UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 |
For the fiscal quarter
ended September 30, 2015
or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 |
For the transition period from _______________
to _______________
Commission File Number: 000-51353
ATRINSIC,
INC.
(Exact name of registrant as specified in its
charter)
Delaware |
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06-1390025 |
(State or other jurisdiction of incorporation or |
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(I.R.S. Employer Identification No.) |
organization) |
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65 Atlantic Avenue, Boston, Massachusetts 02110 |
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(Address of Principal Executive Office) |
(Zip Code) |
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(617) 823-2300 |
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Registrant’s Telephone Number Including Area Code |
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes x No ¨
Indicate by check mark 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 ¨ |
|
Accelerated filer ¨ |
Non-accelerated filer ¨ |
(Do not check if a smaller reporting company) |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 11, 2015, there were 400,000,000 outstanding shares
of the registrant’s common stock.
ATRINSIC INC.
Form 10-Q Report
For the Fiscal Quarter Ended September 30,
2015
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
| |
September 30, | | |
June 30, | |
| |
2015 | | |
2015 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash | |
$ | 10 | | |
$ | 62 | |
Prepaid expenses | |
| 49 | | |
| 70 | |
Total current assets | |
| 59 | | |
| 132 | |
| |
| | | |
| | |
Property and equipment (net of accumulated depreciation) | |
| 1 | | |
| 1 | |
Total assets | |
$ | 60 | | |
$ | 133 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS' DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 174 | | |
$ | 168 | |
Accrued interest expense - stockholders | |
| 28 | | |
| 21 | |
Short-term convertible notes payable - due to stockholders | |
| 565 | | |
| - | |
Total current liabilities | |
| 767 | | |
| 189 | |
| |
| | | |
| | |
Long-term notes payable - due to stockholders | |
| - | | |
| 515 | |
Total liabilities | |
| 767 | | |
| 704 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
Shareholders' deficit: | |
| | | |
| | |
Series A convertible preferred stock, $0.000001 par value, 5,000,000,000 shares authorized, 4,600,000,000 shares issued and outstanding at September 30, 2015 and June 30, 2015; (Liquidation preference 20,700,000 as of September 30, 2015) | |
| 5 | | |
| 5 | |
Common stock, $.000001 par value, 100,000,000,000 shares authorized, 400,000,000 shares issued and outstanding at September 30, 2015 and June 30, 2015 | |
| - | | |
| - | |
Additional paid-in capital | |
| 1,053 | | |
| 1,053 | |
Accumulated deficit | |
| (1,686 | ) | |
| (1,555 | ) |
Shareholders' deficit attributed to Atrinsic, Inc. | |
| (628 | ) | |
| (497 | ) |
| |
| | | |
| | |
Non-controlling interest | |
| (79 | ) | |
| (74 | ) |
Total shareholders' deficit | |
| (707 | ) | |
| (571 | ) |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | |
$ | 60 | | |
$ | 133 | |
See accompanying notes to unaudited condensed
consolidated financial statements.
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share and per
share data)
| |
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
Operating expenses | |
| | | |
| | |
General and administrative | |
$ | 130 | | |
$ | 118 | |
Total operating expenses | |
| 130 | | |
| 118 | |
Loss from operations | |
| (130 | ) | |
| (118 | ) |
| |
| | | |
| | |
Other income (expenses) | |
| | | |
| | |
Other income | |
| 1 | | |
| 2 | |
Interest expense - stockholders | |
| (7 | ) | |
| (3 | ) |
Total other expenses | |
| (6 | ) | |
| (1 | ) |
Net loss | |
| (136 | ) | |
| (119 | ) |
| |
| | | |
| | |
Less: net loss attributable to non-controlling interest | |
| (5 | ) | |
| (7 | ) |
Net loss attributable to Atrinsic | |
$ | (131 | ) | |
$ | (112 | ) |
| |
| | | |
| | |
Net loss per share attributable to Atrinsic common shareholders | |
| | | |
| | |
Basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
Weighted average shares outstanding: | |
| | | |
| | |
Basic and diluted | |
| 400,000,000 | | |
| 400,000,000 | |
See accompanying notes to unaudited condensed
consolidated financial statements.
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
(Dollars in thousands)
| |
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
Cash flows from operating activities | |
| | | |
| | |
Net loss attributable to Atrinsic | |
$ | (131 | ) | |
$ | (112 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Net loss attributable to non-controlling interest in subsidiary | |
| (5 | ) | |
| (7 | ) |
Accrued interest on convertible notes payable | |
| 7 | | |
| 3 | |
Changes in operating assets and liabilities of business, net of acquisitions: | |
| | | |
| | |
Prepaid expenses | |
| 21 | | |
| 10 | |
Accounts payable and accrued expenses | |
| 6 | | |
| 26 | |
Net cash used in operating activities | |
| (102 | ) | |
| (80 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from issuance of convertible notes payable due to stockholders | |
| 50 | | |
| 90 | |
Net cash provided by financing activities | |
| 50 | | |
| 90 | |
| |
| | | |
| | |
Net (decrease) increase in cash | |
| (52 | ) | |
| 10 | |
Cash at beginning of period | |
| 62 | | |
| 101 | |
Cash at end of period | |
$ | 10 | | |
$ | 111 | |
See accompanying notes to unaudited condensed
consolidated financial statements.
ATRINSIC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except share and per
share data)
NOTE 1 - NATURE OF OPERATIONS
On June 15, 2012, the Company filed Chapter
11 in the United States Bankruptcy Court in Southern District of New York (Case No. 12-12553). As of that date, the Company terminated
all remaining employees and ceased its normal business operations.
The Company emerged from Chapter 11 on June
26, 2013, at which time the Plan of Reorganization was conditionally confirmed by the United States Bankruptcy Court, Southern
District of New York. The confirmation was subject to the consummation of the Company’s acquisition of a 51% controlling
interest in Momspot LLC (“Momspot”), which was subsequently completed on July 12, 2013 (“Emergence Date”).
Momspot’s goal is to be the premier specialty retail affiliate marketing company targeting women between the ages of 24 and
45 who are either mothers or expecting their first child. The Emergence Date was the date the Company adopted fresh start accounting
in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 852. The adoption of fresh-start accounting resulted in the Company becoming a new entity for financial reporting purposes.
Momspot is currently the Company’s business operations. The Company’s principle activities are conducted through Momspot.
Since the fourth quarter of the 2015 fiscal
year Momspot’s development plans has been suspended pending receipt of incremental funding.
NOTE 2 - LIQUIDITY AND GOING CONCERN
The Company intends to finance its activities
through:
· |
managing current cash on hand; and |
· |
seeking additional funds raised in the future. |
The Company has experienced recurring losses
and negative cash flow from operations since emerging from bankruptcy. There is substantial doubt about the Company’s ability
to continue as a going concern as it is dependent on its ability to obtain short term financing and ultimately to generate sufficient
cash flow to meet its obligations on a timely basis in order to attain profitability, as well as successfully obtain financing
on favorable terms to fund the Company’s long term plans. The Company continually projects anticipated cash requirements,
which may include business combinations, capital expenditures, and working capital requirements. As of September 30, 2015, the
Company had cash of approximately $10, a working capital deficit of approximately $708 including notes payable to stockholders
due August 2016, and a total shareholders’ deficit of $707. During the three months ended September 30, 2015, the Company
used approximately $102 of cash for operations. The Company’s existing liquidity is not sufficient to fund its operations,
anticipated capital expenditures, working capital and other financing requirements for the foreseeable future.
The Company needs to raise additional capital
to cover its budgeted operating and capital expenditures. If the capital raising efforts are not successful, the Company might
not be able to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary
should the Company not be able to continue as a going concern. These factors among others create substantial doubt about the Company’s
ability to continue as a going concern.
On September 3, 2015, the Company issued secured
convertible promissory notes (the “Secured Convertible Notes”) in the principal amount of $25 to each of its two principal
stockholders, for an aggregate of $50, each an existing secured lender to the Company. The Secured Convertible Notes have a maturity
date of August 31, 2016 and bear interest at the rate of 5.0% per annum, payable at maturity. The outstanding principal and accrued
interest of each Secured Convertible Note is convertible, subject to a 4.99% Beneficial Ownership Cap (as defined in the Secured
Convertible Notes), into shares of the Company’s common stock at an initial conversion price of $5.00 per share (subject
to standard anti-dilution adjustments), at the option of the respective holders.
The obligations of the Company under the Secured
Convertible Notes are secured by a first priority security interest in all of the property of the Company pursuant to letter agreements,
dated September 3, 2015, with its two principal stockholders. The proceeds of the Secured Convertible Notes will be utilized by
the Company to fund its working capital needs (See Note 5).
ATRINSIC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except share and per
share data
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying condensed consolidated financial
statements of the Company are unaudited and do not include all of the information and disclosures generally required for annual
financial statements. In the opinion of management, the statements contain all material adjustments (consisting of normal recurring
accruals) necessary to present fairly the Company’s condensed consolidated financial position as of September 30, 2015, and
the condensed consolidated results of its operations and cash flows for the three month period ended September 30, 2015 and 2014.
This report should be read in conjunction with the Company’s Annual Report on Form 10-K, filed with Securities and Exchange
Commission on September 25, 2015, which contains the complete information and disclosure for the year ended June 30, 2015. Results
of operations for interim periods are not necessarily indicative of the results of operations for a full year.
Principles of Consolidation
The ownership of more than 50% of the voting
stock of an entity creates a subsidiary. The financial statements of the parent and subsidiary are consolidated for reporting purposes.
The condensed consolidated financial statements
include the accounts of all majority and wholly-owned (“Momspot”) subsidiaries and significant intercompany balances
and transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses
as well as the disclosure of contingent assets and liabilities. Management continually evaluates its estimates and judgments including
those related to fair value of stock options granted and income taxes. Management bases its estimates and judgments on historical
experience and other factors that are believed to be reasonable in the circumstances. Actual results may differ from those estimates.
Macroeconomic conditions may directly, or indirectly through the Company’s business partners and vendors, impact the Company’s
financial performance and available resources. Such conditions may, in turn, impact the aforementioned estimates and assumptions.
Earnings per Share
Basic earnings per share (“EPS”)
is computed by dividing reported earnings by the weighted average number of shares of common stock outstanding for the period.
Diluted EPS includes the effect, if any, of the potential issuance of additional shares of common stock as a result of the exercise
or conversion of dilutive securities, using the treasury stock method.
Potential dilutive securities for the Company
include outstanding convertible preferred shares, stock options and convertible debts.
Securities that could potentially dilute loss
per share in the future that were not included in the computation of diluted loss per share at September 30, 2015 and September
30, 2014, because such securities are anti-dilutive, are as follows:
| |
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
Convertible preferred shares | |
| 4,600,000,000 | | |
| 4,600,000,000 | |
Options to purchase common stock | |
| 275,000,000 | | |
| 275,000,000 | |
Convertible notes | |
| 118,537 | | |
| - | |
Total | |
| 4,875,118,537 | | |
| 4,875,000,000 | |
Recent Accounting Pronouncements
The FASB, the Emerging Issues Task Force and
the SEC have issued certain accounting standards updates and regulations as of September 30, 2015 that will become effective in
subsequent periods. However, management does not believe that any of those updates would have significantly affected our financial
accounting measures or disclosures had they been in effect during 2015 and 2014 and it does not believe that any of these pronouncements
will have a significant impact on the condensed consolidated financial statements at the time they become effective.
ATRINSIC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except share and per share data
NOTE 4 - STOCKHOLDERS’ EQUITY
Stock Options
On February 11, 2014, the Company issued options
with a term of five (5) years and an exercise price of $0.002 to the individuals below for the number of shares of common stock:
The Company granted to Sebastian
Giordano, for services as Chief Restructuring Officer and Acting Chief Executive Officer, an option to purchase 125,000,000 shares
of the Company’s Common Stock.
The Company granted to each of Edward
Gildea and Jonathan Schechter, for services as directors of the Company, an option to purchase 50,000,000 shares of the Company’s
Common Stock.
On February 28, 2014, the Company granted to
Edward Gildea, for services to be rendered as Acting Chief Executive Officer, an option to purchase 50,000,000 shares of the Company’s
Common Stock with a term of five (5) years and an exercise price of $0.002.
All of the shares covered by these options
immediately vested on the grant date.
The grant date fair value of stock options
granted was approximately $275. The fair value of the Company’s common stock was based upon the publicly quoted price on
the date of grant. The expected term for stock options granted with service conditions represents the average period the stock
options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities
and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. The Company obtained the risk
free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison
of average volatility rates of similar companies. The fair value of the options was determined using the Black-Scholes model with
the following assumptions: risk free interest rate - 0.69% to 0.71%, volatility - 84.40%, expected term - 2.5 years, expected dividends-
N/A.
As of September 30, 2015, the weighted average
exercise price of all stock options outstanding was $0.002, the remaining contractual life was 3.4 years and there was no intrinsic
value.
NOTE 5 – CONVERTIBLE NOTES PAYABLE DUE TO STOCKHOLDERS
On August 15, 2014, the Company raised gross
proceeds, in a debt financing transaction, of $90 from its two principal stockholders, and issued secured promissory notes in the
principal amount of $45 to each of them (the “August 2014 Notes”). On December 18, 2014, the Company raised gross proceeds,
in a debt financing transaction, of $150 from its two principal stockholders, and issued secured promissory notes in the principal
amount of $75 to each of them (the “December 2014 Notes”). On May 15, 2015, the Company raised gross proceeds, in a
debt financing transaction, of $100 from its two principal stockholders, and issued secured promissory notes in the principal amount
of $50 to each of them (the “May 2015 Notes”). The notes had a Maturity Date of July 31, 2015 and bear interest at
the rate of 5.0% per annum, payable at maturity. Any amounts that remain unpaid after July 31, 2015, shall thereafter bear interest
at the rate of twelve percent (12%) per annum. Interest is calculated on the basis of actual number of days elapsed over a year
of 360 days. The notes are secured by all the assets of the Company.
On September 3, 2015, effective as of July
31, 2015, the maturity dates of the February 2014 Notes, the August 2014 Notes, the December 2014 Notes and the May 2015 Notes
(collectively, the “Prior Notes”), in the aggregate principal amount of $515, were extended to August 31, 2016 and
the Prior Notes were amended to permit conversion of the principal and accrued interest due and payable under the Prior Notes into
shares of the Company’s common stock.
On September 3, 2015, the Company issued secured
convertible promissory notes (the “Secured Convertible Notes”) in the principal amount of $25 to each of its two principal
stockholders, for an aggregate of $50, each an existing secured lender to the Company. The Secured Convertible Notes have a maturity
date of August 31, 2016 and bear interest at the rate of 5.0% per annum, payable at maturity. The outstanding principal and accrued
interest of each Secured Convertible Note is convertible, subject to a 4.99% Beneficial Ownership Cap (as defined in the Secured
Convertible Notes), into shares of the Company’s common stock at an initial conversion price of $5.00 per share (subject
to adjustment), at the option of the respective holders.
The obligations of the Company under the Secured
Convertible Notes are secured by a first priority security interest in all of the property of the Company pursuant to letter agreements,
dated September 3, 2015, with its two principal stockholders. The proceeds of the Secured Convertible Notes will be utilized by
the Company to fund its working capital needs.
ATRINSIC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except share and
per share data
| |
Amount Due | |
Outstanding as of June 30, 2015 | |
$ | 515 | |
Issued | |
| 50 | |
Outstanding as of September 30, 2015 | |
$ | 565 | |
During the three months ended September 30,
2015 and 2014, interest expense amounted to approximately $7 and $3, respectively. Accrued interest as of September 30, 2015 and
June 30, 2015 was approximately $28 and $21, respectively.
NOTE 6 - SUBSEQUENT EVENTS
On October 30, 2015, the Company issued secured
convertible promissory notes (the “New Secured Convertible Notes”) in the principal amount of $25 to each of its two
principal stockholders, for an aggregate of $50, each an existing secured lender to the Company. The New Secured Convertible Notes
have a maturity date of August 31, 2016 and bear interest at the rate of 5.0% per annum, payable at maturity. The outstanding principal
and accrued interest of each New Secured Convertible Note is convertible, subject to a 4.99% Beneficial Ownership Cap (as defined
in the New Secured Convertible Notes), into shares of the Company’s common stock at an initial conversion price of $5.00
per share (subject to adjustment), at the option of the respective holders.
The obligations of the Company under the New
Secured Convertible Notes are secured by a first priority security interest in all of the property of the Company pursuant to letter
agreements, dated October 30, 2015, with each of its two principal stockholders. The proceeds of the New Secured Convertible Notes
will be utilized by the Company to fund its working capital needs.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operation
Historical Background
We were originally incorporated under the name
Millbrook Acquisition Corp., on or about February 3, 1994. In May 2007, we changed our name to New Motion, Inc. In February 2008,
we merged with Traffix, Inc., pursuant to which Traffix, Inc. became a wholly-owned subsidiary of ours. In June 2009, we changed
our name to Atrinsic, Inc. Prior to our bankruptcy filing in 2012, we were a marketer of direct-to-consumer subscription products
and an Internet search-marketing agency. We sold entertainment and lifestyle subscription products directly to consumers, which
we marketed through the Internet. We also sold Internet marketing services to our corporate and advertising clients. However, by
early 2012, we had suspended all operation of these businesses. In addition, until March 30, 2012, we were a reporting company
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and filed periodic reports with the Securities
and Exchange Commission (“SEC”). On March 30, 2012, we filed a Form 15 with the SEC, terminating our obligation to
file periodic reports under Sections 13 and 15(d) of the Exchange Act.
On June 15, 2012, we filed for protection under
Chapter 11 of the U.S. Bankruptcy Code and terminated all remaining employees. Since then we have been managed by several outside
legal and financial professionals. In June 2013, the United States Bankruptcy Court, Southern District of New York confirmed our
Plan of Reorganization (the “Plan of Reorganization”) subject to our acquisition of a 51% controlling equity interest
in Momspot, which was completed on July 12, 2013. Pursuant to the terms of a Membership Interest Purchase Agreement, we acquired
a 51% equity interest in Momspot in exchange for our commitment to contribute up to $165,000 of working capital to Momspot over
a two-year period to fund its business development and operations. Simultaneous with the acquisition, we became a party to the
Momspot Operating Agreement and the manager thereunder. Momspot is a development stage company whose goal is to be the premier
specialty retail affiliate marketing company targeting women between the ages of 24 and 45 who are either mothers or expecting
their first child. Momspot currently constitutes our only business operation.
Pursuant to the Plan of Reorganization, all
outstanding debt was converted to equity with the secured creditors receiving 4,600,000,000 shares, $0.000001 par value per share,
of our Series A Convertible Preferred Stock, general unsecured creditors receiving an aggregate of 300,000,000 shares of our Common
Stock, par value $0.000001 per share (“Common Stock”), and pre-bankruptcy petition common stockholders having their
pre-bankruptcy shares exchanged for an aggregate of 100,000,000 shares of Common Stock.
Results of Operations
Three months ended September 30, 2015
compared to the three months ended September 30, 2014 (dollars in thousands)
During the three months ended September 30,
2015, we incurred a loss from operations of approximately $130 as compared to $118 for three months ended September 30, 2014. The
increase in loss from operations can be primarily attributed to an increase of $12 in professional expenses related to accounting,
legal and other consulting expenses. During the three months ended September 30, 2015, we recorded approximately $5 of net loss
attributable to non-controlling interest as compared to $7 for three months ended September 30, 2014.
Liquidity and Going Concern (dollars in
thousands)
We continually project anticipated cash requirements,
which may include business combinations, capital expenditures, and working capital requirements. As of September 30, 2015, we had
cash of approximately $10 and working capital deficiency of approximately $708.
Our existing liquidity is not sufficient to
fund our operations, anticipated capital expenditures and working capital for the foreseeable future. Absent generation
of sufficient revenue from the execution of our business plan, we will need to obtain additional debt or equity financing.
Operating activities used $102 and $80 in cash
for the three months ended September 30, 2015 and 2014, respectively. The sources of cash from operating activities during the
three months ended September 30, 2015, primarily comprised of $131 net loss, a $6 increase of accounts payable, which included
payments to legal and accounting professionals, payments to consultants, and other administrative expenses, and a $21 decrease
of prepaid insurance expenses.
We do not have investing activities for the
three months ended September 30, 2015 and 2014.
Our financing activities provided cash of $50
for the three months ended September 30, 2015. On September 3, 2015, we raised gross proceeds, in a debt financing transaction,
of $50 from our two principal stockholders, and issued secured convertible promissory notes in the principal amount of $25 to each
of them. The notes are secured by all of our assets.
Our financial statements for the three months
ended September 30, 2015 indicate there is substantial doubt about our ability to continue as a going concern as we are dependent
on our ability to obtain short-term financing and ultimately to generate sufficient cash flow to meet our obligations on a timely
basis in order to attain profitability, as well as successfully obtain financing on favorable terms to fund our long-term plans.
We need to raise additional capital to cover our operating and capital expenditures. If the capital raising efforts are not successful,
we might not be able to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
We are a “smaller reporting company”
as defined by Regulation S-K and as such, is not required to provide the information contained in this item pursuant to Regulation
S-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Evaluation of disclosure controls and procedures
Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange
Act, as of September 30, 2015. Based on this evaluation, our principal executive officer and principal financial officers have
concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act, including this Quarterly Report on Form 10-Q, is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure and controls
are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange
Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
A 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. The design
of any system of controls also is based in part on certain assumptions regarding the likelihood of certain events, and there can
no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Given these and
other inherent limitations of control systems, these are only reasonable assurance that our controls will succeed in achieving
their stated goals under all potential future conditions.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal controls
over financial reporting that occurred during the quarter covered by this Report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 6 . Exhibits
Exhibits |
|
Description |
4.1 |
|
Secured Convertible Note, dated September 3, 2015, in the principal amount of $25,000, bearing interest at the rate of 5.0% per annum issued by the Company to Iroquois Master Fund Ltd. (“Iroquois”) (1) |
4.2 |
|
Secured Convertible Note, dated September 3, 2015, in the principal amount of $25,000, bearing interest at the rate of 5.0% per annum issued by the Company to Hudson Bay Master Fund Ltd.(“Hudson”) (1) |
10.1 |
|
Letter agreement, dated September 3, 2015, between the Company and Iroquois amending the First Amended and Restated Security Agreement among the Company Iroquois and Hudson dated as of December 18, 2014, as amended on May 15, 2015 (1) |
10.2 |
|
Letter agreement, dated September 3, 2015, between the Company and Hudson amending the First Amended and Restated Security Agreement among the Company Iroquois and Hudson dated as of December 18, 2014, as amended on May 15, 2015 (1) |
10.3 |
|
Note Modification Agreement, made as of July 31, 2015, between the Company and Iroquois (1) |
10.4 |
|
Note Modification Agreement, made as of July 31, 2015, between the Company and Hudson (1) |
31.1 |
|
Chief Executive Officer Certification as required under section 302 of the Sarbanes Oxley Act (*€) |
31.2 |
|
Chief Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act (*€) |
32.1 |
|
Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act * |
101.INS |
|
XBRL Instance Document (*€) |
101.CAL |
|
XBRL Taxonomy Extension Schema Document (*€) |
101.SCH |
|
XBRL Taxonomy Extension Calculation Linkbase Document (*€) |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document (*€) |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document (*€) |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document (*€) |
(*€) - Filed herewith.
(*) - Furnished, not filed, in accordance with item 601(32)(ii)
of Regulation S-K.
(1) - Filed on September 9, 2015 as an exhibit to our Current Report
on Form 8-K and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
ATRINSIC, INC. |
|
|
Date: November 13, 2015 |
By: |
/s/ Edward Gildea |
|
Name: Edward Gildea |
|
Title: Chief Executive Officer |
|
(Principal Executive Officer) |
Date: November 13, 2015 |
By: |
/s/ David Horin |
|
Name: David Horin |
|
Title: Chief Financial Officer |
|
(Principal Financial Officer) |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES OXLEY ACT OF 2002
I, Edward Gildea, certify that:
1) I have reviewed this report on Form 10-Q
of Atrinsic, Inc.;
2) Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act
Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 13, 2015 |
By: |
/s/ Edward Gildea |
|
|
Edward Gildea |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES OXLEY ACT OF 2002
I, David Horin, certify that:
1) I have reviewed this report on Form 10-Q
of Atrinsic, Inc.;
2) Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act
Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 13, 2015 |
By: |
/s/ David Horin |
|
|
David Horin |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES OXLEY ACT OF 2002
In connection with the Quarterly Report of
Atrinsic, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), we, Edward Gildea, Chief Executive Officer, and David Horin,
Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley
Act of 2002 that:
| (1) | The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company. |
A signed original of this certification has
been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.
Date: November 13, 2015 |
By: |
/s/ Edward Gildea |
|
|
Edward Gildea |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
Date: November 13, 2015 |
By: |
/s/ David Horin |
|
|
David Horin |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |