ | 23,659,000 | $ | 19,239,000 | ||||
In-process
research and development
|
332,000 | 1,528,000 | ||||||
Stock-based
compensation
|
680,000 | 1,386,000 | ||||||
Transition
adjustment
|
217,000 | 217,000 | ||||||
24,888,000 | 22,370,000 | |||||||
Less
valuation allowance
|
(24,888,000 | ) | (22,370,000 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
|
·
|
Article
I, Section 1.8 was amended to change the definition of a quorum for
stockholder action at any meeting to the outstanding shares representing a
majority of the voting power
outstanding.
|
|
·
|
Article
9 was added to allow the Company to opt out of the requirements imposed by
Nevada Revised Statutes Section 78.378 and Section
78.3793.
|
|
·
|
Article 3, Section 3.1, Section
3.2.1(b) and Section 3.2.2 were amended so as to remove the Chairman of
the Board as an executive officer of the
Company.
|
|
●
|
Revenues were $1,001,540 for the
three months ended June 30, 2008 (compared with $263,156 for the same
period last year).
|
|
●
|
In April 2007 we entered into a
license agreement for the exclusive right to use our technology for the
entertainment market for an initial amount of $1,000,000 and a further
$450,000 contingent on our delivering certain design proofs of concept.
The license agreement granted the license holder a put option which could
have required us to repurchase the license for $2,000,000 at any time
after January 31, 2008, and before April 31, 2010. The revenue from this
license was deferred and is included on our balance sheet as deferred
revenue at September 30, 2007. In December 2007, we concluded an agreement
with the licensee to waive the put option in return for a waiver of the
balance due under the license of $450,000, and accordingly we recorded the
full license fee of $1,000,000 in the quarter ended December 31,
2007.
|
|
●
|
$453,000 for the design of our
customers’ applications, including a major US telecommunications carrier.
We expect continued engineering revenues if and when these customers
successfully deploy their product and/or service
offerings.
|
|
·
|
For
the remainder of 2008, focus on completing the development of and
launching of VUELIVE (previously ESPRE
Live)
|
|
o
|
Panel
Broadcasts (up to 3 panelists): a broadcast is enhanced by a
“panel” of commentators or guests
|
|
o
|
Selective
Broadcasts: the ability to broadcast live or pre-recorded content
to a selected, limited number of
subscribers.
|
|
o
|
User
Generated Broadcasts: the ability for a subscriber to broadcast
it’s own live or pre-recorded
content
|
|
o
|
Multi-party
video-communication (up to 7-way): the ability for a subscriber to
communicate through video with anyone else in the community (take
questions from the audience)
|
|
·
|
Engage
in partnerships with firms in key vertical markets. These partners will be
market experts and have well-defined application strategies that require
VUELive to deliver them. Potential customers have been identified and the
Company is in active negotiations with them. No assurance can be given,
however, that we will be successful in entering into satisfactory
commercial arrangements with these or other
customers.
|
|
·
|
Establish
independent sales agreements with representatives to sell our VUELive
services into the enterprise market. We will actively pursue the
engagement of additional independent sales representatives that can
distribute the Company’s existing video products and services both
domestically and internationally. Potential partners have been identified
and we are in active negotiations with them. No assurance can be given,
however, that we will be successful in entering into satisfactory
commercial arrangements with these or other
partners.
|
|
·
|
Foster
and build relationship with technology partners that want to add live
video to their product portfolio thereby leveraging their existing
customer bases. Potential partners have been identified and we are in
active negotiations with them. No assurance can be given, however, that we
will be successful in entering into satisfactory commercial arrangements
with these or other partners.
|
|
·
|
Raise
additional debt and equity financing. This is critical for the
Company to continue as a going
concern.
|
Date
|
Date
|
|||||
/s/
William Hopke
|
October
8, 2008
|
|
/s/
BG Moore
|
October
8,2008
|
||
William
Hopke
|
BG
Moore
|
|||||
Chief
Executive Officer/President
|
Chief
Financial Officer
|