UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT
NO. 1
[x] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the quarterly period ended June 30, 2014
OR
TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from ___________to
____________
Commission File Number 000-26108
BRAZIL INTERACTIVE MEDIA, INC.
(Exact name of small business issuer as specified
in its charter)
Delaware |
94-2901715 |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.)
|
3457 Ringsby Court, Unit 111
Denver, Colorado 80216-4900
(Address, including zip code, of principal executive
offices)
(720) 466-3789
(Issuer’s 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 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
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 accelerate 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 [ ] No [x]
Indicate the number of shares outstanding of
each of the issuer’s classes of common stock, as of the latest practicable date: As of June 30, 2014, the issuer had 40,425,000
shares of common stock issued and outstanding.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A
is being filed to amend our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 (the
“Original Filing”), filed with the U.S. Securities and Exchange Commission on August 19, 2014, to correct our
financial statements based on immaterial errors identified by our accountants related to the allocation of certain other
general and administrative expenses, and to make other required conforming changes.
This report on Form 10-Q/A amends the following
items on the Original Filing: (i) the Consolidated Balance Sheets, Consolidated Statement of Operations and the Consolidated Statements
of Cash Flows in Item 1 of Part I “Financial Information,” (ii) the operating expense and net loss values for the three
and six months ended June 30, 2014 in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” and we have also updated the signature page, the certifications of our Chief Executive Officer
and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2, and our financial statements formatted in Extensible Business
Reporting Language (XBRL) in Exhibits 101 to reflect the changes noted above. No other changes have been made to the Original Filing.
However, for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Filing.
This report on Form 10-Q/A is presented as of the filing date of the Original Filing and does not reflect events occurring after
that date, or modify or update disclosures in any way other than as required to reflect the restatement described above.
TABLE OF CONTENTS
PART
I. FINANCIAL INFORMATION
Item 1. Consolidated
Financial Statements
BRAZIL INTERACTIVE MEDIA, INC AND ITS SUBSIDIARY |
CONSOLIDATED BALANCE SHEETS |
JUNE 30, 2014 AND DECEMBER 31, 2013 |
| |
June 30,
2014 | |
December 31, 2013 |
ASSETS | |
(Unaudited) | |
(Audited) |
Current assets: | |
| | | |
| | |
Cash - unrestricted | |
$ | 268,496 | | |
$ | 270,449 | |
Cash - restricted | |
| 45,378 | | |
$ | 0 | |
Accounts receivable | |
| 72,508 | | |
| 55,999 | |
Other receivables | |
| 215,642 | | |
| 0 | |
Prepayments and advances | |
| 232,729 | | |
| 41,455 | |
Total Current Assets | |
| 834,753 | | |
| 367,903 | |
Property, Plant and Equipment | |
| | | |
| | |
Fixed assets | |
| 491,879 | | |
| 441,142 | |
Accumulated depreciation | |
| (130,818 | ) | |
| (86,147 | ) |
FIXED ASSETS - NET | |
| 361,061 | | |
| 354,995 | |
Other Assets | |
| | | |
| | |
Intangible Assets | |
| 4,764 | | |
| 4,471 | |
Other Assets | |
| 6,807 | | |
| 6,387 | |
Total Other Assets | |
| 11,571 | | |
| 10,858 | |
TOTAL ASSETS | |
| 1,207,385 | | |
| 733,756 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 1,165,657 | | |
| 1,019,320 | |
Taxes payable | |
| 319,057 | | |
| 305,587 | |
Convertible note payable, net of discount | |
| 36,204 | | |
| 0 | |
Current portion of loans payable | |
| 214,815 | | |
| 100,790 | |
Loans from Directors and Officers | |
| 0 | | |
| 70,000 | |
Bank loans payable | |
| 21,498 | | |
| 23,613 | |
Total current liabilities | |
| 1,757,232 | | |
| 1,519,310 | |
Long-term liabilities: | |
| | | |
| | |
Loans payable | |
| 0 | | |
| 100,790 | |
Tax payable - Long term | |
| 299,706 | | |
| 319,284 | |
Total Long-term liabilities | |
| 299,706 | | |
| 420,074 | |
TOTAL LIABILITIES | |
| 2,056,939 | | |
| 1,939,384 | |
Stockholders' deficit | |
| | | |
| | |
Preferred stock, $0.01 par value, 5,000,000 shares authorized; -0- and 2,500 shares issued and
outstanding, respectively
| |
| 0 | | |
| 25 | |
Common stock, $0.00001 par value, 100,000,000 shares authorized; 40,425,000 and
45,236,314 shares issued and outstanding, respectively | |
| 404 | | |
| 452 | |
Common stock-warrants | |
| 0 | | |
| 187,763 | |
Additional paid-in-capital | |
| 5,353,480 | | |
| 3,283,428 | |
Accumulated other comprehensive income (loss) | |
| 111,581 | | |
| 96,376 | |
Retained earnings | |
| (6,315,019 | ) | |
| (4,773,672 | ) |
Total Stockholder's deficit | |
| (849,554 | ) | |
| (1,205,628 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 1,207,385 | | |
$ | 733,756 | |
The accompanying notes are an integral part of these consolidated financial statements.
BRAZIL INTERACTIVE MEDIA, INC. AND SUBSIDIARY |
CONSOLIDATED INCOME STATEMENT (UNAUDITED) |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 |
| |
| |
| |
| |
|
| |
| |
| |
| |
|
| |
For the three months ended | |
For the three months ended | |
For the six months ended | |
For the six months ended |
| |
June 30, 2014 | |
June 30, 2013 | |
June 30, 2014 | |
June 30, 2013 |
REVENUES | |
$ | 2,585,487 | | |
$ | 1,932,132 | | |
$ | 4,466,321 | | |
$ | 4,240,137 | |
Cost of revenues | |
| 2,173,423 | | |
| 1,489,534 | | |
| 4,038,732 | | |
| 3,185,803 | |
| |
| | | |
| | | |
| | | |
| | |
Gross Profit | |
| 412,064 | | |
| 442,598 | | |
| 427,589 | | |
| 1,054,334 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Other Taxes | |
| 26,165 | | |
| 20,687 | | |
| 49,574 | | |
| 64,991 | |
Subcontractor Expense | |
| 56,772 | | |
| 89,484 | | |
| 106,113 | | |
| 329,291 | |
Rent | |
| 34,596 | | |
| 39,794 | | |
| 61,726 | | |
| 82,928 | |
Other General and administrative | |
| 1,645,411 | | |
| 318,530 | | |
| 1,817,903 | | |
| 508,520 | |
Total Operating Expenses | |
| 1,762,944 | | |
| 468,495 | | |
| 2,035,317 | | |
| 985,730 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Income (Loss) | |
| (1,350,880 | ) | |
| (25,897 | ) | |
| (1,607,728 | ) | |
| 68,604 | |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive Income (Expense) | |
| | | |
| | | |
| | | |
| | |
Interest Income | |
| 44 | | |
| 0 | | |
| 44 | | |
| 185 | |
Gain on debt forgiveness | |
| 96,193 | | |
| 0 | | |
| 96,193 | | |
| 0 | |
Interest Expense | |
| (55,071 | ) | |
| (13,792 | ) | |
| (82,896 | ) | |
| (26,479 | ) |
Total Other Income (Expense) | |
| 41,166 | | |
| (13,792 | ) | |
| 13,341 | | |
| (26,294 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income before Income Taxes | |
| (1,309,714 | ) | |
| (39,689 | ) | |
| (1,594,387 | ) | |
| 42,310 | |
| |
| | | |
| | | |
| | | |
| | |
Provision for Income Taxes | |
| 12,084 | | |
| 19,354 | | |
| (53,040 | ) | |
| 31,476 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
($ | 1,321,798 | ) | |
($ | 59,043 | ) | |
($ | 1,541,347 | ) | |
$ | 10,834 | |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (expense) | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation
adjustment | |
| (28,009 | ) | |
| (25,943 | ) | |
| 15,205 | | |
| 62,114 | |
Comprehensive income | |
($ | 1,349,807 | ) | |
($ | 84,986 | ) | |
($ | 1,526,142 | ) | |
$ | 72,948 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Basic and fully diluted net income (loss) per common share: | |
($ | 0.03 | ) | |
($ | 0.20 | ) | |
($ | 0.03 | ) | |
$ | 0.04 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding | |
| 43,158,647 | | |
| 292,319 | | |
| 44,213,023 | | |
| 290,976 | |
| |
| | | |
| | | |
| | | |
| | |
The accompanying notes are an integral part of these consolidated financial statements.
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 |
| |
For the six months ended | |
For the six months ended |
| |
June 30, 2014 | |
June 30, 2013 |
Cash flows from operating activities: | |
| | | |
| | |
Net income (loss) | |
$ | (1,541,347 | ) | |
$ | 10,835 | |
Depreciation | |
| 44,671 | | |
| 21,647 | |
Common stock issued for services | |
| 1,380,740 | | |
| — | |
Amortization of discount on note payable | |
| 36,204 | | |
| | |
Gain on forgiveness of Debt | |
| (96,193 | ) | |
| | |
Issuance of Preferred Series G stock for service | |
| — | | |
| 20 | |
Effect of Capitalization of Preferred and Common Stock | |
| — | | |
| (62,926 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (16,509 | ) | |
| (631,515 | ) |
Other receivable | |
| (215,642 | ) | |
| — | |
Prepayments and advances | |
| (191,274 | ) | |
| 64,418 | |
Intangible and Other Assets | |
| (713 | ) | |
| (11,454 | ) |
Accounts payable and accrued expenses | |
| 279,005 | | |
| 366,942 | |
Taxes payables | |
| 32,875 | | |
| 69,612 | |
Net cash provided by (used in) operating activities | |
| (288,183 | ) | |
| (172,421 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchase of equipment | |
| (50,737 | ) | |
| — | |
Net cash (used in) investing activities | |
| (50,737 | ) | |
| — | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Issuance of Preferred stock for cash | |
| — | | |
| 171,000 | |
Issuance of convertible note payable | |
| 395,000 | | |
| | |
Proceeds from bank loan payable | |
| 114,026 | | |
| | |
Principal repayments of bank loan payable | |
| (102,905 | ) | |
| (2,444 | ) |
Principal repayments of Tax installments | |
| (38,982 | ) | |
| | |
Net cash provided by financing activities | |
| 367,139 | | |
| 168,556 | |
| |
| | | |
| | |
Foreign currency translation adjustment | |
| 15,206 | | |
| (32,766 | ) |
| |
| | | |
| | |
Increase (decrease) in cash and cash equivalents | |
| 43,425 | | |
| (36,631 | ) |
Cash and cash equivalents at beginning of period | |
| 270,449 | | |
| 146,331 | |
Cash and cash equivalents at end of period | |
$ | 313,874 | | |
$ | 109,700 | |
| |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Income tax | |
$ | 74,108 | | |
$ | 36,434 | |
Interest | |
$ | 47,113 | | |
$ | 16,212 | |
NON-CASH INVESTING ACTIVITIES | |
| | | |
| | |
Issuance of common stock for services | |
$ | 1,380,740 | | |
$ | — | |
Issuance of Preferred Series G stock to convert notes payable | |
$ | — | | |
$ | 3,084,680 | |
Issuance of common stock to retire notes payable | |
$ | 106,476 | | |
$ | 109,602 | |
Issuance of Preferred Series H stock to retire note payable | |
$ | — | | |
$ | 79,024 | |
Conversion of Preferred Series G stock to Common Stocks to be issued | |
$ | — | | |
$ | 39,707 | |
The accompanying notes are an integral part
of these financial statements
Notes To Consolidated Financial Statements
Note 1 - Organization,
Business & Operations
Organization
Brazil Interactive Media, Inc. (the “Company”),
is a publicly listed company quoted on the OTCQB under the symbol “BIMI.” The Company is a Delaware corporation formed
on September 24, 2001 with the name Naturewell, Incorporated, which in the first quarter of 2013, became Brazil Interactive Media,
Inc. through a merger that resulted in the Company becoming the owner of a Brazilian interactive television technology and television
production company, BIMI, Inc. Prior to 2013, the Company business was the research and development of healthcare products intended
for a variety of health conditions. On May 9, 2008, the Company completed the sale of essentially all of its assets, as a result
becoming a shell company as defined under Rule 12b-2 of the Exchange Act. As described below, the Company ceased to be a shell
company when it acquired a Brazilian television and interactive media technology company in March of 2013.
On May 15, 2014, the Company entered into an
Agreement and Plan of Merger (the “Merger Agreement”), between the Company, Cannamerica, Inc., Delaware corporation
and a wholly owned subsidiary of the Company (“Merger Sub”), and Hollister & Blacksmith, Inc. d/b/a American Cannabis
Consulting, Inc., a Colorado corporation (“ACC”). Pursuant to the Merger Agreement, Merger Sub will be merged with
and into ACC through a reverse triangular merger transaction upon the terms and subject to the conditions of the Merger Agreement,
and in accordance with the General Corporation Law of the State of Delaware. Pursuant to the transactions contemplated by the Merger
Agreement, (i) each share of common stock of ACC will be exchanged for shares of the Company based on a ratio of 3,171.0628 to
one, (ii) ACC shall continue as the surviving corporation after the transactions contemplated by the Merger Agreement, (iii) each
share of common stock of Merger Sub will be converted into and exchanged for one share of common stock of ACC and (iv) the Company
shall change its name to “American Cannabis Company, Inc.” ACC was incorporated as Hollister & Blacksmith, Inc.
on March 5, 2013 under the laws of the State of Colorado, and is based out of Denver, Colorado.
On May 16, 2014, the Company entered into a
Separation and Exchange Agreement (the “Separation Agreement”), by and among the Company, BIMI, Inc., a Delaware corporation
and wholly-owned subsidiary of the Company, and Brazil Investment Holding, LLC (“Holdings”), a Delaware limited liability
company and the majority stockholder of the Company. Pursuant to the Separation Agreement, the Company agreed to distribute all
shares of common stock of BIMI, Inc. held by the Company in exchange for all of the common stock held by Holdings, thereby resulting
in a complete separation of BIMI, Inc. The Company and BIMI, Inc. each shall retain all assets
and liabilities in its respective name, and shall take any and all actions necessary so that (i) the Company will own or be liable
for all existing Company assets and liabilities and (ii) BIMI, Inc. will own or be liable for all existing BIMI, Inc. assets
and liabilities, including all assets and liabilities of BIMI Inc.’s subsidiaries. The Separation Agreement further provides
that all intercompany agreements by and between the Company, or any of its subsidiaries, and BIMI Inc., or any of its subsidiaries,
are terminated except for confidentiality, non-disclosure or release of liability agreements.
The foregoing descriptions of the Merger Agreement
and Separation Agreement do not purport to be complete and are qualified in their entirety by the terms of the Merger Agreement,
which is filed as an exhibit to the Form 8-K filed by the Company with the Securities and Exchange Commission on May 15, 2014 and
the terms of the Separation Agreement, which is filed as an exhibit to the Form 8-K filed by the Company with the Securities and
Exchange Commission on May 20, 2014. Further, additional information relevant to the transactions contemplated by the Merger Agreement
and Separation Agreement can be found in the Company’s Preliminary Information Statement filed on Schedule 14C with the Securities
and Exchange Commission on May 29, 2014, as amended June 16, 2014 and July 29, 2014.
Business and Operations of the Company
Prior to the effectiveness of the Separation
Agreement, the Company was the parent of Brazil Interactive Media Participações, Ltda., a Brazilian holding company,
which through its wholly-owned subsidiary, EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda.,
combines live television broadcasts with interactive media technology and telecommunications components to create live, interactive
television programming for the Brazilian viewing public. Since the merger on March 13, 2013 and up until the effectiveness of the
Separation Agreement, the Company has been in the business of producing live TV shows using interactive media technology to generate
revenue with an interactive telephone calling component using its own unique and proprietary television programs that include quiz
shows, games, psychics and live chat formats.
Upon completion of the transactions contemplated
by the Merger Agreement, the Company will complete the acquisition of ACC and be in the business of providing end-to-end solutions
for businesses operating in the cannabis industry in states and countries where cannabis is regulated and has been de-criminalized
for medical use and/or legalized for recreational use.
ACC provides its clients end-to-end solutions
based on its specialized knowledge of and experience with operating in regulated cannabis industries. ACC is both a consulting
and advisory service provider and a supplier of products and equipment to businesses operating in this unique industry. ACC’s
service and product offerings including the following:
• | | Guiding clients through state and local cannabis business license application processes; |
• | | Designing and implementing standard operating procedures and policies to ensure compliance
with the legal regulations of the cannabis industry; |
• | | Assisting clients in monitoring their business to ensure compliance with laws and
regulations of the cannabis industry as well as optimal business operation; |
• | | Educating and training ACC’s clients on ACC’s proven processes and techniques
for maximum yields of pharmaceutical grade cannabis in regulated commercial cultivation environments; |
• | | Advising and consulting clients on the acquisition and start-up of cannabis businesses; |
• | | Supplying customers with a variety of products that support all phases of their cannabis
business, including: |
○ | | The Satchel™, a child-resistant exit bag that will assist owners and operators
in the industry mitigate the risk of having product end up in the hands of unintended individuals; |
○ | | A commercial scale cultivation solution for use in regulated cannabis markets, which
provides environmental controls, increases security, and achieves lean manufacturing for ACC’s customers; and |
• | | Researching, designing, developing, and bringing to market new products for the specific
needs of the cannabis industry that help ACC’s customers operate their cannabis business on a daily basis. |
Note 2 - Summary
of Significant Accounting Policies
This summary of significant accounting policies
of Brazil Interactive Media, Inc. is presented to assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation
of the financial statements.
Basis of Presentation
The accompanying consolidated financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP) under the accrual basis of accounting.
Interim Financial Statements
The accompanying unaudited condensed financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”)
and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the year ended
December 31, 2013, included in the Company’s Form 10-K filed for the year ended December 31, 2013. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. The financial statements reflect all adjustments (consisting
primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s
financial position and results of operations. The operating results for the three and six months ended June 30, 2014 are not necessarily
indicative of the results to be expected for any other interim period of a future year.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Brazil Interactive Media, Inc. and its wholly owned subsidiary EsoTV Brasil Promoção Publicidade
Licenciamento e Comércio Ltda. All significant inter-company accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain items in the prior year financial statements
have been reclassified for comparative purposes to conform to the presentation in the current period’s presentation. These
reclassifications have no effect on the previously reported income (loss).
Use of Estimates
In preparing consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of
the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These
accounts and estimates include, but are not limited to, the valuation of accounts receivables, inventories, income taxes and the
estimation on useful lives of property, plant and equipment. Actual results could differ from these estimates, as well as the reported
amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the
valuation of accounts receivables, inventories, income taxes and the estimation on useful lives of property, plant and equipment.
Actual results could differ from these estimates.
Generally Accepted Accounting Principles
(“GAAP”)
These consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Such
accounting principles differ in certain respects from accounting principles generally accepted in Brazil (“Brazilian GAAP”),
which is applied by the Company for its annual consolidated financial statement preparation. Unless otherwise specified, all references
in these financial statements to (i) “reais,” the “real” or “R$” are to the Brazilian real
(singular), or to Brazilian reais (plural), the legal currency of Brazil, and (ii) “U.S. dollars” or “$”
are to United States dollars.
Beneficial Conversion Feature
If the conversion features of conventional
convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial
conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20
“Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount
related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt using the effective interest
method.
Basis of Consolidation
The consolidated financial statements include
the financial statements of the Company and its subsidiary.
All significant inter-company balances and
transactions within the Company and subsidiary have been eliminated upon consolidation.
Accounting Method
The Company’s financial statements are
prepared using the accrual method of accounting. The Company has elected a December 31 year-end.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments.
Concentration of Credit Risk
Accounts receivable are recorded at the invoiced
amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates
the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known requirements, aging of receivables, payment history,
the customer’s current credit-worthiness and the economic environment. As of June 30, 2014 and 2013, the Company did not
record an allowance for uncollectible accounts.
Fixed Assets - Net
Fixed assets are stated at cost less accumulated
depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following
expected useful lives from the date on which they become fully operational and after taking into account their estimated residual
values:
|
Depreciable Life |
Residual Value |
Machinery and Equipment |
5 years |
5 % |
Furniture and fixture |
7 years |
5 % |
Expenditures for maintenance
and repairs that do not make the fixed asset more useful or prolong its useful life are expensed as incurred.
Fair Value for Financial Assets and
Financial Liabilities
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments
and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets
or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37
are described below:
| • | Level 1 Quoted market prices available in active markets for identical assets or liabilities as
of the reporting date. |
| • | Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are
either directly or indirectly observable as of the reporting date. |
| • | Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data. |
The carrying amounts of the Company’s
financial assets and liabilities, such as cash and accounts payable, approximate their fair values because of the short maturity
of these instruments.
The Company does not have any assets or liabilities
measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments
for assets and liabilities measured at fair value at June 30, 2014 and December 31, 2013 nor are gains or losses reported in the
statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities
still held at the reporting date for the for the periods ended June 30, 2014 and December 31, 2013, respectively.
Revenue Recognition
In accordance with guidance by paragraph 605-10-S99-1
of the FASB ASC for revenue recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer
of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is reasonably
assured.
The Company produces live TV shows including
quiz shows, games, psychics and live chat formats, which are transmitted via satellite to the Company’s television broadcaster
distribution channels. The Company currently leases two satellite uplinks and produces three daily live shows, providing 13 hours
of live television program content daily. Members of the television audiences participate in in the shows in real time via telephone,
calling into the Company’s voice system to participate in the show formats, dialing telephone numbers belonging to the Company’s
telecommunications partners. The Company’s Brazilian telecommunications partners charge audience participants various per-minute
rates for the incoming calls and share a portion of the revenue with the Company. Revenue is recognized by the Company when the
minutes of calls from audiences are determined by the local telecommunications providers.
Cost of Revenues
Cost of revenues consists primarily of media
cost, leasing expenses related to satellite uplinks, and other costs directly attributable to the provision of services.
Income Taxes
Income taxes are determined in accordance with
Accounting Standards Codification Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for
how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected
to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more
likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently
be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement
with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts its primary business in
Brazil and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are
subject to examination by the foreign tax authority. As of June 30, 2014 and December 31, 2013, the Company had outstanding income
taxes due with the tax authority in Brazil in the amounts of $618,763 and $624,871, respectively. A portion of the income tax due
for 2013, or $319,284 will be paid over time pursuant to an installment plan entered into by the Company and the tax authority
in Brazil.
Earnings Per Share
The Company reports earnings (loss) per share
in accordance with FASB Accounting Standards Codification 260 “Earnings per Share” (“ASC 260”). This statement
requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the earnings
(loss) per share computations. Basic earnings per share amounts are based on the weighted average shares of common outstanding.
If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options,
warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation
has been adopted for the periods presented. There were no adjustments required to net income for the periods presented in the computation
of diluted earnings per share. There were no common stock equivalents (CSE) necessary for the computation of diluted earnings per
share.
Comprehensive Income
The Company adopted FASB Accounting Standards
Codification 220 “Comprehensive Income” (ASC “220”) which establishes standards for reporting and display
of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity
during the year from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated balance
sheets consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included
in the computation of income tax expense or benefit.
Foreign Currency Translation
The functional currency of the Company is the
Brazilian Real. The Company maintains its consolidated financial statements in the functional currency. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing
at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional
currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency
transactions are included in the determination of net income for the respective periods.
For financial reporting purposes, the consolidated
financial statements of the Company, which are prepared using the functional currency, have been translated into United States
dollars. Current assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses
are translated at the average exchange rates of the year while fixed assets and stockholders’ equity is translated at historical
exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange
adjustment to other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of June 30,
2014 and 2013 were US$1 for R$2.20 and R$2.23, respectively. The average exchange rates for the 3 months ended June 30, 2014 and
2013 were US$1 for R$2.23 and R$2.06, respectively. There is no significant fluctuation in exchange rate for the conversion of
Brazilian Real to US dollars after the balance sheet date.
Off-balance Sheet Arrangements
The Company does not have any off-balance sheet
arrangements.
Related Parties
The Company follows subtopic 850-10 of the
FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20, related parties
include (a) affiliates of the Company; (b) entities for which investments in their equity securities would be required, absent
the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts
that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company;
(f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties
or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements
shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature
of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to
an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each
of the periods for which income statements are presented and the effects of any change in the method of establishing the terms
from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Commitment and Contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a
contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based
upon information available at this time that these matters will have a material adverse effect on the Company’s consolidated
financial position, consolidated results of operations or consolidated cash flows. However, there is no assurance that such matters
will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results
of operations or consolidated cash flows.
Uncertain Tax Positions
The Company did not take any uncertain tax
positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25
for the quarters ended June 30, 2014 or 2013.
Subsequent Events
The Company evaluated for subsequent events
through the issuance date of the Company’s financial statements.
Recently Issued Accounting Standards
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements up to ASU 2014-05, and does not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 3 - ACCOUNTS
RECEIVABLE
Accounts receivable was comprised of the following
amounts as of June 30, 2014 and December 31, 2013:
|
|
2014 |
|
|
2013 |
Gross trade accounts receivable from customers |
$ |
72,508 |
|
$ |
55,999 |
Allowance for doubtful customer accounts |
|
0 |
|
|
0 |
Accounts receivable, net |
$ |
72,508 |
|
$ |
55,999 |
There were no bad debt expenses recognized
during the quarters ended June 30, 2014 and 2013 in the accompanying consolidated income statements.
NOTE 4 - FIXED
ASSETS
Fixed assets were comprised of the following
as of June 30, 2014 and December 31, 2013:
|
|
2014 |
|
|
2013 |
Cost: |
|
|
|
|
|
Machinery and equipment |
$ |
485,092 |
|
$ |
426,126 |
Furniture and fixtures |
|
6,787 |
|
|
14,926 |
Total cost |
|
491,879 |
|
|
441,142 |
Less: Accumulated depreciation |
|
(130,818) |
|
|
(86,147) |
Property and equipment, net |
$ |
361,061 |
|
$ |
354,995 |
|
|
|
|
|
|
Depreciation expense recorded for the six months
ended June 30, 2014 and June 30, 2013 were $44,671 and $21,647, respectively, for fixed assets placed in service for depreciation
purpose.
The Company’s fixed assets are pledged
as collateral in the event of default on the note payable. See NOTE 7.
NOTE
5 - BANK LOANS PAYABLE
The Company has an unsecured loan with HSBC
at interest rates ranging from 1.08% to 6% per month. The balance of this loan was $21,498 as of June 30, 2014 and $23,613 as of
December 31, 2013, respectively. Accordingly, the Company recorded interest expense of $2,115 and $1,695 during the quarters ended
June 30, 2014 and 2013, respectively.
NOTE 6 - TAX
INSTALLMENTS PAYABLE
In 2012, the Company entered an installment
plan with the tax authority in Brazil, pursuant to which the following taxes will be paid over time. As of June 30, 2014, the outstanding
balance on the tax installments payable was $618,764.
Type of Tax |
Balance as of
June 30, 2014 |
Cofins Payable - Tax on Service |
$228,802 |
PIS Withheld Payable – Tax on Services |
$ 33,642 |
ISS and INS Payable – Tax on Service |
$115,641 |
Social Contribution Payable – Social Security Tax |
$ 85,174 |
Income Tax Payable |
$155,504 |
Total |
$618,763 |
NOTE 7 - NOTE
PAYABLE
The company has a loan payable bearing monthly
interest of 2% as of June 30, 2014. The balance of this loan was $214,816 as of June 30, 2014 and is secured by fixed assets of
the Company with a net book value of $462,520. The effect of accrued interest for the quarters ended June 30, 2014 and June 30,
2013 were $4,843 and $10,422, respectively. The accrued interest for the six months ended June 30, 2014 and June 30, 2013 was $9,686
and $20,844, respectively.
Principal maturities of
the loan payable as of June 30, 2014 are as follows:
|
Amount |
2014 |
$214,816 |
Total |
$214,816 |
Note 8 - Loans
From Directors and Officers
|
Amount |
2014 |
$ 70,000 |
Total |
$ 70,000 |
The Company received $100,000 in loans from
the Company’s directors and officers in 2013. The proceeds from these loans were used to make a $100,000 payment towards
a refinanced loan. The loans had a maturity date of October 1, 2013 and paid interest at a rate of 5% per annum. The Company made
a repayment of $30,000 in the fourth quarter of 2013. During the three months ended June 30, 2014, the Company retired these loans
by issuing common stocks, see note 9. As of June 30, 2014, the balance of these loans was $0.
Note 9 -
Convertible Debentures
On April 24, 2014, the Company issued several
convertible debentures to certain accredited investors. The total amount of the debentures is $395,000 and matures on April 24,
2016 with zero percent interest rate. The debentures are convertible into shares of the Company’s common stock at $0.08 per
share.
The debentures were discounted in the amount
of $395,000 due to the intrinsic value of the beneficial conversion option. As of June 30, 2014, the aggregate carrying value of
the debentures was $36,204, net of debt discounts of $358,796. The Company recorded amortization of debt discount in amount of
$36,204 during the six months ended June 30, 2014.
Note 10 -
Capital Structure
During the three months ended June 30, 2014,
the Company issued 1,228,501 shares of common stock in exchange for 2,500 shares of preferred Series H shares and warrants to purchase
225,000 shares of common stock at $0.60 per share which expires at the fifth anniversary from its original issuance.
During the three months ended June 30, 2014,
the Company issued 1,811,042 shares of common stock for service rendered valued at $1,249,269, which is based on the closing stock
price at the date of issuance.
During the three months ended June 30, 2014,
the Company issued 380,715 shares of common stock to retire $70,000 loans from directors and officers and $36,476 accounts payable
due to various parties. Services expense of $131,471 was recognized due to fair value of the shares in excess of the value of the
debts retired.
During the three months ended June 30, 2014,
the Company issued 31,710,628 shares of common stock and 39,985,000 shares of common stock were returned to the Company and retired
per the Merger Agreement and Separation Agreement. These agreements were not effective yet as of June 30, 2014, as a result, these
shares have not been recorded for accounting purposes.
Common Stock
The Company is authorized to issue 100,000,000
shares of common stock, $0.00001 par value. As of June 30, 2014, there were 40,425,000 shares issued and outstanding.
NOTE 11 - COMMITMENT
AND CONTINGENCIES
Office Leasing
The Company leases its office space under non-cancelable
operating lease agreements. The lease ends in December 2016. Based on the current rental lease agreement, the future
3 years minimum rental payments required as of June 30 are as follows:
|
|
Lease Payment |
Year ended, December 31, 2014 |
|
$ 59,893 |
2015 |
|
$123,359 |
2016 |
|
$127,060 |
Total |
|
$310,312 |
The Company’s two satellite uplink units
are leased on a month to month basis with no future operating lease commitments.
For the quarters ended June 30, 2014 and 2013,
the Company had rental expenses of $34,596 and $39,794, respectively. For the six months ended June 30, 2014 and June 30, 2013,
the Company had rental expenses of $61,726 and $82,928, respectively.
The Company had no contingencies existing as
of June 30, 2014 and 2013.
NOTE 12 - Concentration
and Risk
Major Customers
The Company had one customer from
which the Company generated 100% of revenues during the quarters ended June 30, 2014 and 2013, respectively.
Credit Risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company
performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.
As of June 30, 2014 and December 31, 2013,
substantially all of the Company’s cash and cash equivalents were held by financial institutions located in Brazil, which
the Company’s management believes are of high credit quality.
The Company’s operations are carried
out in Brazil. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the
political, economic and legal environment in Brazil, and by the general state of the local economy. The Company’s operations
in Brazil are subject to specific considerations and significant risks not typically associated with companies in North America
and Western Europe. The Company’s results may be affected by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
NOTE 13 - SEGMENTS
The Company determined that it do not operate
in any material, separately reportable operating segments as of June 30, 2014 and December 31, 2013.
NOTE 14 - SUBSEQUENT
EVENTS
In accordance with ASC Topic 855-10, the Company
has analyzed its operations subsequent to a June 30, 2014 to the date these consolidated financial statements were issued. In addition
to the transactions disclosed below, the Company does not have other material subsequent events to disclose in these financial
statements.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Statements in this report may be “forward-looking
statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.
These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions
made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed
or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed
from time to time in this report, including the risks described under “Risk Factors” in our Form 8-K filed March 21,
2013 and any risks described in any other filings we make with the SEC. Any forward-looking statements speak only as of the date
on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances
after the date of this report.
Our discussion and analysis of our financial
condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate
these estimates, including those related to useful lives of real estate assets, cost reimbursement income, bad debts, impairment,
net lease intangibles, contingencies and litigation. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual
results will not differ from those estimates.
Our Company
Brazil Interactive Media, Inc., is a publicly
listed company quoted on the OTCQB under the symbol “BIMI.” The Company is a Delaware corporation formed on September
24, 2001 with the name Naturewell, Incorporated, which in the first quarter of 2013, became Brazil Interactive Media, Inc. through
a merger that resulted in the Company becoming the owner of a Brazilian interactive television technology and television production
company, BIMI, Inc. Prior to 2013, the Company business was the research and development of healthcare products intended for a
variety of health conditions. On May 9, 2008, the Company completed the sale of essentially all of its assets, as a result becoming
a shell company as defined under Rule 12b-2 of the Exchange Act. As described below, the Company ceased to be a shell company when
it acquired a Brazilian television and interactive media technology company in March of 2013.
On May 15, 2014, the Company entered into an
Agreement and Plan of Merger (the “Merger Agreement”), between the Company, Cannamerica, Inc., Delaware corporation
and a wholly owned subsidiary of the Company (“Merger Sub”), and Hollister & Blacksmith, Inc. d/b/a American Cannabis
Consulting, Inc., a Colorado corporation (“ACC”). Pursuant to the Merger Agreement, Merger Sub will be merged with
and into ACC through a reverse triangular merger transaction upon the terms and subject to the conditions of the Merger Agreement,
and in accordance with the General Corporation Law of the State of Delaware. Pursuant to the transactions contemplated by the Merger
Agreement, (i) each share of common stock of ACC will be exchanged for shares of the Company based on a ratio of 3,171.0628 to
one, (ii) ACC shall continue as the surviving corporation after the transactions contemplated by the Merger Agreement, (iii) each
share of common stock of Merger Sub will be converted into and exchanged for one share of common stock of ACC and (iv) the Company
shall change its name to “American Cannabis Company, Inc.” ACC was incorporated as Hollister & Blacksmith, Inc.
on March 5, 2013 under the laws of the State of Colorado, and is based out of Denver, Colorado.
On May 16, 2014, the Company entered into a
Separation and Exchange Agreement (the “Separation Agreement”), by and among the Company, BIMI, Inc., a Delaware corporation
and wholly-owned subsidiary of the Company, and Brazil Investment Holding, LLC (“Holdings”), a Delaware limited liability
company and the majority stockholder of the Company. Pursuant to the Separation Agreement, the Company agreed to distribute all
shares of common stock of BIMI, Inc. held by the Company in exchange for all of the common stock held by Holdings, thereby resulting
in a complete separation of BIMI, Inc. The Company and BIMI, Inc. each shall retain all assets
and liabilities in its respective name, and shall take any and all actions necessary so that (i) the Company will own or be liable
for all existing Company assets and liabilities and (ii) BIMI, Inc. will own or be liable for all existing BIMI, Inc. assets
and liabilities, including all assets and liabilities of BIMI Inc.’s subsidiaries. The Separation Agreement further provides
that all intercompany agreements by and between the Company, or any of its subsidiaries, and BIMI Inc., or any of its subsidiaries,
are terminated except for confidentiality, non-disclosure or release of liability agreements.
The foregoing descriptions of the Merger Agreement
and Separation Agreement do not purport to be complete and are qualified in their entirety by the terms of the Merger Agreement,
which is filed as an exhibit to the Form 8-K filed by the Company with the Securities and Exchange Commission on May 15, 2014 and
the terms of the Separation Agreement, which is filed as an exhibit to the Form 8-K filed by the Company with the Securities and
Exchange Commission on May 20, 2014. Further, additional information relevant to the transactions contemplated by the Merger Agreement
and Separation Agreement can be found in the Company’s Preliminary Information Statement filed on Schedule 14C with the Securities
and Exchange Commission on May 29, 2014, as amended June 16, 2014 and July 29, 2014.
Business and Operations of the Company
Prior to the effectiveness of the Separation
Agreement, the Company was the parent of Brazil Interactive Media Participações, Ltda., a Brazilian holding company,
which through its wholly-owned subsidiary, EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda.,
combines live television broadcasts with interactive media technology and telecommunications components to create live, interactive
television programming for the Brazilian viewing public. Since the merger on March 13, 2013 and up until the effectiveness of the
Separation Agreement, the Company has been in the business of producing live TV shows using interactive media technology to generate
revenue with an interactive telephone calling component using its own unique and proprietary television programs that include quiz
shows, games, psychics and live chat formats.
Upon completion of the transactions contemplated
by the Merger Agreement, the Company will complete the acquisition of ACC and be in the business of providing end-to-end solutions
for businesses operating in the cannabis industry in states and countries where cannabis is regulated and has been de-criminalized
for medical use and/or legalized for recreational use.
ACC provides its clients end-to-end solutions
based on its specialized knowledge of and experience with operating in regulated cannabis industries. ACC is both a consulting
and advisory service provider and a supplier of products and equipment to businesses operating in this unique industry. ACC’s
service and product offerings including the following:
• | | Guiding clients through state and local cannabis business license application processes; |
• | | Designing and implementing standard operating procedures and policies to ensure compliance
with the legal regulations of the cannabis industry; |
• | | Assisting clients in monitoring their business to ensure compliance with laws and
regulations of the cannabis industry as well as optimal business operation; |
• | | Educating and training ACC’s clients on ACC’s proven processes and techniques
for maximum yields of pharmaceutical grade cannabis in regulated commercial cultivation environments; |
• | | Advising and consulting clients on the acquisition and start-up of cannabis businesses; |
• | | Supplying customers with a variety of products that support all phases of their cannabis
business, including: |
○ | | The Satchel™, a child-resistant exit bag that will assist owners and operators
in the industry mitigate the risk of having product end up in the hands of unintended individuals; |
○ | | A commercial scale cultivation solution for use in regulated cannabis markets, which
provides environmental controls, increases security, and achieves lean manufacturing for ACC’s customers; and |
• | | Researching, designing, developing, and bringing to market new products for the specific
needs of the cannabis industry that help ACC’s customers operate their cannabis business on a daily basis. |
Results of Operations for the
Three Months Ended June 30, 2014 and June 30, 2013
Revenues
We had revenue of $2,587,487 and $1,932,132
for the three months ended June 30, 2014 and 2013, respectively. The increase in our revenues is mainly attributed to a higher
billing rate in 2014 negotiated with our new Telecom partner.
Cost of Revenues
Cost of revenues was recorded at $2,173,423
and $1,489,534 during the three months ended June 30, 2014 and 2013, respectively. Cost of revenues consists primarily of cost
of media time, television production crew contractors and the cost of prize payouts. The increase in the cost of goods sold is
attributed to media pressures in the market, which resulted in higher media pay rates, as well as an increase in media usage.
Operating Expenses
We had operating expenses of $1,762,944 and
$468,495 for the three months ended June 30, 2014 and 2013, respectively. The expenses were mainly attributed to stock issuances
for services rendered to the Company, as well as television studio rent and maintenance costs, depreciation of equipment, subcontractor
costs, legal and professional fees, security and traveling expenses.
Net Income
We had net loss of $1,321,798 and a net loss
of $59,043 for the three months ended June 30, 2014 and 2013, respectively. Net loss for the three months ended June 30, 2014 was
due mainly to the expenses for services rendered which were satisfied by equity issuances. The net loss for the three months ended
June 30, 20013 was due to insufficient gross profit to cover our operating expenses.
Results of Operations for the
Six Months Ended June 30, 2014 and June 30, 2013
Revenues
We had revenue of $4,466,321 and $4,240,137
for the six months ended June 30, 2014 and 2013, respectively. The increase in our revenues is mainly attributed to a higher billing
rate in 2014 negotiated with our new Telecom partner.
Cost of Revenues
Cost of revenues was recorded at $4,038,732
and $3,185,803 during the six months ended June 30, 2014 and 2013, respectively. Cost of revenues consists primarily of cost of
media time, television production crew contractors and the cost of prize payouts. The increase in the cost of goods sold is attributed
to media pressures in the market, which resulted in higher media pay rate.
Operating Expenses
We had operating expenses of $2,035,317 and
$985,730 for the six months ended June 30, 2014 and 2013, respectively. The expenses were mainly composed of equity issuances for
services rendered to the Company as well as television studio rent and maintenance costs, depreciation of equipment, subcontractor
costs, legal and professional fees, security and traveling expenses.
Net Income
We had net loss of $1,541,347 and net income
of $10,835 for the six months ended June 30, 2014 and 2013, respectively. Net loss for the six months ended June 30, 2014 was due
to the higher operating expenses from services rendered to the Company, which was satisfied through equity issuances, and also
media costs due to market pressures resulting in higher media cost rates. The net income for the six months ended June 30, 20013
was due to our gross profit level which was enough to cover our operating expenses
Liquidity and Capital Resources
Cash flows used in operating activities were
$288,183 and $172,421 for the six months ended June 30, 2014 and 2013, respectively. The $288,183 provided by operating activities
for the six months ended June 30, 2014 was due primarily to increase in accounts payable and accrued expenses. However, this was
reduced by an increase in other receivables and prepayments and advances to suppliers. The $172,421 cash used in operating activities
for the six months ended June 30, 2013 was attributed to mainly to an increase in Customer receivables which was then offset by
an increase in accounts payable and accrued expenses due to new negotiated payment terms to vendors.
Cash flows used in investing activities were
$50,737 and $0 during the six months ended June 30, 2014 and 2013, respectively. This was mainly attributed to the purchase
of television studio and broadcast equipment during the six months ended June 30, 2014.
Cash flows provided by financing activities
were $367,139 and $168,556 for the six months ended June 30, 2014 and 2013, respectively. For both periods, these cashflows provided
were attributed mainly to equity issuances for preferred stock and debt issuance, as well as bank loan repayments and tax payments
made which were offset by bank borrowings.
Capital Expenditures
Overall, we have funded our cash needs from
inception through June 30, 2014 with a series of debt and equity transactions, primarily with related parties. If we are unable
to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity
transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing
could have a material adverse effect on our operations and financial condition.
We had cash of $313,874 on hand as of June
30, 2014, of which $45,378 was restricted in escrow as part of a new loan agreement deal with Bradesco Bank which took effect on
July 1, 2014. Currently, we have enough cash to fund our operations for the next few months. This is based on current positive
cash flows from operation and potential funding from investor capital groups. Modifications to our business plans may require
additional capital for us to operate. For example, if we are unable to raise additional capital in the future, this could affect
our ability to purchase media in advance and at a discount. This may result in lower revenues and market share for us. In addition,
there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.
On a long-term basis, liquidity is dependent
on continuation and expansion of operations, receipt of revenues, and additional infusions of capital and debt financing. Our current
capital and revenues are insufficient to fund such expansion. If we choose to launch such an expansion campaign, we will require
substantially more capital. However, there can be no assurance that we will be able to obtain additional equity or debt financing
in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely affected and we
will have to significantly modify our plans.
Our success will be dependent upon implementing
our plan of operations and the risks associated with our business plans. Our strategy is to purchase TV media in advance at discounted
prices which also affects our gross profit. We plan to strengthen our position in our market.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet
arrangements and it is not anticipated that the Company will enter into any off-balance sheet arrangements.
Competition
The Company is unaware of any direct competition
with the Company’s products or services in the Brazilian market.
Intellectual Property
In order to protect its proprietary television
program formats and designs, the Company has applied for several trademarks with the Brazilian patent and trademark office.
Customer Base
Our overall target audience consists of members
of the Brazilian television viewing public who use cellular telephones. During the third quarter of 2013, we began a focused effort
to identify and categorize our client base, to allow us to better customize our live programming to maximize viewer participation,
as well as prepare for the addition of advertising to our revenue model and better inform the creative process of our new product
development. Previously, our business model, where income flows from third-party telecommunications providers who bill the Company’s
customers directly, did not allow us access to detailed information regarding the Company’s customers. Beginning in the third
quarter of 2013 the Company employs new systems operated by our technical and production teams to create and maintain a constantly
updated database of comprehensive information regarding our customers. This database allows the Company to match the style and
content of our production to the preferences of our clients.
Employees
The Company contracts with thirty-six independent
technical television engineers, television production staff, financial staff, and clerical and administrative support persons on
an on-going as-needed basis. The majority of our third-party contractors are members of a Brazilian television industry labor union,
in accordance with Brazilian law. There are no employment agreements.
Facilities
The Company does not own any real estate. The
Company leases its principal office at 3457 Ringsby Ct., Unit 111, Denver, CO 80216 with a month-to-month lease payment of $2,000
per month.
The Company has no plans to acquire any property
in the immediate future. The Company believes that its current facilities are adequate for its needs through the next twelve months,
and that, should it be needed, suitable additional space will be available to accommodate expansion of the Company’s operations.
Item 3. Quantitative
& Qualitative Disclosures about Market Risks
Not applicable.
Item 4. Controls
and Procedures
Our Chief Executive Officer and Chief Financial
Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures
for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information
is made known to them, particularly during the period in which this Report was prepared.
Evaluation of Controls
and Procedures
The Company maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, including our chief executive and financial officer, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the
cost- benefit relationship of possible controls and procedures.
As of June 30, 2014, an evaluation was performed
under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief
Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Controls
There have been no changes in the Company’s
internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Limitations on the Effectiveness of Controls
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. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected. The Company’s disclosure controls and procedures are
designed to provide reasonable assurance of achieving its objectives. The Company’s Chief Executive Officer and Chief Financial
Officer have concluded that the Company’s disclosure controls and procedures are effective at that reasonable assurance level.
PART
II OTHER INFORMATION
Item 1. Legal
Proceedings
The Company is not currently a party to any
pending legal proceedings.
Item 1A. Risk Factors
Not required.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds
Please refer to the Form 8-K filed by the Company
with the Securities and Exchange Commission on May 15, 2014.
Item 3. Defaults
upon Senior Securities
None.
Item 5. Other
Information
None.
Item 6. Exhibits
31.2 (1) | | Certification of Chief Executive Officer as required by Rule 13a-14 or 15d-14
of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 (2) | | Certification of Vice President of Finance and Principal Financial Officer
as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 (2) | | Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 (2) | | Certification of Vice President of Finance and Principal Financial Officer
Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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 hereunto duly authorized.
BRAZIL INTERACTIVE MEDIA, INC.
(Registrant)
Dated: September 5, 2014 |
By: |
/s/ Corey Hollister |
|
|
|
Corey Hollister, Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
Dated: September 5, 2014 |
By: |
/s/ Jesus Quintero |
|
|
|
Jesus Quintero, Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
|
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, I, Corey Hollister, certify that:
| 1. | I have reviewed this report on Form 10-Q of Brazil Interactive Media, Inc., for the fiscal quarter
ended June 30, 2014; |
| 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 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 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 involves management or other employees who have a significant
role in the registrant’s internal controls over financial reporting. |
Date: September 5, 2014
/s/ Corey Hollister
Corey Hollister
Chief Executive Officer, Principle Executive
Officer
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, I, Jesus Quintero certify that:
| 1. | I have reviewed this report on Form 10-Q of Brazil Interactive Media, Inc., for the fiscal quarter
ended June 30, 2014; |
| 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 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 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 involves management or other employees who have a significant
role in the registrant’s internal controls over financial reporting. |
Date: September 5, 2014
/s/ Jesus Quintero
Jesus Quintero
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
Brazil Interactive Media, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Corey Hollister, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
| 1. | The Report 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 the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company. |
Date: September 5, 2014
/s/ Corey Hollister
Corey Hollister
Chief Executive Officer, Principle Executive
Officer
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement 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.
EXHIBIT 32.2
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
Brazil Interactive Media, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Jesus Quintero, principal financial officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
| 1. | The Report 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 the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company. |
Date: September 5, 2014
/s/ Jesus Quintero
Jesus Quintero
Principal Financial Officer
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement 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.
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