U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-7475
____________________________
SOOUM CORP.
(Exact name of registrant as specified in its charter)
Minnesota 41-0831186
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
590 Madison Avenue, Suite 1800, New York, New York 10022
(Address of principal executive offices)
(480) 287-6675
(Registrants telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. [ X ] Yes [ ] 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] 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 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 [ ] 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 [X] No
The number of shares of issuers common stock, par value $0.0001 per share, outstanding as of September 1, 2015 was approximately 4,990,987,418.
1
PART I
FINANCIAL INFORMATION
Item 1:
Financial Statements
Unaudited Consolidated Balance Sheets September 30, 2015 (Unaudited) and December 31, 2014
3
Unaudited Consolidated Statements of Operations Nine Months Ended September 30, 2014 and
2015
4
Unaudited Consolidated Statements of Cash Flows Nine Months Ended September 30, 2014
and 2015 (Unaudited)
5
Notes to Unaudited Consolidated Financial Statements
6
Item 2:
Managements Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3:
Quantitative and Qualitative Disclosures About Market Risks
17
Item 4:
Controls and Procedures
17
PART II - OTHER INFORMATION
Item 1:
Legal Proceedings
18
Item 1A:
Risk Factors
18
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
18
Item 3:
Defaults Upon Senior Securities
18
Item 4:
Mine Safety Disclosures
18
Item 5:
Other Information
18
Item 6:
Exhibits
18
Signatures
19
2
SoOum Corp. |
New York, New York |
|
|
UNAUDITED CONSOLIDATED BALANCE SHEETS |
| | | |
| | | |
| September 30,
| | December 31,
|
| 2015
|
| ;2014
|
| | | |
ASSETS
| | | |
Cash and Cash Equivalents
| $
| | $ 4
|
Note Receivable - Related Party
| 297
|
|
|
| | | |
Total Assets
| $ 297
|
| $ 4
|
| | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT
| | | |
| | | |
Liabilities
| | | |
Bank Overdraft
| $ 44
| | $
|
Term Notes Payable
| 441,421
| | 441,421
|
Notes Payable - Affiliates
| 1,102,971
| | 1,100,611
|
Judgements Payable
| 1,129,326
| | 1,102,510
|
Convertible Notes Payable, Net of Discounts of $833 and $24,291
| 101,462
| | 75,189
|
Derivative Liability
| 284,455
| | 168,248
|
Deferred Retirement Benefits
| 438,782
| | 438,782
|
Accounts Payable
| 844,543
| | 822,182
|
Advances from Shareholders
| 149,185
| | 149,185
|
Accrued Expenses
| 2,974,295
|
| 15,486,885
|
| | | |
Total Liabilities
| 7,466,484
|
| 19,785,013
|
| | | |
Stockholders' Deficit
| | | |
Common Stock - $.0001 Par; 5,000,000,000 Shares Authorized,
| | | |
4,487,438 and 4,440,960 Issued and Outstanding, Respectively
| 449
| | 444
|
Preferred Stock: $0.0001 Par; 200,000,000 Shares Authorized,
| | | |
25,000,000 Issued and Outstanding, Respectively
| 2,500
| | 2,500
|
Preferred Stock Class B: $0.0001 Par; 10,000,000 Shares Authorized,
| | | |
9,100,000 Issued and Outstanding, Respectively
| 910
| | 910
|
Preferred Stock Class C: $0.0001 Par; 10,000,000 Shares Authorized,
| | | |
1,690,000 Issued and Outstanding, Respectively
| 169
| | 169
|
Stock Subscriptions Payable
| 10,000
| | 10,000
|
Additional Paid-In-Capital
| 6,349,208
| | 6,334,585
|
Accumulated Deficit
| (13,829,423)
|
| (26,133,617)
|
| | | |
Total Stockholders' Deficit
| (7,466,187)
|
| (19,785,009)
|
| | | |
Total Liabilities and Stockholders' Deficit
| $ 297
|
| $ 4
|
| | | |
The accompanying notes are an integral part of these financial statements.
3
SoOum Corp. |
New York, New York |
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
| | | | | | | | |
| | | | | | | | |
| | For the Three Months Ended
| | For the Nine Months Ended
|
| | September 30,
| | September 30,
|
|
| 2015
|
| 2014
|
| 2015
|
| 2014
|
| | | | | | | | |
Sales
| | $
| | $ 492
| | $ 45,900
| | $ 492
|
| | | | | | | | |
Cost of Sales
|
|
|
|
|
| 43,040
|
|
|
| | | | | | | | |
Gross Profit
|
|
|
| 492
|
| 2,860
|
| 492
|
| | | | | | | | |
Expenses
| | | | | | | | |
General and Administrative
| | 69,504
| | 180,604
| | 201,285
| | 345,782
|
Interest Expense
|
| 66,153
|
| 148,153
|
| 226,376
|
| 493,495
|
| | | | | | | | |
Total Expenses
|
| 135,657
|
| 328,757
|
| 427,661
|
| 839,277
|
| | | | | | | | |
Other (Income) and Expenses
| | | | | | | | |
Gain on Conversion Feature of Preferred Shares
| | (2,573,744)
| |
| | (12,845,480)
| |
|
Loss on Conversion
| |
| | 16,250
| |
| | 280,061
|
Loss on Derivative
|
| 85,933
|
| 86,996
|
| 116,485
|
| 99,966
|
| | | | | | | | |
Total Other (Income) and Expenses
|
| $ (2,487,811)
|
| $ 103,246
|
| $ (12,728,995)
|
| $ 380,027
|
| | | | | | | | |
Income (Loss) from Operations Before
| | | | | | | | |
Provision for Taxes
| | 2,352,154
| | (431,511)
| | 12,304,194
| | (1,218,812)
|
| | | | | | | | |
Provision for Taxes
|
|
|
|
|
|
|
|
|
| | | | | | | | |
| | | | | | | | |
Net Income (Loss) for the Period
|
| $ 2,352,154
|
| $ (431,511)
|
| $ 12,304,194
|
| $ (1,218,812)
|
| | | | | | | | |
Weighted Average Number of Common Shares Outstanding
| | | | | | | | |
Basic and Diluted
| | 4,487,438
| | 2,379,807
| | 4,483,693
| | 1,525,605
|
| | | | | | | | |
Net Income (Loss) for the Period Per Common Share -
| | | | | | | | |
Basic and Diluted
|
| $ 0.52
|
| $ (0.18)
|
| $ 2.74
|
| $ (0.80)
|
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
4
SoOum Corp. |
New York, New York |
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | |
| | | | |
For the Nine Months Ended September 30,
|
| 2015
|
| 2014
|
| | | | |
Cash Flows from Operating Activities
| | | | |
| | | | |
Net Loss for the Period
| | $ 12,304,194
| | $(1,218,812)
|
| | | | |
Non-Cash Adjustments:
| | | | |
Amortization of Debt Discount
| | 33,278
| | 278,322
|
Loss on Derivative
| | 116,485
| | 99,966
|
Gain on Conversion Feature of Preferred Stock
| | (12,845,480)
| |
|
Interest on Convertible Notes Paid with Stock
| | 139
| | 1,540
|
Common Stock Issued in Exchange for Services Rendered
| |
| | 133,845
|
Loss on Conversion
| |
| | 280,061
|
Changes in Assets and Liabilities:
| | | | |
Judgements Payable
| | 26,816
| | 26,816
|
Accounts Payable
| | 22,361
| |
|
Accrued Expenses
|
| 332,890
|
| 218,212
|
| | | | |
Net Cash Flows Used In Operating Activities
|
| (9,317)
|
| (180,050)
|
| | | | |
Cash Flows from Investing Activities
| | | | |
Cash Proceeds - Note Receivable Related Party
|
| $ (297)
|
| $
|
| | | | |
Cash Flows from Financing Activities
| | | | |
Bank Overdraft
| | 44
| |
|
Cash Receipts from Equity Purchase Agreement
| |
| | 10,000
|
Cash Proceeds from Notes Payable Affiliates
| | 4,566
| | 5,611
|
Proceeds from Convertible Notes Payable
|
| 5,000
|
| 164,500
|
| | | | |
Net Cash Flows Used In Financing Activities
|
| 9,610
|
| 180,111
|
| | | | |
Net Change in Cash and Cash Equivalents
| | (4)
| | 61
|
| | | | |
Cash and Cash Equivalents - Beginning of Period
|
| 4
|
|
|
| | | | |
Cash and Cash Equivalents - End of Period
|
| $
|
| $ 61
|
| | | | |
| | | | |
Cash Paid During the Period for:
| | | | |
| | | | |
Interest
| | $
| | $
|
Income Taxes
|
| $
|
| $
|
| | | | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
| |
Issuance of Preferred Stock
| | | | $ 2,500
|
Common Stock Exchanged for Debt
| | $ 2,185
| | $ 152,501
|
Assignment of Notes Payable Affiliates
|
|
|
| $ 155,000
|
| | | | |
The accompanying notes are an integral part of these financial statements.
5
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A Basis of Presentation
The condensed consolidated financial statements of SoOum Corp., (the Company) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Companys Form 10-K, and other reports filed with the SEC.
The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.
Principles of Consolidation
The consolidated financial statements include the accounts of SoOum Corp., and its wholly owned subsidiaries; Nature Vision, Inc. and SoOum (the Company). All significant inter-company balances have been eliminated in consolidation.
NOTE B Summary of Significant Accounting Policies
All significant accounting policies can be viewed on the Companys annual report filed with the Securities and Exchange Commission.
NOTE C Recently Issued Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect and that may impacts its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
6
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE D Acquisition iPoint Television continued
On January 15, 2014, the Company completed the acquisition of 90% of the issued and outstanding membership interest of iPoint. Pursuant to the Securities and Exchange Agreement the Company issued Clark Ortiz, the Companys CEO and Chairman, 25,000,000 shares of Swordfishs Series A Preferred Stock, which has voting rights equal to 100 shares of the Companys common stock and is convertible into the Companys common stock at the rate of 10 shares of common stock for each share of Series A Preferred Stock. In addition to issuance of the Series A Preferred Stock, the Company agreed as part of the purchase price to issue 50,000,000 shares of its common stock to Mr. Ortiz. At the date of the transaction, the Company didnt have any authorized and unissued shares available to issue to Mr. Ortiz, however in order to close the transaction, Mr. Ortiz agreed to close the transaction pending the Company increasing the authorized shares of common stock, which the Company did on March 25, 2014. As a result of the transaction, the Company owns 90% of issued and outstanding membership interests in iPoint Television LLC and is therefore a majority owned subsidiary of the Company and the Company will be able to report the results of iPoint on a consolidated basis in the Companys financial statements. iPoint Television, also known as iPoint TV, is a Smart media and entertainment company, which holds development licenses from Apple, Android, Google, Roku, Kindle and most every smart device. iPoint is a full service Internet Protocol Television (IPTV), media entertainment company which develops applications for mobile and TV smart devices. As an acquisition of common control we are recording the assets acquired at their cost which is $0. The Company incurred $2,500 of acquisition expense which was expensed. iPoint did not have any results from operations from the date of acquisition through September 30, 2015.
NOTE E Going Concern
The Companys consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations. As a result, there is an accumulated deficit of $13,829,423 at September 30, 2015.
The Companys continued existence is dependent upon its ability to raise capital or increase sales. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
7
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE F Term Notes Payable
The Company is in default on all of the following unsecured term notes payable.
| | |
| September 30,
| December 31,
|
| 2015
| 2014
|
| | |
Jeff Zernov (Former Chief Executive Officer)
| | |
Payable August 17, 2010 at 15% Interest.
| $ 290,000
| $ 290,000
|
| | |
Castaic
| | |
Installment note payable annually at $17,171 including interest at 8.0% from January 2009 through January 2011.
| 30,620
| 30,620
|
| | |
Installment note payable monthly at $1,175 including interest at 8.0% from February 2008 through January 2011.
| 20,246
| 20,246
|
| | |
Innovative Outdoors
| | |
Installment note payable monthly at $4,632 including interest at 7.0% from August 2008 through July 2011.
| 100,555
| 100,555
|
| | |
Total Notes Payable
| $ 441,421
| $ 441,421
|
| | |
NOTE G Convertible Promissory Notes Payable
As of September 30, 2015, the Company has outstanding five (5) security purchase agreements with accredited investors for the sale of convertible promissory notes bearing interest at 8.0% - 12%, per annum. Pursuant to the convertible promissory notes the investor may convert the amount paid towards the Securities Purchase Agreements into common stock of the company at a conversion price equal to 50% - 55% of the average of the 3 lowest volume weighted average trading prices during the 10 12 day period ending on the latest complete trading day prior to the conversion date. Trading price means the closing bid price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.
The conversion rights embedded in the notes are accounted for as a derivative financial instruments because of the down round feature of the conversion price.
8
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE G Convertible Promissory Notes Payable continued
The beneficial conversion feature was valued at the date of issuance using the Black-Scholes-Merton options pricing model with the following assumptions: risk free interest rates ranging from .07% to .15%, contractual expected life of six (6) to twelve (12) months, expected volatility of 185% to 496%, calculated using the historical closing price of the companys common stock, and dividend yield of zero, resulting in fair market value.
The Company had convertible debentures outstanding as follows:
| | | | |
September 30, 2015
|
|
Outstanding Balance of Convertible Debenture |
Unamortized
Discount | Net of Principal and Unamortized Discount
|
Convertible Debentures
|
|
|
|
|
January 10, 2014 - Debenture
| | $ 7,150
|
| $ 7,150
|
February 28, 2014 Debenture
|
| 13,910
|
| 13,910
|
April 2, 2014 Debenture
| | 17,815
|
| 17,815
|
June 18, 2014 Settlement Agreement
| | 58,420
|
| 58,420
|
April 29, 2015 - Debenture
| | 5,000
| (833)
| 4,167
|
April 29, 2015 - Debenture
| | 5,000
| (833)
| 4,167
|
Total Convertible Debentures
| | $ 102,295
| (833)
| $ 101,462
|
| | | | |
December 31, 2014
|
| Outstanding Balance of Convertible Debenture
|
Unamortized
Discount
| Net of Principal and Unamortized Discount
|
Convertible Debentures
|
|
|
|
|
January 10, 2014 - Debenture
| | $ 7,150
|
| $ 7,150
|
9
| | | | |
February 28, 2014 Debenture
|
| 13,910
| (2,063)
| 11,847
|
| | | | |
April 2, 2014 Debenture
| | 20,000
| (6,000)
| 14,000
|
June 18, 2014 Settlement Agreement
| | 58,420
| (16,228)
| 42,192
|
Total Convertible Debentures
| | $ 99,480
| (24,291)
| $ 75,189
|
Total Convertible Debentures
| | $ 99,480
| (24,291)
| $ 75,189
|
NOTE H Accrued Expenses
Accrued Expenses consisted of the following at September 30, 2015 and December 31, 2014:
| | |
| September 30,
| December 31,
|
| 2015
| 2014
|
| | |
Consulting Fees
| $ 765,379
| $ 765,379
|
Commissions
| 71,033
| 71,033
|
Conversion of Preferred Stock
|
| 12,845,480
|
Interest
| 1,585,234
| 1,421,091
|
Miscellaneous
| 408,347
| 239,599
|
Royalties
| 144,303
| 144,303
|
| | |
Total Accrued Expenses
| $ 2,974,295
| $ 15,486,885
|
| | |
NOTE I Stockholders Equity
Preferred Stock
On August 12, 2015 the Company approved an increase of their preferred shares from 50,000,000 to 200,000,000. The Company is authorized to issue up to 25,000,000 shares of Class A preferred stock, $0.0001 par value (Preferred Stock), which is convertible to common at .01 to 1. The Board of Directors is authorized to fix the designations, rights, preferences, powers and limitations of each series of Preferred Stock. The Companys prior CEO, Clark Ortiz currently holds 25,000,000 shares of the Companys series A preferred stock.
On September 26, 2014 the Board of Directors authorized an amendment to the articles of incorporation to authorize 10,000,000 shares each preferred stock series B and series C. These shares have a $.0001 par value. The series B shares have voting rights of one to one and they are each convertible into one shares of common stock. The series C shares have voting rights of 10-1 and are each convertible into 10 shares of common stock..
10
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE I Stockholders Equity continued
On August 12, 2015, the Company approved a reverse stock split of their common stock at 1,000 shares to 1. In conjunction with this reverse, the rate at which preferred stock is convertible to common was also impacted by the same 1,000 rate. The new conversion rates are reflected above.
Common Stock
On March 25, 2014 the Company amended their authorized Common Stock to 5,000,000,000 shares from 1,000,000,000 shares.
On March 21, 2014 the Company resolved to adopt the 2014 Incentive Stock Option and Restricted Stock Plan. The purpose of this Plan is to provide a means by which eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following: (i) Incentive Stock Options, (ii) Nonqualified Stock Options, (iii) rights to acquire restricted stock, and (iv) stock appreciation rights. Eligible Award recipients are the employees, directors and consultants of the Company and its Affiliates.
The Company also seeks to retain the services of the group of persons eligible to receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 450,000,000 shares of common stock are registered to this plan at an offering price of $0.001. The Plan shall expire on March 20, 2024.
NOTE J Commitments and Contingencies
Various creditors have brought legal proceedings for collections of their claims against the Company. Judgments payable at September 30, 2015 and December 31, 2014 are $1,129,326 and $1,102,510 respectively.
NOTE K Related Party Transactions
The Company has borrowed funds from a former board member and two (2) related parties in the amount of $1,100,611 and $1,100,611, at September 30, 2015 and December 31, 2014, respectively. The related party notes total to $5,611 at September 30, 2015 and December 31, 2014.
11
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE K Related Party Transactions continued
Two notes from the former Board of Directors total to $1,045,000 at September 30, 2015 and December 31, 2014, respectively, and are unsecured. The third note in the amount of $50,000 at September 30, 2015 and December 31, 2014, respectively is secured by a second lien on the Companys assets. The notes to the former member of the Board of Directors are in default and the Company has included approximately $1,252,039 of accrued interest in accrued expenses at September 30, 2015.
Payments have been made by current members of the board of directors in the amount of $2,081 through September 30, 2015. These payments have been forgiven by the members and are included in additional paid in capital at September 30, 2015.
In May 2015, a related party to a board member, paid expenses of the Company in the amount of $11,312. The Company repaid this related party in June 2015 plus interest in the amount of $2,000.
At September 30, 2015 and 2014 note receivable related party was $297 and $-0-, respectively.
NOTE L Fair Value
The Company has categorized its assets and liabilities recorded at fair value based upon the fair value hierarchy specified by GAAP. All assets and liabilities are recorded at historical cost which approximates fair value, and therefore, no items were valued according to these inputs.
12
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE L Fair Value continued
The levels of fair value hierarchy are as follows:
·
Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;
·
Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and
·
Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company categorizes such financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category. All assets and liabilities are at cost which approximates fair value and there are not items that were required to be valued on a non-recurring basis.
The following liabilities were valued at fair value as of September 30, 2015 and December 31, 2014. No other items were valued at fair value on a recurring or non-recurring basis as of September 30, 2015 and December 31, 2014.
13
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE L Fair Value continued
| | | | | |
September 30, 2015
| | Fair Value Measurements Using
|
| Carrying
| | | | |
| Value
| Level 1
| Level 2
| Level 3
| Total
|
Derivative Liabilities
| $
| $
| $
| $ 284,455
| $ 284,455
|
| | | | | |
Total
| | $
| $
| $ 284,455
| $ 284,455
|
| | | | | |
December 31, 2014
| | Fair Value Measurements Using
|
| Carrying
| | | | |
| Value
| Level 1
| Level 2
| Level 3
| Total
|
Derivative Liabilities
| $
| $
| $
| $ 168,248
| $ 168,248
|
| | | | | |
Total
| | $
| $
| $ 168,248
| $ 168,248
|
NOTE M Merger
On September 23, 2014 the Company signed a merger agreement with SoOum Corp., a Delaware corporation. Per the agreement, the outstanding shares of SoOum Corp common stock will be converted into 6,768,955 shares of the Companys preferred stock. This transfer of stock will result in an eighty percent (80%) ownership interest of the Company. Upon completion, the Company will be the surviving corporation and SoOum will be a wholly owned subsidiary. At the date of merger, $480,000 goodwill was acquired and posted to the Company. At December 31, 2014 the goodwill amount of $480,000 was impaired (See Note N).
| | |
Years Ended
| 12/31/2014
| 12/31/2013
|
| | |
Sales
| $ 40,472
| $ -0-
|
Earnings Attributable to Swordfish Financial, Inc.
| (14,710,770)
| (669,988)
|
Basic Earnings Per Share Available to Common Shareholders
| 0.00
| 0.00
|
Earnings Per Share Assuming Dilution Available to Common Shareholders
| 0.00
| 0.00
|
14
SOOUM CORP.
New York, New York
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE N Impairment of Goodwill
At December 31, 2014 the Company has evaluated the balance of goodwill and has determined that it has a value of $-0-. The Company has therefore impaired goodwill in the amount of $480,000 at December 31, 2014.
NOTE O Liability for Conversion Feature of Preferred Shares
Upon the issuance of the Series B Preferred and the Series C Preferred for the SoOum Corp acquisition, the owners of these securities were entitled to receive in total 80% of the common stock of the Company upon full conversion. Assuming full conversion at a fixed conversion ratio, based on the common shares outstanding at September 30, 2015 and December 31, 2014, there would be 26,250,000 shares common that would be converted, which is -0- and 25,690,960,686 more shares respectively, than the current authorized amount. Based on the stock price at September 30, 2015 and December 31, 2014, the total value of those shares would be $-0- and $12,845,480 respectively. In accordance with Generally Accepted Accounting Principles, the Company recorded a liability for that amount on the September 30, 2015 and December 31, 2014 financial statements.
NOTE P Subsequent Events
On October 13, 2015, the Company resolved to adopt the Employees, Directors and Consultants Stock Plan for the Year 2015. The purpose of this Plan is to enable the Company, to promote the interests of the Company and its stockholders by attracting and retaining employees, directors and consultants capable of furthering the future success of the Company and by aligning their economic interests more closely with those of the Companys stockholders, by paying their fees or salaries in the form of shares of the Companys common stock. 500,000,000 shares of common stock are registered to this plan at an offering price of $0.0001. The Plan shall expire on January 1, 2017.
15
Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Three Months Ended September 30, 2015 Compared With Three Months Ended September 30, 2014
Net revenue for the three months ended September 30, 2015 and 2014 was $-0- and $492, respectively. Net income for the three months ended September 30, 2015 was $2,352,154 compared to net loss of $431,511 for the three months ended September 30, 2014.
Total operating expenses were $135,657 for the three months ended September 30, 2015 compared to $328,757 for the three months ended September 30, 2014. The primary expenses for the three months ended September 30, 2015 were general and administrative expenses of $69,504 and interest expense of approximately $66,153 compared to general and administrative expenses of $180,604 and interest expense of approximately $148,153 for the three months ended September 30, 2014.
Total Other (Income) and Expenses were ($2,487,811) for the three months ended September 30, 2015 compared to $103,246 for the three months ended September 30, 2014. The primary other (income) and expense for the three months ended September 30, 2015 were gain on conversion feature of preferred shares of ($2,573,744) and loss on derivative of $85,933 compared to gain on conversion feature of preferred shares of $-0-, loss on derivative of $86,996 and loss on conversion of $16,250 for the three months ended September 30, 2014.
Nine Months Ended September 30, 2015 Compared With Nine Months Ended September 30, 2014
Net revenue for the nine months ended September 30, 2015 and 2014 was $45,900 and $492, respectively. Net income for the nine months ended September 30, 2015 was $12,304,194 compared to net loss of $1,218,812 for the nine months ended September 30, 2014.
Total operating expenses were $427,661 for the nine months ended September 30, 2015 compared to $839,277 for the nine months ended September 30, 2014. The primary expenses for the nine months ended September 30, 2015 were general and administrative expenses of $201,285 and interest expense of approximately $226,376 compared to general and administrative expenses of $345,782 and interest expense of $493,495 for the nine months ended September 30, 2014.
Total Other (Income) and Expenses were ($12,728,995) for the nine months ended September 30, 2015 compared to $380,027 for the nine months ended September 30, 2014. The primary other (income) and expenses for the nine months ended September 30, 2015 were gain on conversion feature of preferred shares of ($12,845,480) and loss on derivative of $116,485 compared to gain on conversion feature of preferred shares of $-0-, loss on derivative of $99,966 and loss on conversion of $280,061 for the nine months ended September 30, 2014.
Liquidity and Capital Resources
Our operations used approximately $9,317 in cash for the nine months ended September 30, 2015. Investing activities used $297 for the nine months ended September 30, 2015. Cash required during the nine months ended September 30, 2015, came principally from cash proceeds from convertible notes payable of $5,000 and cash proceeds from notes payable affiliates of $4,566.
Our operations used approximately $180,050 in cash for the nine months ended September 30, 2014. Cash required during the nine months ended September 30, 2014 came principally from cash proceeds from convertible notes payable of $164,500, cash proceeds from notes payable affiliates of $5,611 and cash proceeds from an equity purchase agreement in the amount of $10,000.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We incurred net income (loss) of $12,304,194 and $(1,218,812), respectively, for the nine months ended September 30, 2015 and 2014 and had an accumulated deficit of $ 13,829,423 as of September 30, 2015. We have managed our liquidity during the three quarters of 2015 through the revenues and issuance of convertible notes. These factors raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
16
Item 3: Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
Item 4: Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on our evaluation, our Principal Executive Officer and Principal Financial Officer, after considering the existence of material weaknesses identified, determined that our disclosure controls and procedures were not effective as of September 30, 2015, primarily due to the fact that there is no effective separation of duties, which includes monitoring controls between the management.
(b)
Changes in internal controls.
There have been no significant changes in our internal controls or other factors that would significantly affect such controls and procedures subsequent to the date we completed our evaluation. Therefore, no corrective actions were taken.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best knowledge of the Companys officers and directors, the Company is currently not a party to any material pending legal proceeding.
Item 1A. Risk Factors
Not applicable as a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures .
Not applicable.
Item 5. Other Information .
None.
Item 6. Exhibits
(a) Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002
(b)Reports of Form 8-K
None.
18
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOOUM CORP.
Date: November 17, 2015
By:/s/ William Westbrook
William Westbrook
Its: Chief Executive Officer and President
Date: November 17, 2015
By:/s/ Ronald Vega
Ronald Vega
Its: Treasurer and Chief Financial Officer
19
Exhibit 31.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
I, William Westbrook, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of SoOum Corp.;
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 registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-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 registrants 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(s) 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 registrants 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 reasonable 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 involved management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: November 17, 2015
SoOum Corp.
By: /s/ William Westbrook
William Westbrook
Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
I, Ronald Vega, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of SoOum Corp.;
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 registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-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 registrants 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(s) 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 registrants 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 reasonable 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 involved management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: November 17, 2015
SoOum Corp.
By: /s/ Ronald Vega
Ronald Vega
Exhibit 32.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of SoOum Corp. (the "Company") for the quarter ending September 30, 2015, I, William Westbrook, Chief Executive Officer of the Company hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
1.
Such Quarterly Report on Form 10-Q for the quarter ending September 30, 2015, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in such Quarterly Report on Form 10-Q for the quarter ending September 30, 2015, fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 17, 2015
SoOum Corp.
By: /s/ William Westbrook
William Westbrook
Exhibit 32.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of SoOum Corp. (the "Company") for the quarter ending September 30, 2015, I, Ronald Vega, Chief Financial Officer of the Company hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
1.
Such Quarterly Report on Form 10-Q for the quarter ending September 30, 2015, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in such Quarterly Report on Form 10-Q for the quarter ending September 30, 2015, fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 17, 2015
SoOum Corp.
By: /s/ Ronald Vega
Ronald Vega