Item 1. Financial Statements
.
ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Condensed Consolidated Balance Sheets
|
|
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.
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.
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.
ADAPTIVE MEDIAS, INC.
F/K/A/ MIMVI, INC.
Condensed Consolidated Statements of
Cash Flows
|
|
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.
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.
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.
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.
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.
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.
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.
|
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.
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
C
ompany
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.
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.
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.
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.