UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One
)
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the fiscal year ended
December 31,
2008
|
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from _____________ to
_____________
|
Commission
file number
000-52404
VALUERICH,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
41-2102385
|
(STATE
OR OTHER JURISDICTION OF
INCORPORATION
OR ORGANIZATION)
|
|
(I.R.S.
EMPLOYER IDENTIFICATION NO.)
|
1804
N. Dixie Highway, Suite A, West Palm Beach, FL 33407
1-561-370-3617
(Address
and telephone number, including area code, of registrant’s principal executive
offices)
Securities
registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par
value per share
(Title of
Class)
Securities
registered pursuant to Section 12(g) of the Act:
None.
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
x
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
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
o
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. (Check one):
Large accelerated
filer
o
|
Accelerated
filer
o
|
|
|
Non-accelerated
filer
o
(Do not check if a smaller reporting
company)
|
Smaller reporting
company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act.) Yes
o
No
x
At June
30, 2008, the end of our second fiscal quarter, the aggregate market value of
common stock held by non-affiliates of the registrant was approximately
$1,000,000 based on the closing price of $0.20 as reported on the American Stock
Exchange.
The
number of outstanding shares of the registrant’s Common Stock, $0.01 par
value, was 8,669,571 shares as of March 23, 2009.
DOCUMENTS INCORPORATED BY
REFERENCE
The
information required by Part III of this Report, to the extent not set forth
herein, is incorporated herein by reference from the registrant’s definitive
proxy statement relating to the Annual Meeting of Shareholders to be held in
2008, which definitive proxy statement shall be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal year to which
this Report relates.
VALUERICH,
INC.
TABLE
OF CONTENTS
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Page
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PART
I
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5
|
Item 1.
Businses.
|
5
|
Item 1A. Risk
Factors
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5
|
Item 1B. Unresolved
Staff Comments
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10
|
Item 2.
Properties.
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11
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Item 3. Legal
Proceedings.
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11
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Item 4. Submission
of Matters to a Vote of Security Holders.
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11
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PART II
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11
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Part
5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
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11
|
Item 6. Selected
Financial Data.
|
14
|
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operation.
|
14
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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
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21
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Item 8.
Financial Statements and Supplementary Data.
|
22
|
Item 9. Changes in
and Disagreements with Accountants on Accounting and Financial
Dosclosure.
|
44
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Item 9A. Controls
and Procedures.
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44
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Item 9B. Other
Information.
|
44
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PART III
|
45
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Item 10. Directors,
Executive Officers and Corporate Governance.
|
45
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Item 11. Executive
Compensation.
|
46
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Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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47
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Item
13. Certain Relationships and Related Transactions, and Director
Independence
|
47
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Item 14. Principal
Accounting Fees and Services.
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48
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PART IV
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49
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Item 15. Exhibits
and Financial Statement Schedules.
|
49
|
CAUTIONARY
STATEMENT RELATING TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This
Annual Report on Form 10-K and the information incorporated by reference
includes ‘‘forward-looking statements’’ within the meaning of section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
We intend those forward looking-statements to be covered by the safe harbor
provisions for forward-looking statements. All statements regarding our expected
financial position and operating results, our business strategy, our financing
plans and the outcome of any contingencies are forward-looking statements. Any
such forward-looking statements are based on current expectations, estimates,
and projections about our industry and our business. Words such as
‘‘anticipates,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘seeks,’’
‘‘estimates,’’ or variations of those words and similar expressions are intended
to identify such forward-looking statements. Forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those stated in or implied by any forward-looking
statements.
PART
I
Item
1. Business
Our
Current Business
Valuerich,
Inc., (the Company), was incorporated under the laws of the state of Florida on
July 11, 2003. Prior to 2009, the Company operated various online and offline
media-based properties for corporate and financial professionals. Its properties
included 1) iValueRich.com, 2) Valuerich magazine and 3) the Valuerich Small-cap
Financial Expo.
In the
first quarter of 2009, the Company became dedicated to a web-based financial
media business model. Until December 2008, Valuerich magazine
was published approximately three times per year and was a glossy full-color
magazine of approximately 120 pages that was geared toward an affluent
readership of investment related professionals and corporate
leaders.
By the
end of 2008, the Company had nearly completed, but not yet launched, the second
generation of the ValueRich platform, which added a full spectrum of financial
and web-based tools for small-cap companies seeking to go public and raise
capital via a web-based Direct Public Offering (“DPO”) format. Companies that
want to raise capital could file their own registration statement through the
DPO process and pay the Company for the use of the technology platform and
access to its database of financial related professionals to help fund the
issuing company’s deal. For the first time, users of the ValueRich technology
platform who have verified their qualified investor’s status will be able to
discover and participate in Direct Offerings featured on the ValueRich platform.
While ValueRich, Inc. is not a registered broker-dealer or investment advisor,
soon we will be able to provide companies with technology and marketing tools
they need to communicate directly with qualified investors. The Company
anticipates announcing the official launch of www.iValueRich.com platform in
early 2009.
In
January 2009, the Company announced plans to create a business talk show called
ValueRich TV, which will be produced at a dedicated studio next door to its
headquarters. Its purpose is to create a successful Wall Street based talk show
that can be streamed over the internet for worldwide distribution. In January
2009, the Company purchased and closed on the building to be used as the
studio.
The
Company trades on the NYSE Amex under the trading symbol “IVA.”
ITEM
1A. Risk Factors
In
evaluating us and our business you should carefully consider the risks set forth
below.
Risks
Relating to Our Business
No
assurance can be given that we will not be subject to liability if persons rely
on information about other companies made available through the use of our
services.
Although
we believe that we should not be held liable if information made available
through our services about other companies, and/or relied on by persons using
our services, turns out to be fraudulent or otherwise misleading, there can be
no assurance given that any potential liability for any such fraudulent or
otherwise misleading information would lie exclusively with the companies
providing such information, and not us. If we were found to be held liable for
damages resulting from any such fraudulent or otherwise misleading information,
the damages could be significant. In this regard, we are not involved at any
level with the preparation of the content of the information provided by our
participating member companies, nor do we check, verify or confirm any of this
information; but, merely organize the manner in which it is presented and make
it available to be searched. All substantive information about other companies
that is made available through our services is provided directly to us by the
respective companies themselves. In addition, there are disclaimers in place
required to be accepted by paying members in connection with gaining membership
to our website which are intended to further restrict our liability for the
accuracy of this information.
We
have not been profitable in the past and may never become
profitable.
We
have not yet achieved profitability and there can be no assurance that we will
become profitable. During our fiscal years ended December 31, 2008 and December
31, 2007, we incurred net losses of approximately $1,010,595 and $1,747,987,170,
respectively. Our ability to generate revenues and to become profitable depends
on many factors, including the market acceptance of our products and services,
our ability to control costs and our ability to implement and maintain our
business strategy. There can be no assurance that we will become or remain
profitable.
There
is an uncertain market for our products.
We
have only a limited operating history to determine the market acceptance by
small capitalization companies, investment banks and buy-side professionals of
our expos, magazine and internet community. No assurance can be given that a
significant market for our products and services will be developed or
sustained.
If
we are unable to hire and retain key personnel, then we may not be able to
implement our business plan.
The
success and growth of our business will depend on the contributions of our
Chairman, President and Chief Executive Officer, Joseph Visconti, and a small
number of other key personnel, as well as our ability to attract, motivate and
retain other highly qualified personnel. Competition for such personnel is
intense. We do not have an employment agreement with Mr. Visconti or any of our
other employees. The loss of the services of any of our key personnel, or our
inability to hire or retain qualified personnel, could have a material adverse
effect on our business.
If
our business plan fails, our company will dissolve and investors may not receive
any portion of their investment back.
If
we are unable to realize profitable operations, or raise sufficient capital, our
business will eventually fail. In such circumstances, it is likely that we will
dissolve and, depending on our remaining assets at the time of dissolution, we
may not be able to return any funds back to investors.
If
we do not meet the American Stock Exchange requirements for continued listing,
our common stock may be delisted and our securities may then become
illiquid.
If
our securities are delisted from AMEX, they will likely be quoted in the
over-the-counter market in the “pink sheets” or the OTC Bulletin Board.
Consequently, an investor would find it more difficult to trade our securities.
In addition, if our common stock is delisted from AMEX, it will be subject to
the rules relating to “penny stocks.” These rules require brokers who sell
securities subject to such rules to persons other than established customers and
“institutional accredited investors” to complete certain documentation, make
suitability inquiries of investors and provide investors with certain
information concerning the risks of trading in the securities. Application of
the penny stock rules to our securities will adversely affect the market
liquidity of our securities, which may adversely affect the ability of
purchasers in this offering to resell our securities.
We
utilize third parties to provide reliable software, systems and related
services.
We
utilize various third parties for technology, software, systems and related
services in order to provide our clients with the most comprehensive menu of
publicly available business and financial information by providing historical
data in chart format, daily updates and live feeds. Currently we have not
entered into any agreements with any third party for technology, software,
systems or related services. If for any reason one or more of these service
providers becomes unable or unwilling to continue to provide services of
acceptable quality, at acceptable costs and in a timely manner, our ability to
deliver our product and services offering to our members could be impaired. We
would have to identify and qualify substitute service providers, which could be
time consuming and difficult and could result in unforeseen difficulties.
Although we are confident that alternative service providers are available, we
cannot assure that we will be able to obtain such services on our favorable
terms as we currently receive or in a timely manner.
The
operating performance of computer systems and Web servers is critical to our
business and reputation.
Any
system failure, including network, software or hardware failure due to a
computer virus break-ins or otherwise that causes an interruption to our website
could lead to reduced revenues for our business. In addition, our members depend
on internet service providers, online service providers and other website
operators for access to our websites. Many of them have experienced significant
outages in the past, and could experience outages, delays and other difficulties
due to system failures unrelated to our degraded service, number satisfaction
would decrease, we would likely lose revenue and our reputation could be
permanently harmed.
We
may issue shares of preferred stock with greater rights than our common
stock.
Our
articles of incorporation authorize our board of directors to issue up to ten
million shares of preferred stock in one or more series and determine the price
for those shares without seeking any further approval from our stockholders.
Further, under Delaware law, the board of directors may at its discretion, and
without stockholder approval, set the other terms of the preferred stock. Any
preferred stock that is issued may rank ahead of our common stock, in terms of
dividends, liquidation rights and voting rights that could adversely affect the
voting power or other rights of the holders of our common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of our
company. Such provisions could have the effect of depriving stockholders of an
opportunity to sell their shares at a premium over prevailing market prices. Any
delay or prevention of, or significant payments required to be made upon, a
change of control transaction or changes in our board of directors or management
could deter potential acquirers or prevent the completion of a transaction in
which our stockholders could receive a substantial premium over the then current
market price for their shares.
Intense
competition could reduce our market share and harm our financial
performance.
An
increasing number of financial news and information sources compete for
consumers’ and advertisers’ attention and spending. We expect this competition
to continue to increase. We compete for advertisers, readers, staff and outside
contributors with many types of companies. We have experienced increased
competition in the financial convention space. We have found that in many cases
our clients are being offered free and/or no charge presentation spots
at investment banking conferences where the host investment bank
derives revenue not from charging the exhibiting companies to present but rather
from the investment banking fees derived from engaging the invited company and
generating revenue from investment banking services, consulting and advisory
fees. There can be no assurance that we will be able to continue to
attract clients for our expos, and that if we are able to attract clients that
it will be at prices that will enable us to meet the costs of running the
expos.
Our
ability to compete depends on many factors, including the originality,
timeliness, comprehensiveness and trustworthiness of our content and that of our
competitors, the ease of use of services developed either by us or our
competitors and the effectiveness of our sales and marketing
efforts.
Many
of our existing competitors, as well as a number of potential new competitors,
have longer operating histories, greater name recognition, larger customer bases
and significantly greater financial, technical and marketing resources than we
do. This may allow them to devote greater resources than we can to the
development and promotion of their services and to offer clients incentives such
as free entry to their expos. These competitors may also engage in more
extensive research and development, undertake more far-reaching marketing
campaigns, adopt more aggressive pricing policies (including offering their
financial news for free) and make more attractive offers to existing and
potential employees, outside contributors, strategic partners and advertisers.
Our competitors may develop content that is equal or superior to ours or that
achieves greater market acceptance than ours. It is also possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully for advertisers, readers, staff or outside
contributors, which could materially adversely affect our business, results of
operations and financial condition. Increased competition could result in
advertising price reductions, reduced margins or loss of market share, any of
which could materially adversely affect our business, results of operations and
financial condition.
We
also compete with other web sites, television, radio and print media for a share
of advertisers’ total advertising budgets. If advertisers perceive the Internet
or our web site to be a limited or an ineffective advertising medium, they may
be reluctant to devote a portion of their advertising budget to Internet
advertising or to advertising on our web site.
Our
online operations are subject to security risks and systems
failures.
Security
risks.
Online
security breaches could materially adversely affect our collective businesses,
financial condition or results of operations. Any well-publicized compromise of
security could deter use of the Internet in general or use of the Internet to
conduct transactions that involve transmitting confidential information or
downloading sensitive materials in particular. In offering online payment
services, we may increasingly rely on technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information, such as consumer credit card numbers. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments could compromise or breach the algorithms that we use to protect
our consumers’ transaction data. In addition, experienced programmers or
“hackers” may attempt to misappropriate proprietary information or cause
interruptions in our services which could require us to expend significant
capital and resources to protect against these problems.
Other
system failures.
The
uninterrupted performance of our computer systems is critical to the operations
of our Internet sites. We may have to restrict access to our Internet sites to
solve problems caused by computer viruses or other system failures. Our
customers may become dissatisfied by any systems disruption or failure that
interrupts our ability to provide our content. Repeated system failures could
substantially reduce the attractiveness of our Internet site and/or interfere
with commercial transactions, negatively affecting our ability to generate
revenues. Our Internet sites must accommodate a high volume of traffic and
deliver regularly updated content. Our sites have, on occasion, experienced
slower response times and network failures. These types of occurrences in the
future could cause users to perceive our web sites as not functioning properly
and therefore induce them to frequent Internet sites other than ours. In
addition, our customers depend on their own Internet service providers for
access to our sites. Our revenues could be negatively affected by outages or
other difficulties customers experience in accessing our Internet sites due to
Internet service providers’ system disruptions or similar failures unrelated to
our systems.
If
we are unable to generate revenues from advertising and sponsorships, or if we
were to lose our large advertisers or sponsors, our business would be
harmed.
If
companies perceive ValueRich Magazine, iValueRich.com or our conference events
to be a limited or ineffective advertising medium, they may be reluctant to
advertise in our products or be a sponsor of our company. Our ability to
generate significant advertising and sponsorship revenues depends upon several
factors, including, among others, the following:
|
●
|
our
ability to maintain a large, demographically attractive reader base for
ValueRich Magazine or subscriber base for
iValueRich.com;
|
|
|
our
ability to maintain attractive advertising
rates;
|
|
|
our
ability to attract and retain advertisers and sponsors;
and
|
|
|
our
ability to provide effective advertising delivery and measurement
systems.
|
Our
advertising revenues are also dependent on the level of spending by advertisers,
which is impacted by a number of factors beyond our control, including general
economic conditions, changes in consumer purchasing and viewing habits and
changes in the retail sales environment. Our existing competitors, as well as
potential new competitors, may have significantly greater financial, technical
and marketing resources than we do. These companies may be able to undertake
more extensive marketing campaigns, adopt aggressive advertising pricing
policies and devote substantially more resources to attracting advertising
customers. In an effort to decrease cost, we have changed publication
to digital. There can be no assurance that such a change will not
negatively impact our magazine revenue.
If
we are unable to generate revenues from subscription and site membership fees to
iValueRich.com or fees for specific research or other services utilized by
members of iValueRich.com our business would be harmed.
To
date, we have not obtained any revenues from the
interactive flow of commerce and financing queries through subscription and site
membership fees for access to iValueRich.com, “a la carte” fees for specific
valuable research and other services or from selling Internet advertising to
reach the demographic this business community offers. While we continue to hope
that we will be successful in these endeavors, no assurance can be given that we
will, in fact, generate this revenue.
The
Company must be able to adapt to rapidly changing market trends and technologies
in order to continue offering its clients a viable business
service.
The
Company’s success will depend largely upon its ability to monitor rapidly
changing technologies and market trends and to adapt its publications and
services to meet the evolving information needs of existing and emerging target
clients. The process of internally researching and developing, launching,
gaining acceptance and establishing profitability for a new publication, new
expo structure or new service, or assimilating and marketing an acquired
publication or service, is inherently risky and costly. We are currently in the
process of modifying our expo line of business in order to more effectively
compete in our industry and have chosen to change our magazine publication to
digital. New publications typically require several years and significant
investment to achieve profitability. There can be no assurance that the
Company’s efforts to modify its existing lines of business or introduce new or
assimilate acquired publications or services will be successful or profitable.
In addition, the Company has invested in certain Internet services that are not
yet revenue optimized. The Internet is still in the relatively early stages of
development as a commercial medium, and there can be no assurance that these
services will be successful or profitable. Costs related to the development of
new publications and services are expensed as incurred and, accordingly, the
Company’s profitability from year to year may be adversely affected by the
number and timing of new product launches.
Some
of the Company’s business services compete in a highly competitive
market.
Certain
of the business lines in which the Company is engaged are highly competitive and
certain of the Company’s competitors are larger and have greater financial
resources than the Company. There can be no assurance that the Company will be
able to continue to compete successfully or that such competition will not have
a material adverse effect on the Company’s business or financial
results.
If
we are unable to attract or retain qualified editorial staff and outside
contributors, our business could be adversely affected.
The
success of our magazine depends substantially upon our ability to produce
original, timely, comprehensive and trustworthy content. We may not
be able to retain or attract highly qualified writers, and in fact, as a
cost-cutting measure we recently substantially reduced our editorial staff in an
effort to reduce expenses. If we are unable to retain our current
writers with appropriate qualifications, our business, results of operations and
financial condition could be materially adversely affected.
We
may be exposed to liability over privacy concerns.
Despite
the display of our privacy policy on our website, any penetration of our network
security or misappropriation of our customers’ personal or credit card
information could subject us to liability. We may be liable for claims based on
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. Claims could also be based on other misuses of personal
information, such as for unauthorized marketing purposes. These claims could
result in litigation, which could divert management’s attention from the
operation of our business and result in the imposition of significant damages.
In addition, the Federal Trade Commission and several states have investigated
the use by Internet companies of personal information. In 1998, the U.S.
Congress enacted the Children’s Online Privacy Protection Act of 1998. The
Federal Trade Commission recently promulgated final regulations interpreting
this act. We depend upon collecting personal information from our customers and
we believe that the regulations under this act will make it more difficult for
us to collect personal information from some of our customers. Any failure to
comply with this act may make us liable for substantial fines and other
penalties. We could also incur expenses if new regulations regarding the use of
personal information are introduced or if our privacy practices are
investigated.
The
profitability and success of our trade shows and conferences could be adversely
affected if we are unable to obtain desirable dates and locations or are unable
to increase the frequency of our events.
The
competition for desirable dates and venues for our expos is also increasing. As
this competition intensifies, we may be unable to schedule important
engagements. If we are unable to obtain desirable dates and venues for events,
the profitability and future success of these events could be adversely
affected. In addition, we may desire to increase the frequency of our trade
shows and conferences to take advantage of increasing demand in the future. If
we are unable to secure additional venues with suitable exhibit space to
accommodate this demand, the growth of our trade shows and conferences business
could be adversely affected.
Our
business is directly effected by the success of the financial service
industry.
Our
business depends in large part upon the spending patterns of members of the
financial services industry. The financial services industry has
recently been extremely volatile and experienced significant economic
downturns. Our expo participation and advertising revenue depends in
part of the spending patterns of these businesses which may be reduced in such
volatile markets.
We
may not be able to protect our intellectual property, and we may be liable for
infringing the intellectual property of others.
Third
parties may infringe or misappropriate our intellectual property, which could
have a material adverse effect on our business, results of operations or
financial condition. While we enter into confidentiality agreements with our
material employees, guides, consultants and strategic partners, and generally
control access to and distribution of our proprietary information, the steps we
have taken to protect our intellectual property may not prevent
misappropriation. In addition, we do not know whether we will be able to defend
our proprietary rights since the validity, enforceability and scope of
protection of proprietary rights in Internet-related industries is still
evolving.
Third
parties may assert infringement claims against us. From time to time in the
ordinary course of business we expect to be subject to claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties. These claims and any resultant litigation, should it occur, could
subject us and our subsidiaries to significant liability for damages. In
addition, even if we and our subsidiaries prevail, litigation could be
time-consuming and expensive to defend and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our and our subsidiaries’ ability to use the intellectual property subject to
these claims unless we are able to enter into agreements with the third parties
making these claims.
ITEM
1B. Unresolved Staff Comments
None
Item
2. Properties
We
currently lease an office in West Palm Beach, Florida of approximately 1,750
square feet on a month to month basis from Joseph Visconti, our Chairman,
President and CEO at a rate of $32,400 per year.
In
January 2009, the Company purchased and closed on a building to be used as a
studio pursuant to its ValueRich TV business. The building is part of a
development named Flagler Pointe located at 1804 North Dixie Highway, West Palm
Beach, Florida. The building is in the same commercial complex as
ValueRich’s current corporate headquarters, which should make for more efficient
use of the company’s staff and resources. The building will serve as ValueRich’s
dedicated production and television studio for its newly formed ValueRich TV
division. The building is one large open space, with 20-foot ceilings
and a small mezzanine that could serve as a production booth for the filming and
editing of ValueRich’s new proposed business talk show. The building
is less than 10 years old and has been maintained in good
condition.
Item
3. Legal Proceedings
We are,
from time to time, parties to various legal proceedings arising out of our
business. We believe, however, that there are no proceedings pending or
threatened against us, which, if determined adversely, would have a material
adverse effect upon our business financial conditions, results of operations or
liquidity.
Item
4. Submission of Matters to a Vote of Security Holders
None
PART
II
Item
5. Market for the Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Our
common shares were quoted for trading on the Amex on August 8, 2007 under the
symbol “IVA”. On October 1, 2008, our common shares were transferred to the NYSE
Alternext US under the symbol “IVA.” On March 18, 2009, NYSE Alternext US was
re-branded as NYSE Amex Equities.
The high
and low bid prices of our common stock for the periods indicated below, as
reported on Yahoo Finance, are as follows:
|
Yahoo
Finance
|
|
|
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
|
December
31, 2008
|
|
$
|
0.30
|
|
|
$
|
0.06
|
|
|
|
September
30, 2008
|
|
$
|
0.35
|
|
|
$
|
0.08
|
|
|
|
June
30, 2008
|
|
$
|
0.48
|
|
|
$
|
0.16
|
|
|
|
March
31, 2008
|
|
$
|
0.80
|
|
|
$
|
0.11
|
|
|
|
December
31, 2007
|
|
$
|
1.50
|
|
|
$
|
0.20
|
|
|
|
September
30, 2007
|
|
$
|
3.00
|
|
|
$
|
0.92
|
|
|
|
June
30, 2007
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
|
March
31, 2007
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
Our
common shares are issued in registered form. Interwest Transfer Company, 1981
Murray Holladay Road, Suite 100, Salt Lake City, UT 84117 (Telephone:
801-272-9294; Facsimile: 801-277-3147) is the registrar and transfer agent for
our common shares. On March 23, 2009, the shareholders' list of our common
shares showed 287 registered shareholders and 8,669,571 shares
outstanding.
Recent
Sales of Unregistered Securities
We have
not sold any of our securities which were not registered under the Securities
Act during the year ended December 31, 2008 which were not previously disclosed
in our Quarterly Reports on Form 10-Q or Current Reports on Form
8-K.
Dividend
Policy
We have
never paid or declared any cash dividends on our common stock. We currently
anticipate that we will retain all of our future earnings for use in developing
our business and do not expect to pay any dividend in the foreseeable
future.
Equity
Compensation Plan Information
In April
2006, we adopted the ValueRich, Inc. Incentive Stock Option Plan (the “Plan”) to
promote our long-term growth and profitability by (i) providing our key
directors, officers and employees with incentives to improve stockholder value
and contribute to our growth and financial success and (ii) enable us to
attract, retain and reward the best available persons for positions of
substantial responsibility.
The
following discussion represents only a summary of certain of the plan terms and
is qualified in its entirety by reference to the complete plan, a copy of which
has been filed as an exhibit to the registration statement of which this
prospectus forms a part.
Shares
Available; Maximum Awards; Participants. A total of 5,000,000 shares of the
Company’s Common Stock have been reserved for issuance upon exercise of options
granted pursuant to the Plan. The Plan allows the Company to grant options to
employees, officers and directors of the Company and its subsidiaries; provided
that only employees of the Company and its subsidiaries may receive incentive
stock options under the Plan. The Company has reserved a total of 1,500,000
options as of December 31, 2008. As of December 31, 2008, no options have been
issued under the Plan.
Stock
Option Features. Under the Plan, options to purchase the Company’s Common Stock
may take the form of incentive stock options (“ISOs”) under Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”) or nonqualified stock
options (“NQSOs”). As required by Section 422 of the Code, the aggregate fair
market value (as defined in the Plan) of shares of Common Stock (determined as
of the date of grant of the ISO) with respect to which ISOs granted to an
employee are exercisable for the first time in any calendar year may not exceed
$100,000. The foregoing limitation does not apply to NQSOs.
Initially,
each option will be exercisable over a period, determined by the Board of
Directors of the Company, in its discretion, of up to ten years from the date of
grant. Options may be exercisable during the option period at such time, in such
amounts, and in accordance with such terms and conditions and subject to such
restrictions as are determined by the Board and set forth in option agreements
evidencing the grant of such options; provided that no option may be exercisable
less than six months from its date of grant.
The
exercise price of options granted pursuant to the Plan is determined by the
Board, in its discretion; provided that the exercise price of an ISO may not be
less than 100% of the fair market value (as defined in the Plan) of the shares
of the Company Common Stock on the date of grant. The exercise price of options
granted pursuant to the Plan is subject to adjustment as provided in the Plan to
reflect stock dividends, splits, other recapitalizations or reclassifications or
changes in the market value of the Company Common Stock. In addition, the Plan
provides that, in the event of a proposed change in control of the Company (as
defined in the Plan), the Board of Directors is to take such actions as it deems
appropriate to effectuate the purposes of the Plan and to protect the grantees
of options, which action may include (i) acceleration or change of the exercise
dates of
any
option; (ii) arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option; and
(iii) in any case where equity securities other than Common Stock are proposed
to be delivered in exchange for or with respect to Common Stock, arrangements
providing that any option shall become one or more options with respect to such
other equity securities. Further, in the event the Company dissolves and
liquidates (other than pursuant to a plan of merger or reorganization), then
notwithstanding any restrictions on exercise set forth in the Plan or any grant
agreement pursuant thereto (i) each grantee shall have the right to exercise his
option at any time up to ten days prior to the effective date of such
liquidation and dissolution; and (ii) the Board of Directors may make
arrangements with the grantees for the payment of appropriate consideration to
them for the cancellation and surrender of any option that is so canceled or
surrendered at any time up to ten days prior to the effective date of such
liquidation and dissolution. The Board of Directors also may establish a
different period (and different conditions) for such exercise, cancellation, or
surrender to avoid subjecting the grantee to liability under Section 16(b) of
the Exchange Act.
The
shares purchased upon the exercise of an option are to be paid for by the
optionee in cash or cash equivalents acceptable to the Board. In addition, the
Plan provides for broker-assisted cashless exercises in the discretion of the
Board of Directors.
Except as
permitted pursuant to Rule 16b-3 under the Exchange Act, and in any event in the
case of an ISO, an option is not transferable except by will or the laws of
descent and distribution. In no case may the options be exercised later than the
expiration date specified in the option agreement.
Plan
Administration. The Plan is administered by the Board of Directors, or a
committee of the board if so approved by the board, in accordance with the
provisions of Rule 16b-3.
The Board
of Directors will decide when and to whom to make grants, the number of shares
to be covered by the grants, the vesting schedule, the type of awards and the
terms and provisions relating to the exercise of the awards. The Board may
interpret the Plan and may at any time adopt such rules and regulations for the
Plan as it deems advisable. The Board of Directors may at any time amend or
terminate the Plan and change its terms and conditions, except that, without
stockholder approval, no such amendment may (i) materially increase the maximum
number of shares as to which awards may be granted under the Plan; (ii)
materially increase the benefits accruing to Plan participants; or (iii)
materially change the requirements as to eligibility for participation in the
Plan.
Accounting
Effects. Under current accounting rules, neither the grant of options at an
exercise price not less than the current fair market value of the underlying
Common Stock, nor the exercise of options under the Plan, is expected to result
in any charge to the earnings of the Company.
Certain
Federal Income Tax Consequences. The following is a brief summary of certain
Federal income tax aspects of awards under the Plan based upon the Federal
income tax laws in effect on the date hereof. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
Incentive
Stock Options. An optionee will not realize taxable income upon the grant of an
ISO. In addition, an optionee will not realize taxable income upon the exercise
of an ISO, provided that such exercise occurs no later than three months after
the optionee’s termination of employment with the Company (one year in the event
of a termination on account of disability). However, an optionee’s alternative
minimum taxable income will be increased by the amount that the fair market
value of the shares acquired upon exercise of an ISO, generally determined as of
the date of
exercise,
exceeds the exercise price of the option. If an optionee sells the shares of
Common Stock acquired upon exercise of an ISO, the tax consequences of the
disposition depend upon whether the disposition is qualifying or disqualifying.
The disposition of the shares is qualifying if made more than two years after
the date the ISO was granted and more than one year after the date the ISO was
exercised. If the disposition of the shares is qualifying, any excess of the
sale price of the shares over the exercise price of the ISO would be treated as
long-term capital gain taxable to the option holder at the time of the sale. If
the disposition is not qualifying, i.e., a disqualifying disposition, the excess
of the fair market value of the shares on the date the ISO was exercised over
the exercise price would be compensation income taxable to the optionee at the
time of the disposition, and any excess of the sale price of the shares over the
fair market value of the shares on the date the ISO was exercised would be
capital gain.
Unless an
optionee engages in a disqualifying disposition, the Company will not be
entitled to a deduction with respect to an ISO. However, if an optionee engages
in a disqualifying disposition, the Company generally will be entitled to a
deduction equal to the amount of compensation income taxable to the
optionee.
Nonqualified
Stock Options. An optionee will not realize taxable income upon the grant of an
NQSO. However, when the optionee exercises the NQSO, the difference between the
exercise price of the NQSO and the fair market value of the shares acquired upon
exercise of the NQSO on the date of exercise is compensation income taxable to
the optionee. The Company generally will be entitled to a deduction equal to the
amount of compensation income taxable to the optionee.
Employment
Agreements
We do not
have any employment agreements with any of our employees at this
time.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item
6. Selected Financial Data
Not
required.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operation
Certain
statements in this annual report on Form 10-K that are not historical in fact
constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides certain
“safe harbor” provisions for forward-looking statements. All forward-looking
statements made in this annual report on Form 10-K are made pursuant to the
PSLRA. Words such as, but not limited to, “believe,” “expect,” “anticipate,”
“estimate,” “intend,” “plan,” and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors based on the Company’s estimates
and expectations concerning future events that may cause the actual results of
the Company to be materially different from historical results or from any
results expressed or implied by such forward-looking statements. These risks and
uncertainties, as well as the Company’s critical accounting policies, are
discussed in more detail under “Management’s Discussion and Analysis—Critical
Accounting Policies” and in periodic filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
You
should read the following discussion of our financial condition and results of
operations together with the audited financial statements and the notes to the
audited financial statements included in this annual report. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results may differ materially from those anticipated in
these forward-looking statements.
Our
Corporate History
ValueRich,
Inc., (the Company), was incorporated under the laws of the state of Florida on
July 11, 2003 and reincorporated in Delaware on March 3, 2006. The Company owns
various online and offline media-based properties for corporate and financial
professionals. Its properties include 1) iValueRich.com, 2) ValueRich magazine
and 3) the ValueRich Small-cap Financial Expo. iValueRich.com is an online
community providing a range of business solutions for public companies and the
many industry related businesses and professionals that seek to do business with
each other. The small-cap financial expo is a unique expo-style financial
conference format for small-cap public companies to showcase their products and
services and have continuous access to investment bankers and buy-side
professionals.
We have a
limited operating history. We launched iValuerich.com in June 2006, we hosted
our first financial expo in March 2005, and we published our first edition of
ValueRich magazine in the spring of 2004. During our limited operating history,
we have not been profitable. For the year ended December 31, 2008, we incurred a
net loss of $1,010,595.
Our
corporate mission is to create an active community of Wall Street professionals
and small-cap public company executives. To accomplish this we will use our
online and offline properties, including our global Internet community, print
publishing and financial events to connect the corporate and financial
professionals that make up the securities industry. We seek to accomplish this
through our integrated portfolio of products and services that we now provide
for the small public capitalization market place.
Results
of Operations
Our
results of operations for the year ended December 31, 2008 have been
significantly impacted by our decision to revise our financial expo line of
business to be a co-branded or partnered expo in response to increased
competition we have experienced in the financial convention
space. Since we were unable until the mid-second quarter 2008 to find
a suitable partner to co-brand or partner our expos, we did not have any expo
events during the first three quarters of 2008 as we had planned, and therefore
we did not derive any revenue from expos during such quarters.
Throughout
2008, we have focused on the transition of our old line financial media products
including the ValueRich financial Expos and the ValueRich Magazine to web-based
products such as www.WallStreetHDTV.com, the second generation of
www.iValueRich.com and the soon to be launched
www.ValueRichTV.com. The new ValueRich products have mostly been in
design, development and implementation stages throughout the 2008 calendar
year.
By the
end of 2008, we had nearly completed, but not yet launched, the second
generation of the ValueRich platform, which added a full spectrum of financial
and web-based tools for small-cap companies seeking to go public and raise
capital via a web-based Direct Offering (“DO”) format. Companies that
want to raise capital could file their own registration statement through the DO
process and pay us for the use of our technology platform and access to their
our of financial related professionals to assist in funding the issuing
company’s deal. For the first time, users of the ValueRich technology
platform who have verified their qualified investor’s status will be able to
discover and participate in Direct Offerings featured on the ValueRich
platform. While we are not a registered broker-dealer or investment
advisor, soon we will be able to provide companies with technology and marketing
tools they need to communicate directly with qualified investors. We anticipate
announcing the official launch of the www.iValueRich.com platform in early
2009.
In
January 2009, we announced plans to create a business talk show called ValueRich
TV, which will be produced at a dedicated studio next door to our headquarters.
Its purpose is to create a successful Wall Street based talk show that can be
streamed over the internet for worldwide distribution. In January 2009, we
purchased and closed on the building to be used as the studio.
Other
accomplishments in 2008 include entering into a consulting agreement with Xi'an
Qinba Pharmaceutical Co., Ltd. (“Qinba”). ValueRich received an approximately 4%
equity ownership position in Qinba. We are pleased to report that Qinba has
filed its registration statement with the SEC and, if Qinba successfully
completes the registration process, Qinba could become a publicly traded
company. At the time Qinba goes public, it is our belief that ValueRich will
have an asset that will add value to our balance sheet.
In August
2008, we implemented a stock repurchase program for up to $400,000 shares of our
common stock on the open market. As you know, our stock has become somewhat
illiquid due to very light volume. To date, the $400,000 buy back program has
resulted in only approximately $30,000 of stock being repurchased in the open
market.
For the year ended December
31, 2008 vs. year ended December 31, 2007
During
the year ended December 31, 2008, we generated $76,583 in revenue that arose
from consulting services we provided. During the year ended December
31, 2007, we had revenues of $1,227,694. Our total cost of revenue for the year
ended December 31, 2008 was $7,331 as compared to $1,040,992 for the year ended
December 31, 2007. Total operating expenses decreased significantly
from $1,981,043 for the year ended December 31, 2007 to $1,244,892 for the year
ended December 31, 2007. The decrease in total operating expenses was
primarily attributable to a decrease in salaries as a result in downsizing due
to a change in our focus. Net loss for the year ended December 31, 2008 as
compared to the year ended December 31, 2007 decreased from $1,747,987 to
$1,010,595 primarily as a result of the decrease in revenues and consequently a
decrease in staffing costs.
Liquidity
and Capital Resources
For the
year ended December 31, 2008 we had a decrease in total cash resources of
$2,647,627. The decrease in cash was due in most part to lack of sales to offset
costs and professional and consulting expenses, as well as purchases of
$1,670,927 in marketable securities. Noncash stock issuances was $141,732 for
the year ended December 31, 2008.
We have
spent, and expect to continue to spend, substantial amounts in connection with
the implementation of our business strategy, including our revisions to our
current lines of business and our future endeavors. Based on our current plans,
we believe that our cash will be sufficient to enable us to meet our planned
operating needs at least for the next 12 months. Because of current economic and
market conditions and due to the unknown future of our nations’ economic health,
we have taken prudent measures to manage our cash position and not force the
growth of our core business.
Off-Balance
Sheet Arrangements
We do not
maintain any off-balance sheet arrangements, transactions, obligations or other
relationships with unconsolidated entities that would be expected to have a
material current or future effect upon our financial condition or results of
operations.
Critical
Accounting Policies
Use of
Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. We
base our estimates on historical experience, management expectations for future
performance, and other assumptions as appropriate. Key areas affected by
estimates include the assessment of the recoverability of long-lived assets,
which is based on such factors as estimated future cash flows. We re-evaluate
our estimates on an ongoing basis; actual results may vary from those
estimates.
Concentration of Credit
Risk
Financial
instruments, which potentially subject us to concentrations of credit risk,
consist of cash and cash equivalents and accounts receivables. We place our cash
with high quality financial institutions and at times may exceed the FDIC
insurance limit. We extend credit based on an evaluation of the customer’s
financial condition, generally without collateral. Exposure to losses on
receivables is principally dependent on each customer’s financial condition. We
monitor our exposure for credit losses and maintain allowances for anticipated
losses, as required. Accounts are “written-off” when deemed
uncollectible.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
Marketable
Securities
The
Company has designated its investments in marketable securities as trading and
available-for-sale. Marketable securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains and losses
recognized in earnings. Marketable equity securities not classified as trading
are classified as available for sale, and are carried at fair market value, with
the unrealized gains and losses, net of tax, included in the determination of
comprehensive income and reported in shareholders’ equity. Investment income is
recognized on an accrual basis.
The fair
value of substantially all securities is determined by quoted market prices. The
estimated fair value of securities for which there are no quoted market prices
is based on similar types of securities that are traded in the
market.
Fair Value of Financial
Instruments
On
January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157
defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follow:
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Our
investments in marketable securities are carried at fair value totaling
$1,957,993 and $0 at December 31, 2008 and 2007, respectively. We used Level 1
inputs for our valuation methodology as the securities’ quoted prices are
publicly available. As of December 31, 2007, we did not identify any assets and
liabilities that are required to be presented on the balance sheet at fair
value.
|
|
Fair
Value
As
of
December
31, 2008
|
|
Fair
Value Measurements at
December
31, 2008
Using
Fair Value Hierarchy
|
Assets
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Investments
in marketable securities
|
|
$1,957,993
|
|
$1,957,993
|
-
|
-
|
For the
years ended December 31, 2008 and 2007, the Company recognized unrealized gains
on its trading securities in its statements of operations and comprehensive loss
in the amounts of $119,066 and $0, respectively. For the years ended December
31, 2008 and 2007, the Company recognized unrealized gains on its trading
securities in its statements of stockholders’ equity in the amounts of $108,000
and $0, respectively, for the changes in the valuation of the aforementioned
assets.
We did
not identify any other assets or liabilities that are required to be presented
on the balance sheets at fair value in accordance with SFAS No.
157.
Revenue
Recognition
Revenues
are recognized in the period that services are provided. For revenue from
product sales, we recognize revenue in accordance with Staff Accounting Bulletin
No. 104, “Revenue Recognition” (“SAB104”), which superseded Staff Accounting
Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB101”). SAB
101 requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4)
collectability is reasonably assured. Determination of criteria (3) and (4) are
based on management’s judgments regarding the fixed nature of the selling prices
of the products delivered and the collectability of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. We defer any revenue for which the product has not been delivered or
is subject to refund until such time that we and the customer jointly determine
that the product has been delivered or no refund will be required. Payments
received in advance are deferred until the product is delivered or service is
rendered. SAB 104 incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”),
“Multiple-Deliverable Revenue Arrangements.” EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
our financial position and results of operations was not
significant.
For the
year ended December 31, 2007, we earned revenue primarily from our expos and
magazine advertising business. We recognized revenue for its financial expos
when the revenues were earned, which took place at the time of the expos,
provided the selling price was fixed and determinable, and collectability was
reasonably assured. In 2008, we have focused on the transition from our old line
of financial media products including the ValueRich financial Expos and the
ValueRich Magazine to web-based products such as www.WallStreetHDTV.com, the
second generation of www.iValueRich.com and www.ValueRichTV.com (expected to
launch in the second quarter of 2009). The new ValueRich products
have mostly been in the design, development and implementation stages throughout
the 2008 calendar year. Accordingly, we have not earned any revenue from our old
line of financial media products during the year ended 2008. During 2008, we
entered into two consulting agreements to assist the foreign-based companies
manage their financial statement reporting, regulatory and compliance issues in
the United States. We do not recognize revenue on its consulting business until
persuasive evidence of an arrangement exists, delivery has occurred (we have
performed according to the terms of the consulting agreement), the selling price
is fixed and determinable, and collectability is reasonably
assured.
Basic and Diluted Losses Per
Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share for
all periods presented have been restated to reflect the adoption of SFAS No.
128. Basic earnings per share is based upon the weighted average number of
common shares outstanding. Diluted earnings per share is based on the assumption
that all dilutive convertible shares and stock options were converted or
exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. All dilutive securities were excluded from the diluted loss per
share due to the anti-dilutive effect.
The
computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial
statements.
|
|
Income
(Loss)
|
|
Shares
|
|
Per-Share
|
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
For
the Year Ended December 31, 2008:
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
|
Income
(loss) to common stockholders
|
|
$
|
(1,010,595)
|
|
8,488,504
|
|
$
|
(0.12)
|
For
the Year Ended December 31, 2007:
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
|
Income
(loss) to common stockholders
|
|
$
|
(1,747,987)
|
|
7,215,794
|
|
$
|
(0.24)
|
As of
December 31, 2008 and 2007, the following potential dilutive shares were
excluded from diluted loss per share for all periods presented because of their
anti-dilutive effect.
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
Options
|
|
|
100,000
|
|
|
|
100,000
|
|
Warrants
|
|
|
1,185,715
|
|
|
|
2,376,494
|
|
Convertible
notes
|
|
|
67,000
|
|
|
|
134,000
|
|
Total
|
|
|
1,352,715
|
|
|
|
2,610,494
|
|
Stock-Based
Compensation
We
account for its stock-based compensation in accordance with SFAS No. 123R,
“Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize in
the statement of operations the grant-date fair value of stock options and other
equity-based compensation issued to employees and non-employees, estimated using
the Black-Scholes option pricing model. During the three months ended September
30, 2008 we issued no shares of our common stock nor did it grant any new
options or warrants and no options or warrants were cancelled or exercised
during the three months ended September 30, 2008. As of December 31, 2008 and
2007, there were 1,185,715 warrants and 100,000 options and 2,376,494
warrants and 100,000 options outstanding, respectively.
Recent
Pronouncements
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
enterprise accounts for the acquisition of a business. SFAS No. 141
(Revised 2007) requires an acquiring entity to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with limited exceptions, and applies to a wider range of transactions or events.
SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
after December 15, 2008 and early adoption and retrospective application is
prohibited. We believe adopting SFAS No. 141R will significantly
impact our financial statements for any business combination completed after
December 31, 2008.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest. This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Based on current conditions, we do not expect the
adoption of SFAS 160 to have a significant impact on our results of operations
or financial position.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective as of the beginning
of an entity’s first fiscal year that begins after November 15, 2007. We adopted
SFAS No. 159 on January 1, 2008. We chose not to elect the option to measure the
fair value of eligible financial assets and liabilities.
In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed.
Management is currently evaluating the effect of this pronouncement on financial
statements.
In June
2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether
an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF
No. 07-5”). This Issue is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. Early application is not permitted. Paragraph 11(a) of Statement of
Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging
Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the
definition of a derivative but is both (a) indexed to the Company’s own
stock and (b) classified in stockholders’ equity in the statement of
financial position would not be considered a derivative financial instrument.
EITF No.07-5 provides a new two-step model to be applied in determining whether
a financial instrument or an embedded feature is indexed to an issuer’s own
stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception.
We believe adopting this statement will have a material impact on the financial
statements because among other things, any option or warrant previously issued
and all new issuances denominated in US dollars will be required to be carried
as a liability and marked to market each reporting period.
In April
2008, the FASB issued 142-3 “Determination of the useful life of Intangible
Assets”, which amends the factors a company should consider when developing
renewal assumptions used to determine the useful life of an intangible asset
under SFAS142. This Issue is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. SFAS 142 requires companies to consider whether renewal can be
completed without substantial cost or material modification of the existing
terms and conditions associated with the asset. FSP 142-3 replaces the previous
useful life criteria with a new requirement—that an entity consider its own
historical experience in renewing similar arrangements. If historical experience
does not exist then the Company would consider market participant assumptions
regarding renewal including 1) highest and best use of the asset by a market
participant, and 2) adjustments for other entity-specific factors included in
SFAS 142. We are currently evaluating the impact that adopting SFAS No.142-3
will have on its financial statements
In May
2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting
Principles.” This Statement identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). We are currently evaluating the impact that
adopting SFAS No. 162 will have on its financial statements.
In May
2008, the FASB issued SFAS 163, “Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60.” The scope of this
Statement is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, this Statement does not apply to
financial guarantee contracts issued by enterprises excluded from the scope of
Statement 60 or to some insurance contracts that seem similar to financial
guarantee insurance contracts issued by insurance enterprises (such as mortgage
guaranty insurance or credit insurance on trade receivables). This Statement
also does not apply to financial guarantee insurance contracts that are
derivative instruments included within the scope of FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” This Statement
will not have and impact on our financial statements.
In June
2008, FASB issued EITF 08-4, “Transition Guidance for Conforming Changes to
Issue No. 98-5”. The objective of EITF 08-4 is to provide transition
guidance for conforming changes made to EITF 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, that result from EITF 00-27 “Application of Issue No. 98-5
to Certain Convertible Instruments”, and SFAS 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”. This
Issue is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted. We arecurrently
evaluating the impact that adopting EITF 08-4 will have on our financial
statements.
On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which clarifies
the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. FSP
157-3 became effective on October 10, 2008, and its adoption did not have a
material impact on our financial position or results for the year ended December
31, 2008.
In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20, and EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets” (“FSP EITF 99-20-1”). FSP EITF 99-20-1 changes the
impairment model included within EITF 99-20 to be more consistent with the
impairment model of SFAS No. 115. FSP EITF 99-20-1 achieves this by amending the
impairment model in EITF 99-20 to remove its exclusive reliance on “market
participant” estimates of future cash flows used in determining fair value.
Changing the cash flows used to analyze other-than-temporary impairment from the
“market participant” view to a holder’s estimate of whether there has been a
“probable” adverse change in estimated cash flows allows companies to apply
reasonable judgment in assessing whether an other-than-temporary impairment has
occurred. The adoption of FSP EITF 99-20-1 did not have a material impact on our
consolidated financial statements.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
Not
required.
Item
8. Financial Statements and Supplementary Data
ValueRich,
Inc.
Financial
Statements
Years
Ended December 31, 2008 and 2007
|
Page
|
Report of Independent
Registered Public Accounting Firm
|
18
|
Financial
Statements:
|
|
Balance Sheets as of
December 31, 2008 and 2007
|
19
|
Statements of
Operations and Other Comprehensive Loss
for
the years ended December 31, 2008 and 2007
|
20
|
Statements of
Stockholders' Equity for the years ended December 31, 2008
and
2007
|
21
|
Statements of Cash
Flows for the years ended December 31, 2008 and 2007
|
22
|
Notes to Financial
Statements
|
23
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
ValueRich,
Inc.
West Palm
Beach, Florida
We have
audited the accompanying balance sheets of ValueRich, Inc. at December 31,
2008 and 2007 and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal controls over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ValueRich, Inc. at
December 31, 2008 and 2007 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Chisholm,
Bierwolf, Nilson & Morrill, LLC
Bountiful,
Utah
March 30,
2009
ValueRich,
Inc.
BALANCE
SHEETS
As
of December 31, 2008 and 2007
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
920,908
|
|
|
$
|
3,568,535
|
|
Trade
accounts receivable
|
|
|
1,713
|
|
|
|
-
|
|
Prepaid
consulting
|
|
|
23,333
|
|
|
|
75,000
|
|
Investments
in marketable securities
|
|
|
1,957,993
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
2,903,947
|
|
|
|
3,643,535
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net of accumulated depreciation
|
|
|
113,547
|
|
|
|
57,173
|
|
JOINT
VENTURE
|
|
|
-
|
|
|
|
278,560
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,017,494
|
|
|
$
|
3,979,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
240,757
|
|
|
$
|
302,690
|
|
Deferred
revenue
|
|
|
45,000
|
|
|
|
-
|
|
Derivative
liability
|
|
|
-
|
|
|
|
100,000
|
|
Convertible
notes payable, current portion
|
|
|
25,000
|
|
|
|
40,500
|
|
Convertible
shareholder notes payable
|
|
|
-
|
|
|
|
70,000
|
|
Shareholder
note payable
|
|
|
9,500
|
|
|
|
9,500
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
320,257
|
|
|
|
522,690
|
|
|
|
|
|
|
|
|
|
|
CONVERTIBLE
NOTES PAYABLE, net of current portion
|
|
|
-
|
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
320,257
|
|
|
|
532,190
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common
stock; $0.01 par value; 100,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
8,669,670
and 8,276,542 shares issued and outstanding as
|
|
|
|
|
|
|
|
|
of
December 31, 2008 and December 31, 2007 respectively
|
|
|
86,696
|
|
|
|
82,765
|
|
Additional
paid-in capital
|
|
|
7,175,789
|
|
|
|
7,026,966
|
|
Accumulated
other comprehensive income
|
|
|
108,000
|
|
|
|
-
|
|
Accumulated
deficit
|
|
|
(4,673,248
|
)
|
|
|
(3,662,653
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
2,697,237
|
|
|
|
3,447,078
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
3,017,494
|
|
|
$
|
3,979,268
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
ValueRich,
Inc.
STATEMENTS
OF OPERATIONS AND COMPREHENSIVE LOSS
For
the Years Ended December 31, 2008 and 2007
|
|
For
The Year Ended
|
|
|
|
2008
|
|
|
2007
|
|
REVENUE
|
|
$
|
76,583
|
|
|
$
|
1,227,694
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
|
|
7,331
|
|
|
|
1,040,992
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
69,252
|
|
|
|
186,702
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
505,089
|
|
|
|
1,157,155
|
|
Selling,
general and administrative expenses
|
|
|
329,190
|
|
|
|
271,466
|
|
Professional
fees
|
|
|
369,754
|
|
|
|
506,848
|
|
Financing
costs
|
|
|
-
|
|
|
|
15,032
|
|
Depreciation
|
|
|
40,859
|
|
|
|
30,542
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
1,244,892
|
|
|
|
1,981,043
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(1,175,640
|
)
|
|
|
(1,794,341
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(3,002
|
)
|
|
|
(59,881
|
)
|
Dividend
and interest income
|
|
|
64,446
|
|
|
|
-
|
|
Loss
on extinguishment of debt
|
|
|
1,400
|
|
|
|
-
|
|
Loss
on impairment of joint venture
|
|
|
(278,560
|
)
|
|
|
-
|
|
Unrealized
gain (loss) on marketable securities
|
|
|
119,066
|
|
|
|
-
|
|
Realized
gain (loss) on sale of marketable securities
|
|
|
249,691
|
|
|
|
-
|
|
Other
income (expenses)
|
|
|
12,004
|
|
|
|
106,235
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME (EXPENSES)
|
|
|
165,045
|
|
|
|
46,354
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
|
|
(1,010,595
|
)
|
|
|
(1,747,987
|
)
|
|
|
|
|
|
|
|
|
|
INCOME
TAX BENEFIT
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,010,595
|
)
|
|
$
|
(1,747,987
|
)
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE - BASIC AND DILUTED
|
|
$
|
(0.12
|
)
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON EQUIVALENT
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - BASIC AND DILUTED
|
|
|
8,488,504
|
|
|
|
7,215,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,010,595
|
)
|
|
$
|
(1,747,987
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
Unrealized
gain on marketable securities
|
|
|
108,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(902,595
|
)
|
|
$
|
(1,747,987
|
)
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
ValueRich,
Inc.
STATEMENTS
OF STOCKHOLDERS' EQUITY
For
the Years Ended December 31, 2008 and 2007
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2007
|
|
|
6,492,644
|
|
|
$
|
64,926
|
|
|
$
|
2,039,559
|
|
|
$
|
-
|
|
|
$
|
(1,914,666
|
)
|
|
$
|
189,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of warrants at $2 per share
|
|
|
41,668
|
|
|
|
417
|
|
|
|
83,336
|
|
|
|
|
|
|
|
-
|
|
|
|
83,753
|
|
Deferred
financing cost
|
|
|
-
|
|
|
|
-
|
|
|
|
12,572
|
|
|
|
|
|
|
|
-
|
|
|
|
12,572
|
|
Shares
issued for Initial Public Offering at $3.50 per share
|
|
|
1,617,230
|
|
|
|
16,172
|
|
|
|
5,644,134
|
|
|
|
|
|
|
|
-
|
|
|
|
5,660,306
|
|
Joint
venture agreement issuance of stock
|
|
|
100,000
|
|
|
|
1,000
|
|
|
|
102,000
|
|
|
|
|
|
|
|
-
|
|
|
|
103,000
|
|
Value
of options issued for joint venture agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
75,560
|
|
|
|
|
|
|
|
-
|
|
|
|
75,560
|
|
Shares
issued for web development
|
|
|
25,000
|
|
|
|
250
|
|
|
|
28,500
|
|
|
|
|
|
|
|
-
|
|
|
|
28,750
|
|
Fund
raising costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(958,695
|
)
|
|
|
|
|
|
|
-
|
|
|
|
(958,695
|
)
|
Net
loss for the year ended December 31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(1,747,987
|
)
|
|
|
(1,747,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
8,276,542
|
|
|
|
82,765
|
|
|
|
7,026,966
|
|
|
|
-
|
|
|
|
(3,662,653
|
)
|
|
|
3,447,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of common stock issued for consulting services
|
|
|
290,000
|
|
|
|
2,900
|
|
|
|
85,600
|
|
|
|
|
|
|
|
|
|
|
|
88,500
|
|
Shares
of common stock issued in repayment of note payable
|
|
|
128,128
|
|
|
|
1,281
|
|
|
|
51,951
|
|
|
|
|
|
|
|
|
|
|
|
53,232
|
|
Value
of warrants granted to settle convertible note
payable
|
|
|
|
|
|
|
|
|
|
|
9,818
|
|
|
|
|
|
|
|
|
|
|
|
9,818
|
|
Value
of warrants granted for consulting services
|
|
|
|
|
|
|
|
|
|
|
29,954
|
|
|
|
|
|
|
|
|
|
|
|
29,954
|
|
Shares
of common stock canceled
|
|
|
(25,000
|
)
|
|
|
(250
|
)
|
|
|
(28,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(28,750
|
)
|
Unrealized
gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,000
|
|
|
|
|
|
|
|
108,000
|
|
Net
loss for the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,010,595
|
)
|
|
|
(1,010,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
8,669,670
|
|
|
$
|
86,696
|
|
|
$
|
7,175,789
|
|
|
$
|
108,000
|
|
|
$
|
(4,673,248
|
)
|
|
$
|
2,697,237
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
ValueRich,
Inc.
For
the Years Ended December 31, 2008 and 2007
|
|
2008
|
|
|
2007
|
|
CASH
FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,010,595
|
)
|
|
$
|
(1,747,987
|
)
|
Adjustment
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
40,858
|
|
|
|
30,542
|
|
Loss
on disposition of fixed assets
|
|
|
-
|
|
|
|
4,908
|
|
Marketable
securities received for consulting services
|
|
|
(15,000
|
)
|
|
|
-
|
|
Unrealized
gain on trading securities
|
|
|
(119,066
|
)
|
|
|
-
|
|
Common
stock issued for services
|
|
|
88,500
|
|
|
|
-
|
|
Loss
on impairment of joint venture
|
|
|
278,560
|
|
|
|
-
|
|
Expenses
incurrred in repayment of note payable
|
|
|
22,232
|
|
|
|
-
|
|
Value
of warrants granted as payment of interest expense on note
payable
|
|
|
9,818
|
|
|
|
-
|
|
Value
of warrants granted for consulting services
|
|
|
29,954
|
|
|
|
-
|
|
Gain
on write-off of derivative liability
|
|
|
(100,000
|
)
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,713
|
)
|
|
|
21,285
|
|
Prepaid
consulting
|
|
|
51,667
|
|
|
|
31,533
|
|
Accounts
payable and accrued expenses
|
|
|
(55,933
|
)
|
|
|
148,490
|
|
Deferred
revenue
|
|
|
-
|
|
|
|
(80,580
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(780,718
|
)
|
|
|
(1,591,809
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash
paid for joint venture
|
|
|
-
|
|
|
|
(100,000
|
)
|
Marketable
securtities
|
|
|
(1,670,927
|
)
|
|
|
-
|
|
Purchase
of fixed assets
|
|
|
(125,982
|
)
|
|
|
(9,177
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(1,796,909
|
)
|
|
|
(109,177
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from stock issuances
|
|
|
-
|
|
|
|
4,731,511
|
|
Proceeds
from warrant conversion
|
|
|
-
|
|
|
|
83,753
|
|
Repayments
of shareholder notes payable
|
|
|
(70,000
|
)
|
|
|
(425,642
|
)
|
Officer
advances (payments), net
|
|
|
-
|
|
|
|
(62,167
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(70,000
|
)
|
|
|
4,327,455
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
(2,647,627
|
)
|
|
|
2,626,469
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, Beginning of period
|
|
|
3,568,535
|
|
|
|
942,066
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, End of period
|
|
$
|
920,908
|
|
|
$
|
3,568,535
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
58,193
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
|
|
|
|
|
|
|
|
|
Conversion
of convertible shareholders' notes payable
|
|
$
|
53,232
|
|
|
$
|
-
|
|
Warrants
issued in repayment of note payable
|
|
$
|
9,818
|
|
|
$
|
206,089
|
|
Change
in fair value fo securities available for sale
|
|
$
|
108,000
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
Note 1 - Organization and Basis of
Presentation
Valuerich,
Inc., (the Company), was incorporated under the laws of the state of Florida on
July 11, 2003. Prior to 2009, the Company operated various online and offline
media-based properties for corporate and financial professionals. Its properties
included 1) iValueRich.com, 2) Valuerich magazine and 3) the Valuerich Small-cap
Financial Expo.
In the
first quarter of 2009, the Company became dedicated to a web-based financial
media business model. Until December 2008, Valuerich magazine
was published approximately three times per year and was a glossy full-color
magazine of approximately 120 pages that was geared toward an affluent
readership of investment related professionals and corporate
leaders.
By the
end of 2008, the Company had nearly completed, but not yet launched the second
generation of the ValueRich platform, which added a full spectrum of financial
and web-based tools for small-cap companies seeking to go public and raise
capital via a web-based Direct Public Offering (“DPO”) format. Companies that
want to raise capital could file their own registration statement through the
DPO process and pay the Company for the use of the technology platform and
access to its database of financial related professionals to help fund the
issuing company’s deal. For the first time, users of the ValueRich technology
platform who have verified their qualified investor’s status will be able to
discover and participate in Direct Offerings featured on the ValueRich platform.
While ValueRich, Inc. is not a registered broker-dealer or investment advisor,
soon we will be able to provide companies with technology and marketing tools
they need to communicate directly with qualified investors. The Company
anticipates announcing the official launch of
www.iValueRich.com
platform in early 2009.
In
January 2009, the Company announced plans to create a business talk show called
ValueRich TV, which will be produced at a dedicated studio next door to its
headquarters. Its purpose is to create a successful Wall Street based talk show
that can be streamed over the Internet for worldwide distribution. In January
2009, the Company purchased and closed on the building to be used as the
studio.
The
Company trades on the NYSE Amex under the trading symbol “IVA.”
Note 2 – Summary of
Significant Accounting Policies
Use of
Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. The
Company bases its estimates on historical experience, management expectations
for future performance, and other assumptions as appropriate. Key areas affected
by estimates include the assessment of the recoverability of long-lived assets,
which is based on such factors as estimated future cash flows. The Company
re-evaluates its estimates on an ongoing basis; actual results may vary from
those estimates.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
Marketable
Securities
The
Company has designated its investments in marketable securities as trading and
available-for-sale. Marketable securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains and losses
recognized in earnings. Marketable equity securities not classified as trading
are classified as available for sale, and are carried at fair market value, with
the unrealized gains and losses, net of tax, included in the determination of
comprehensive income and reported in shareholders’ equity. Investment income is
recognized on an accrual basis.
The fair
value of substantially all securities is determined by quoted market prices. The
estimated fair value of securities for which there are no quoted market prices
is based on similar types of securities that are traded in the
market.
Property and
Equipment
Property
and equipment are stated at historical cost and are depreciated using the
straight-line method over their estimated useful lives. The useful life and
depreciation method are reviewed periodically to ensure that the depreciation
method and period are consistent with the anticipated pattern of future economic
benefits. Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized. Gains and losses on
disposals are included in the results of operations.
The
Company provides for depreciation over the assets estimated lives as
follows:
Computers, software and
equipment
|
3
years
|
|
Furniture and fixtures
|
5
years
|
|
Leasehold improvements
|
Lesser
of lease life or economic life
|
|
Long-Lived
Assets
The
Company applies the provisions of Statement of Financial Accounting Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of December 31, 2008 and 2007, there were no significant impairments of
its long-lived assets.
Fair Value of Financial
Instruments
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follow:
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
The
Company’s investments in marketable securities are carried at fair value
totaling $1,957,993 and $0 at December 31, 2008 and 2007, respectively. The
Company used Level 1 inputs for its valuation methodology as the securities’
quoted prices are publicly available. As of December 31, 2007, the Company did
not identify any assets and liabilities that are required to be presented on the
balance sheet at fair value.
|
|
Fair
Value
As
of
December
31, 2008
|
|
Fair
Value Measurements at
December
31, 2008
Using
Fair Value Hierarchy
|
Assets
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Investments
in marketable securities
|
|
$1,957,993
|
|
$1,957,993
|
-
|
-
|
For the
years ended December 31, 2008 and 2007, the Company recognized unrealized gains
on its trading securities in its statements of operations and comprehensive loss
in the amounts of $119,066 and $0, respectively. For the years ended December
31, 2008 and 2007, the Company recognized unrealized gains on its trading
securities in its statements of stockholders’ equity in the amounts of $108,000
and $0, respectively, for the changes in the valuation of the aforementioned
assets.
The
Company did not identify any other assets or liabilities that are required to be
presented on the balance sheets at fair value in accordance with SFAS No.
157.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
The Company adopted SFAS 159 on January 1, 2008. The Company chose not to elect
the option to measure the fair value of eligible financial assets and
liabilities.
Revenues
are recognized in the period that services are provided. For revenue from
product sales, the Company recognizes revenue in accordance with Staff
Accounting Bulletin No. 104, “Revenue Recognition” (“SAB104”), which superseded
Staff Accounting Bulletin No. 101, “Revenue Recognition
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
in
Financial Statements” (“SAB101”). SAB 101 requires that four basic criteria must
be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management’s judgments regarding the fixed
nature of the selling prices of the products delivered and the collectability of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required. Payments received in advance are
deferred until the product is delivered or service is rendered. SAB 104
incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”),
“Multiple-Deliverable Revenue Arrangements.” EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
our financial position and results of operations was not
significant.
For the
year ended December 31, 2007, the Company earned revenue primarily from its
expos and magazine advertising business. The Company recognized revenue for its
financial expos when the revenues were earned, which took place at the time of
the expos, provided the selling price was fixed and determinable, and
collectability was reasonably assured. In 2008, the Company has focused on the
transition from its old line of financial media products including the ValueRich
financial Expos and the ValueRich Magazine to web-based products such as
www.WallStreetHDTV.com, the second generation of www.iValueRich.com and
www.ValueRichTV.com (expected to launch in the second quarter of
2009). The new ValueRich products have mostly been in the design,
development and implementation stages throughout the 2008 calendar year.
Accordingly, the Company has not earned any revenue from its old line of
financial media products during the year ended 2008. During 2008, the Company
entered into two consulting agreements to assist the foreign-based companies
manage their financial statement reporting, regulatory and compliance issues in
the United States. The Company does not recognize revenue on its consulting
business until persuasive evidence of an arrangement exists, delivery has
occurred (the Company has performed according to the terms of the consulting
agreement), the selling price is fixed and determinable, and collectability is
reasonably assured. See Note 3.
Concentration of credit
risk
Cash
includes cash on hand and demand deposits in accounts maintained within the
United States. Certain financial instruments, which subject the Company to
concentration of credit risk, consist of cash. The Company maintains balances at
financial institutions which, from time to time, may exceed Federal Deposit
Insurance Corporation insured limits for the banks located in the Unites States.
As of December 31, 2008 and 2007, the Company had deposits in excess of
federally-insured limits totaling $782,283 and $3,468,535, respectively. The
Company has not experienced any losses in such accounts.
Income
Taxes
Income
taxes are provided based upon the asset and liability method of accounting in
accordance with SFAS No. 109, “Accounting for Income Taxes”. Pursuant to SFAS
No. 109 the Company is required to compute deferred income tax assets for net
operating losses carried forward. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income in the period that includes the enactment
date. Realizing of deferred tax assets is assessed throughout the year and a
valuation allowance is recorded if necessary to reduce net deferred tax assets
to the amount more likely than not to be realized. The potential
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
benefits
of net operating losses (“NOLs”) have not been recognized in these financial
statements because the Company cannot be assured it is more likely than not it
will utilize the net operating losses carried forward in future
years.
The
Company has an NOL carry forward for income tax reporting purposes that may be
offset against future taxable income. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Accordingly, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements, because the Company is uncertain if they will ever be in a position
to utilize the NOL carry forward. Accordingly, the potential tax benefits of the
loss carry forward are offset by a valuation allowance of the same
amount.
The
Company is current in its filing of federal income tax returns. The Company
believes that the statutes of limitations for its federal income tax returns are
open for years after 2004. The Company is not currently under examination by the
Internal Revenue Service or any other taxing authority.
The
Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
Taxes”, during 2007. A tax position is recognized as a benefit only if it is
“more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is greater than 50% likely
of being realized on examination. For tax positions not meeting the “more likely
than not” test, no tax benefit is recorded. The adoption had no affect on the
Company’s financial statements.
The
Company’s practice is to recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses. At December
31, 2008 and December 31, 2007, the Company had no accrued interest or
penalties.
Basic and Diluted Losses Per
Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share for
all periods presented have been restated to reflect the adoption of SFAS No.
128. Basic earnings per share is based upon the weighted average number of
common shares outstanding. Diluted earnings per share is based on the assumption
that all dilutive convertible shares and stock options were converted or
exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. All dilutive securities were excluded from the diluted loss per
share due to the anti-dilutive effect.
The
computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
|
|
Income
(Loss)
|
|
Shares
|
|
Per-Share
|
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
For
the Year Ended December 31, 2008:
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
|
Income
(loss) to common stockholders
|
|
$
|
(1,010,595)
|
|
8,488,504
|
|
$
|
(0.12)
|
For
the Year Ended December 31, 2007:
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
|
Income
(loss) to common stockholders
|
|
$
|
(1,747,987)
|
|
7,215,794
|
|
$
|
(0.24)
|
As of December 31, 2008 and 2007, the
following potential dilutive shares were excluded from diluted loss per share
for all periods presented because of their anti-dilutive effect.
|
|
December
31, 2008
|
December
31, 2007
|
|
|
Options
|
100,000
|
100,000
|
|
|
Warrants
|
1,185,715
|
2,376,494
|
|
|
Convertible
notes
|
67,000
|
134,000
|
|
|
Total
|
1,352,715
|
2,610,494
|
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
Stock-Based
Compensation
The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and
non-employees, estimated using the Black-Scholes option pricing model. No
options or warrants were exercised during the year ended December 31,
2008. During the year ended December 31, 2008, 1,390,779 warrants
expired. As of December 31, 2008 and 2007, there were 1,185,715 warrants
and 100,000 options and 2,376,494 warrants and 100,000 options outstanding,
respectively.
Reclassification
Certain
reclassifications have been made to the 2007 financial statements to conform to
the 2008 financial statement presentation. These reclassifications had no effect
on net income or cash flows as previously reported.
Recent
Pronouncements
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
enterprise accounts for the acquisition of a business. SFAS No. 141
(Revised 2007) requires an acquiring entity to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with limited exceptions, and applies to a wider range of transactions or events.
SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
after December 15, 2008 and early adoption and retrospective application is
prohibited. The Company believes adopting SFAS No. 141R will
significantly impact its financial statements for any business combination
completed after December 31, 2008.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest. This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective as of the beginning
of an entity’s first fiscal year that begins after November 15, 2007. The
Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect
the option to measure the fair value of eligible financial assets and
liabilities.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed.
Management is currently evaluating the effect of this pronouncement on financial
statements.
In June
2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether
an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF
No. 07-5”). This Issue is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. Early application is not permitted. Paragraph 11(a) of Statement of
Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging
Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the
definition of a derivative but is both (a) indexed to the Company’s own
stock and (b) classified in stockholders’ equity in the statement of
financial position would not be considered a derivative financial instrument.
EITF No.07-5 provides a new two-step model to be applied in determining whether
a financial instrument or an embedded feature is indexed to an issuer’s own
stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception.
We believe adopting this statement will have a material impact on the financial
statements because among other things, any option or warrant previously issued
and all new issuances denominated in US dollars will be required to be carried
as a liability and marked to market each reporting period.
In April
2008, the FASB issued 142-3 “Determination of the useful life of Intangible
Assets”, which amends the factors a company should consider when developing
renewal assumptions used to determine the useful life of an intangible asset
under SFAS142. This Issue is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. SFAS 142 requires companies to consider whether renewal can be
completed without substantial cost or material modification of the existing
terms and conditions associated with the asset. FSP 142-3 replaces the previous
useful life criteria with a new requirement—that an entity consider its own
historical experience in renewing similar arrangements. If historical experience
does not exist then the Company would consider market participant assumptions
regarding renewal including 1) highest and best use of the asset by a market
participant, and 2) adjustments for other entity-specific factors included in
SFAS 142. The Company is currently evaluating the impact that adopting SFAS
No.142-3 will have on its financial statements
In May
2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting
Principles.” This Statement identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). The Company is currently evaluating the impact that
adopting SFAS No. 162 will have on its financial statements.
In May
2008, the FASB issued SFAS 163, “Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60.” The scope of this
Statement is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, this Statement does not apply to
financial guarantee contracts issued by enterprises excluded from the scope of
Statement 60 or to some insurance contracts that seem similar to financial
guarantee insurance contracts issued by insurance enterprises (such as mortgage
guaranty insurance or credit insurance on trade receivables). This Statement
also does not apply to financial guarantee insurance contracts that are
derivative instruments included within the scope of FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” This Statement
will not have and impact on the Company’s financial statements.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
In June
2008, FASB issued EITF 08-4, “Transition Guidance for Conforming Changes to
Issue No. 98-5”. The objective of EITF 08-4 is to provide transition
guidance for conforming changes made to EITF 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, that result from EITF 00-27 “Application of Issue No. 98-5
to Certain Convertible Instruments”, and SFAS 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”. This
Issue is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted. The Company is currently
evaluating the impact that adopting EITF 08-4 will have on its financial
statements.
On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which clarifies
the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. FSP
157-3 became effective on October 10, 2008, and its adoption did not have a
material impact on the Company’s financial position or results for the year
ended December 31, 2008.
In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20, and EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets” (“FSP EITF 99-20-1”). FSP EITF 99-20-1 changes the
impairment model included within EITF 99-20 to be more consistent with the
impairment model of SFAS No. 115. FSP EITF 99-20-1 achieves this by amending the
impairment model in EITF 99-20 to remove its exclusive reliance on “market
participant” estimates of future cash flows used in determining fair value.
Changing the cash flows used to analyze other-than-temporary impairment from the
“market participant” view to a holder’s estimate of whether there has been a
“probable” adverse change in estimated cash flows allows companies to apply
reasonable judgment in assessing whether an other-than-temporary impairment has
occurred. The adoption of FSP EITF 99-20-1 did not have a material impact on the
Company’s consolidated financial statements.
Effective
July 1, 2008 and continuing for a period of 2 years, the Company has been
engaged to perform strategic business consulting services to Bodisen Biotech. As
compensation for the consulting services, Bodisen Biotech has agreed
to:
(a)
|
Issue
to the Company 400,000 shares of Bodisen Biotech common stock to the
Company up front;
|
(b)
|
Issue
to the Company options to purchase 400,000 shares of its common stock. The
options will be exercisable at $0.70 per share and will have an exercise
period of 5 years;
|
(c)
|
Pay
the Company $10,000 per month for the 24-month consulting period, equaling
a total of $120,000 per year.
|
The
Company has also recorded $60,000 in marketable securities for the 400,000
shares received on September 18, 2008. The marketable securities have been
classified as available-for-sale. These securities are carried at fair value
with unrealized gains and losses, net of deferred income taxes, reported as
accumulated other comprehensive income (loss), a separate component of
stockholder's equity. (see Note 4)
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
The
Company has valued the options received under the consulting agreement using the
Black-Scholes option pricing model. The option exercise price is $0.70 per
share. The fair value of the options was re-valued at December 31, 2008 at
$33,840 using the following assumptions: term of 2.5 years, a
risk free interest rate of 2.05%, a dividend yield of 0% and volatility
of 151%. Management has performed an analysis and determined the options
are impaired at December 31, 2008, and therefore the Company has recorded a 100%
allowance against the value of the options.
For the
year ended December 31, 2008, the Company has recognized $15,000, less wire
fees, in consulting revenues relating to the cash component of its consulting
compensation. The Company has recognized $45,000 in deferred revenues relating
to this agreement in its accompanying balance sheets at December 31,
2008.
Note
4 – Marketable Securities
The
Company’s marketable securities consist of trading and available-for-sale
securities, all of which are classified as marketable securities and are carried
at their fair value based on the quoted market prices of the securities at
December 31, 2008. Net unrealized gains and losses on trading securities are
included in net earnings. Available-for sale securities consist of the 400,000
shares received in July 2008 for consulting services performed for Bodisen
Biotech (see Note 3). These securities are carried at fair value with unrealized
gains and losses, net of deferred income taxes, reported as accumulated other
comprehensive income (loss), a separate component of stockholder's equity. The
investment in these shares has been valued at $168,000 at December 31, 2008, and
accordingly a $108,000 unrealized gain has been recognized in accumulated other
comprehensive income at December 31, 2008 in the accompanying balance sheets.
Realized gains and losses on trading and available-for-sale securities are
included in net earnings in the period earned or incurred. For purpose of
determining realized gains and losses, the const of securities sold is based on
specific identification.
The
composition of marketable securities, classified as current assets, is as
follows at December 31, 2008 and December 31, 2007.
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Fair
Value
|
|
Available-for-sale
securities
|
|
$
|
600,000
|
|
|
$
|
168,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual
Funds
|
|
|
1,249,431
|
|
|
|
1,331,571
|
|
|
|
-
|
|
|
|
-
|
|
Common
Stock
|
|
|
421,497
|
|
|
|
458,422
|
|
|
|
-
|
|
|
|
-
|
|
Total marketable
securities
|
|
$
|
1,730,928
|
|
|
$
|
1,957,393
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment
income for the years ended December 31, 2008 and 2007 consists of the
following:
|
|
2008
|
|
|
2007
|
|
Gross realized gains
from sale of trading securities
|
|
$
|
281,551
|
|
|
$
|
-
|
|
Gross realized
losses from the sale of trading securities
|
|
|
(31,860
|
)
|
|
|
-
|
|
Dividend and
interest income
|
|
|
64,446
|
|
|
|
|
|
Net unrealized
holding gains
|
|
|
119,006
|
|
|
|
-
|
|
Net investment
income
|
|
$
|
433,203
|
|
|
$
|
-
|
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
Management
evaluates securities for other-than-temporary impairment at least on a yearly
basis, and more frequently when economic or market conditions warrant such
evaluation. Consideration is given to the length of time and amount of the loss
relative to cost, the nature and financial condition of the issuer and the
ability and intent of the Company to hold the investment for a time sufficient
to allow any anticipated recovery in fair value. There were no securities with
unrealized losses which management considers to be other-than-temporary
impairments at December 31, 2008 or 2007.
Proceeds
from the sale of investments in trading securities during 2008 and 2007 were
$1,670,927 and $0, respectively. As of December 31, 2008 and 2007, the Company
had no significant concentration of credit risk related to
investments.
Note
5 – Derivative Liability
At
December 31, 2007, the Company had an outstanding liability to its IR firm of
100,000 shares of its common stock, which was valued at $100,000. Per the terms
of the agreement, the Company must register these shares with the SEC and AMEX,
and accordingly, until successfully done, the Company carried the $100,000
liability on its balance sheets as a derivative liability. In the fourth quarter
2008, the Company and the IR firm mutually canceled the contract, and the
Company was no longer obligated to deliver the 100,000 shares of its common
stock. As a result, the Company wrote off the $100,000 derivative liability to
professional fees its accompanying statement of operations and comprehensive
loss during the year ended December 31, 2008.
Note
6 – Joint Venture
The
Company entered into a joint venture agreement with Verdund Legal in
2007. Verdund Legal has a strong European presence focused on
emerging companies seeking capital and exposure to American markets. Verdund
Legal and the Company planed on leveraging each other’s data base to create
business from engaging each other’s clients with advisory, consulting and the
Company’s related businesses. The total capitalized cost of the
agreement is $278,560 which consisted of $100,000 in cash, 100,000 shares of
stock at $1.03 per share and 100,000 options exercisable at
$1.00. The profits and losses of the joint venture were to be shared
among the joint ventures in equal amounts. In the fourth quarter 2008, the
Company and Verdund Legal terminated the joint venture agreement. Accordingly,
the Company recognized an impairment of the joint venture asset in the full
amount of $278,560 and has recognized a loss on impairment in its accompanying
statements of operations and comprehensive loss for the year ended December 31,
2008. The options were not terminated and remain outstanding at December 31,
2008.
Note 7 – Property and
Equipment
Property
and equipment consisted of the following at December 31, 2008 and
2007:
|
|
2008
|
|
|
2007
|
|
Computers and
equipment
|
|
|
31,859
|
|
|
|
11,296
|
|
Furniture and
fixtures
|
|
|
29,366
|
|
|
|
26,766
|
|
Leasehold
improvements
|
|
|
82,257
|
|
|
|
29,978
|
|
Website
|
|
|
55,140
|
|
|
|
23,102
|
|
Accumulated
depreciation
|
|
|
(85,075
|
)
|
|
|
(43,059
|
)
|
Fixed assets,
net
|
|
$
|
113,547
|
|
|
$
|
57,173
|
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
Depreciation
expense for the year ended December 31, 2008 and 2007 amounted to $40,859 and
$30,542, respectively.
Note
8 – Accounts Payable and Accrued Expenses
Accrued
expenses and other liabilities at December 31, 2008 and 2007 were comprised of
the following:
|
|
2008
|
|
|
2007
|
|
Accounts
payable
|
|
$
|
216,252
|
|
|
$
|
276,057
|
|
Accrued
interest
|
|
|
6,000
|
|
|
|
26,633
|
|
Other
accrued expenses
|
|
|
18,505
|
|
|
|
-
|
|
Total
|
|
$
|
240,757
|
|
|
$
|
302,690
|
|
Note 9
- Operating Lease and Other Commitments
The
Company leases a 1,750 square foot office facility at $32,400 per year from
Joseph C. Visconti CEO and President. There is no long-term lease arrangement
and the company pays on a month-to-month basis. The company is currently looking
for a larger space.
Note
10 - Debt
The
Company’s debt at December 31, 2008 and 2007 is detailed as
follows:
|
|
2008
|
|
|
2007
|
|
Convertible
Notes Payable:
|
|
|
|
|
|
|
Note
payable to an individual 6% interest accrued, Issued 9/04, convertible
Matured 12/07
|
|
$
|
-
|
|
|
$
|
25,000
|
|
Note
payable to an individual 6% interest accrued, Issued 10/04, convertible
Matured 12/07 (in default)
|
|
|
25,000
|
|
|
|
25,000
|
|
Total
Convertible Notes Payable:
|
|
$
|
25,000
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Convertible
Shareholder Notes Payable:
|
|
|
|
|
|
|
|
|
Notes
payable (2) to an individual 10% to 12.5% interest accrued, Issued 9/03
and 4/04, Matured 5/04 & 12/07
|
|
$
|
-
|
|
|
$
|
45,000
|
|
Note
payable to an individual 10% interest accrued, Issued 8/04, Matured
12/07
|
|
|
-
|
|
|
|
25,000
|
|
Total
Convertible Shareholder Notes Payable:
|
|
$
|
-
|
|
|
$
|
70,000
|
|
|
|
|
|
|
|
|
|
|
Shareholder
Note Payable:
|
|
|
|
|
|
|
|
|
Note
payable to an individual 10% interest accrued, Issued 12/03, Matures
5/09
|
|
|
9,500
|
|
|
|
9,500
|
|
Total
Shareholder Note Payable:
|
|
|
9,500
|
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
In
addition to the information stated above, other material terms of the
convertible debt instruments include: 1) a conversion price of $0.60 per share;
2) a debt penalty to include the issuance of additional shares upon conversion
totaling 10% of the shares into which the note may convert if the Company’s
shares are not listed for public trading on or before October 1, 2004; 3) a debt
penalty to include the issuance of additional shares upon conversion totaling
15% of the shares into which the note may convert if the Company’s shares are
not listed for public trading on or before December 31, 2004 and 4) a warrant to
purchase the same number of shares into which the original principal amount
could be converted at an exercise price of $2.00 per share.
The
Company has adopted Emerging Issues Task Force (“EITF”) Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios,” and EITF Issue No. 00-27,
“Application of EITF Issue No. 98-5 to Certain Convertible Instruments.” During
2004 and 2005 we incurred debt with a conversion feature that provides for a
rate of conversion, but with no trading market value there was no beneficial
conversion feature to record.
On
October 1, 2008, the Company converted a note payable into shares of its common
stock according to the following table:
|
|
Shares
|
|
|
Amount
Settled
|
|
Shares issued in
repayment of $25,000 face value of note
|
|
|
62,501
|
|
|
$
|
25,000
|
|
Shares issued in
payment of note penalties
|
|
|
21,880
|
|
|
|
13,128
|
|
Shares issued in
payment of accrued interest
|
|
|
10,000
|
|
|
|
6,000
|
|
Shares issued as
settlement of note
|
|
|
33,747
|
|
|
|
9,104
|
|
|
|
|
128,128
|
|
|
$
|
53,232
|
|
In
addition to the shares issued in repayment and settlement of the above
convertible note, the Company issued a warrant to purchase 50,000 shares of the
Company’s common stock. See Note 12.
The
Company repaid $70,000 and $425,642 of its shareholder notes payable in cash
during the years ended December 31, 2008 and 2007, respectively.
Note
11 – Equity
On March
31, 2008, the Company issued 290,000 shares of its common stock at approximately
$0.31 per share to four consultants for strategic, financial and business
consulting services performed in 2008.
On
September 30, 2008, the Company canceled 25,000 shares of its common stock at
$1.15 per share issued in 2007 for software development services related to its
intangible asset.
On
October 1, 2008, the Company issued 128,128 shares of common stock at
approximately $0.42 per share and 50,000 warrants (see Note 12) in repayment of
a convertible note payable with a face amount of $25,000.
On
February 27, 2007, the Company issued 25,001 shares of common stock for the
exercise of certain warrants at $2.00 per share.
On March
5, 2007, the Company issued 16,667 shares of common stock for the exercise of a
certain warrants at $2.00 per share.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
On August
13, 2007 the Company issued 1,617,230 shares of common stock as an initial
public offering at 3.50 per share.
On
December 15, 2007 the Company issued 100,000 shares of common stock at $1.03 per
share to enter into a joint venture agreement (see Note 6).
On
November 15, 2007 the Company issued 25,000 shares of common stock at $1.15 per
share to purchase “Meet the CEO.”
Note
12 — Warrants and Deferred Financing costs
The
following table summarizes the changes in warrants outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. These warrants were granted in connection with the convertible
shareholder notes payable and for consulting services.
A summary
of warrant activity for the years ended December 31, 2008 and 2007 is presented
below:
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
|
|
Aggregate
Intrinsic
Value
(000)
|
|
Outstanding,
January 1, 2007
|
|
|
2,659,012
|
|
|
$
|
1.88
|
|
|
|
1.77
|
|
|
$
|
-
|
|
Granted
|
|
|
148,812
|
|
|
|
1.74
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(41,668
|
)
|
|
|
2.00
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(389,471
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
December 31, 2007
|
|
|
2,376,694
|
|
|
|
2.00
|
|
|
|
0.37
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2007
|
|
|
2,376,694
|
|
|
|
2.00
|
|
|
|
0.37
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January
1, 2008
|
|
|
2,376,494
|
|
|
|
2.00
|
|
|
|
0.37
|
|
|
|
-
|
|
Granted
|
|
|
200,000
|
|
|
|
0.55
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(1,390,779
|
)
|
|
|
1.89
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
December 31, 2008
|
|
|
1,185,715
|
|
|
|
1.61
|
|
|
|
2.59
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2008
|
|
|
1,185,715
|
|
|
$
|
1.61
|
|
|
|
2.59
|
|
|
$
|
-
|
|
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
The
aggregate intrinsic value in the table above is before applicable income taxes
and is calculated based on the difference between the exercise price of the
warrants and the quoted price of the Company’s common stock as of the reporting
date.
A summary
of the status of unvested warrants as of December 31, 2008 and changes during
the period then ended, is presented below:
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
Exercise
Price
|
|
|
Number
of Shares
|
|
|
Weighted
Average
Remaining
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
$
|
0.35
|
|
|
|
100,000
|
|
|
|
2.88
|
|
|
$
|
0.35
|
|
|
|
100,000
|
|
|
$
|
0.35
|
|
|
0.50
|
|
|
|
50,000
|
|
|
|
2.27
|
|
|
|
0.50
|
|
|
|
50,000
|
|
|
|
0.50
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
4.09
|
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
1.00
|
|
|
1.40
|
|
|
|
57,143
|
|
|
|
2.09
|
|
|
|
1.40
|
|
|
|
57,143
|
|
|
|
1.40
|
|
|
1.70
|
|
|
|
464,286
|
|
|
|
2.52
|
|
|
|
1.70
|
|
|
|
464,286
|
|
|
|
1.70
|
|
|
2.00
|
|
|
|
464,286
|
|
|
|
2.52
|
|
|
|
2.00
|
|
|
|
464,286
|
|
|
|
2.00
|
|
|
|
|
|
|
1,185,715
|
|
|
|
|
|
|
|
|
|
|
|
1,185,715
|
|
|
|
|
|
The
following table summarizes information about warrants outstanding and
exercisable at December 31, 2008.
|
|
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Unvested at January
1, 2008
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
200,000
|
|
|
|
0.55
|
|
Vested
|
|
|
(200,000
|
)
|
|
|
0.55
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Unvested at December
31, 2008
|
|
|
-
|
|
|
$
|
-
|
|
On
February 2, 2008, the Company granted 50,000 warrants to purchase common stock
at $1.00 in connection with consulting services. The warrants were
valued at $18,270 using the Black-Scholes pricing model with the following
assumptions: (1) dividend yield of 0%; (2) expected volatility
of 200%; (3) risk-free interest rate of 2.12%, and expected life of 5
years. The amount was recorded to professional fees in the
accompanying statements of operations and comprehensive loss for the year ended
December 31, 2008.
On
October 9, 2008, the Company granted 50,000 warrants to purchase common stock at
$1.00 in connection with a settlement of a note payable. The warrants
were valued at $9,818 using the Black-Scholes pricing model with the following
assumptions: (1) dividend yield of 0%; (2) expected volatility
of 168%; (3) risk-free interest rate of 2.12%, and expected life of 2.5
years. The amount was recorded to selling, general and administrative
expenses in the accompanying statements of operations and comprehensive loss for
the year ended December 31, 2008.
On
November 17, 2008, the Company granted 100,000 warrants to purchase common stock
at $0.35 per share in connection with consulting services. The
warrants were valued at $11,684 using the Black-Scholes pricing model with the
following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 165%; (3) risk-free interest rate of 2.12%, and expected life
of 3 years. The amount was recorded to professional fees in the
accompanying statements of operations and comprehensive loss for the year ended
December 31, 2008.
On
February 27, 2007, the Company issued 25,001 shares of common stock for the
exercise of certain warrants at $2.00 per share.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
On March
5, 2007, the Company issued 16,667 shares of common stock for the exercise of a
certain warrant at $2.00 per share.
On
October 24, 2007, the Company issued 100,000 Options exercisable at $1.00 to
expire in 36 months from date of issuance to complete a Joint Venture agreement.
See Note
6.
The
following table summarizes the changes in Options outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. These options were granted in connection with a joint venture
agreement. See note 6.
|
|
Options
Outstanding
|
Options
Exercisable
|
Year
|
Exercise
Price
|
Number
of Shares
|
Weighted
Average
Remaining
Life (Years)
|
Weighted
Average
Exercise
Price
|
Number
of Shares
|
Weighted
Average
Exercise
Price
|
2007
|
1.00
|
100,000
|
3.00
|
$1.00
|
100,000
|
$1.00
|
2008
|
1.00
|
100,000
|
2.00
|
$1.00
|
100,000
|
$1.00
|
Note
13 – Termination of Agreement with StarLight Investments, LLC
On August
20, 2008, pursuant to a letter agreement (the “Letter Agreement”), the Company
and Starlight Investments, LLC (“StarLight”) terminated that certain Stock
Purchase Agreement (the “Agreement”), dated as of May 20, 2008, by and between
the Company and Starlight.
As
reported in the Company’s Report on Form 8-K filed on May 30, 2008, the
Agreement provided that the Company was to acquire all of the outstanding
membership interests of StarLight for $200,000 in cash and 500,000 shares of
common stock of the Company. The sale was to result in StarLight becoming a
wholly-owned subsidiary of the Company. Closing was subject to
regulatory approvals, which included approval of FINRA and AMEX, and other
customary closing conditions.
The
Company had made best efforts to complete the aforementioned transaction within
the timelines defined in the Agreement. There were no material
termination penalties incurred by the Company.
Note
14 - Related Party Transactions
The
company leases office space from Mr. Visconti, the Company’s CEO and President.
See Note 9.
Various
shareholders have made loans to the company. At December 31, 2008 and 2007, one
shareholder note was outstanding for $9,500. At December 31, 2007, two
convertible shareholder notes were outstanding for a total of $70,000. The
convertible shareholder notes are convertible at a rate of $0.60 per share, for
a total of $70,000 in outstanding notes, convertible into 116,667 shares of
common stock. See Note 10.
Note
15 - Income Taxes
Net
operating losses for tax purposes of approximately $4,558,000 at
December 31, 2008 are available for carryover. We have provided a 100%
valuation allowance for the deferred tax benefit resulting from the net
operating loss carryover. In addressing the realizability of deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
are deductible. When we demonstrate a history of profitable operation
we will reduce our valuation allowance at that time.
ValueRich,
Inc.
Notes
to Financial Statements
For
the Years Ended December 31, 2008 and 2007
A
reconciliation of the provision for (benefit from) income tax expense with
the expected income tax computed by applying the federal statutory income tax
rate to income before provision for (benefit from) income taxes for the
years ended December 31, 2008 and 2007 was as follows:
|
|
2008
|
|
|
2007
|
|
Federal income tax
(benefit) rate
|
|
|
-34.0
|
%
|
|
|
-34.0
|
%
|
State tax (benefit),
net of federal benefit
|
|
|
-3.06
|
%
|
|
|
-3.6
|
%
|
Share-based payments
for services
|
|
|
0.4
|
%
|
|
|
1.5
|
%
|
Unrealized gain on
trading securities
|
|
|
-4.4
|
%
|
|
|
0.0
|
%
|
Increase in
valuation allowance
|
|
|
41.6
|
%
|
|
|
36.0
|
%
|
Effective income tax
rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
components of income tax expense are as follows:
|
|
2008
|
|
|
2007
|
|
Current
federal income tax
|
|
|
-
|
|
|
|
-
|
|
Current
state income tax
|
|
|
-
|
|
|
|
-
|
|
Deferred
taxes
|
|
|
382,201
|
|
|
|
657,745
|
|
Valuation
allowance
|
|
|
(382,201
|
)
|
|
|
(657,745
|
)
|
|
|
|
-
|
|
|
|
-
|
|
Significiant
components of deferred tax assets and liabilities are as follows:
|
|
2008
|
|
|
2007
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Federal
net operating loss
|
|
$
|
1,513,945
|
|
|
$
|
1,152,533
|
|
State
net operating loss
|
|
|
259,156
|
|
|
|
197,290
|
|
Share-based
payments for services
|
|
|
32,102
|
|
|
|
28,411
|
|
Valuation
allowance
|
|
|
(1,760,434
|
)
|
|
|
(1,378,234
|
)
|
Total
deferred tax assets
|
|
|
44,769
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized
gain on trading securities
|
|
|
(44,769
|
)
|
|
|
-
|
|
Total
deferred tax liabilities
|
|
|
(44,769
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset (liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2008, the Company did not utilize its federal net
operating loss carry-forwards.
The
Company adopted FIN No. 48 on January 1, 2007. There were no
unrecognized tax benefits as of the date of adoption and there are no
unrecognized tax benefits included in the balance sheet at December 31, 2008,
that would, if recognized, affect the effective tax rate.
Note
16 – Subsequent Events
In August
2008, the Company implemented a stock repurchase program for up to $400,000
shares of common stock on the open market, due to its common stock becoming
somewhat illiquid from a very light volume. As of March 31, 2009, the $400,000
buy back program has resulted in approximately $30,000 of stock being
repurchased in the open market.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item
9A. Controls and Procedures
Evaluation of Disclosure
Controls and Procedures
The
Certifying Officers are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Exchange Act. The Certifying
Officers' evaluation of our internal control over financial reporting concluded
that they were effective and that there have been no occurrences during the
period covered by this annual report on Form 10-K that has materially affected
or is reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on
Internal Control Over Financial Reporting
The
Certifying Officers are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Exchange Act. The Certifying
Officers' evaluation of our internal control over financial reporting concluded
that they were effective and that there have been no occurrences during the
period covered by this annual report on Form 10-K that has materially affected
or is reasonably likely to materially affect, our internal control over
financial reporting.
Changes in Internal Control
Over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during that the year ended December 31, 2008 have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Item
9B. Other Information
None.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
The
following individuals serve as the directors and executive officers of our
Company as of March 23, 2009. All directors of our Company hold office until the
next annual meeting of our shareholders or until their successors have been
elected and qualified. The executive officers of our Company are appointed by
our board of directors and hold office until their death, resignation or removal
from office.
Name
|
Position
Held with our Company
|
|
Age
|
|
Date
First
Elected
or Appointed
|
Joseph
Visconti
|
President,
Chief Executive Officer and Chief Financial Officer
|
|
|
44
|
|
July
26, 2006
|
David
Lemoie
|
Director
|
|
|
48
|
|
March
19, 2008
|
Philip
Verges
|
Director
|
|
|
|
|
November
17,
2008
|
The background of our directors and executive officers
is as follows:
Joseph
Visconti.
Mr. Visconti has been our President, CEO and Chairman since
inception in 2003. He has extensive experience in development and management of
both public and private companies. For the past 16 years Mr. Visconti has worked
with senior management of public and private companies to assist in their
structure, finance and related banking issues. Mr. Visconti has overseen the
financing of 26 public and private companies that raised more than $250,000,000
through IPO’s, secondary offerings and private placements. From 2001 to 2003 Mr.
Visconti worked as a consultant with various investment banks and public and
private companies.
David
Lemoie.
Mr. Lemoie has served as a member of the board of
directors of ValueRich, Inc since March 2007. For the past 17 years,
Mr. Lemoie has practiced law concentrating his practice in the areas of complex
commercial, corporate, and bankruptcy litigation, and use, and corporate
transactions. Mr. Lemoie is admitted to practice and is a member of the bar in
Florida, Rhode Island and Massachusetts. He is also a member of the Federal Bar
in the United States District Courts for the Southern and Middle District of
Florida, the District of Rhode Island, and the District of Massachusetts, and
United States Bankruptcy Courts for the Southern and Middle Districts of
Florida. He earned his Juris Doctor degree from Santa Clara University School of
Law in 1991, where he was a member of the law school’s moot court team and the
trial team. He is a 1986 graduate of the University of Rhode Island, with a
Bachelor of Science degree in Civil and Environmental Engineering
Philip
Verges
. As Chief Executive Officer and Chairman of NewMarket,
Mr. Verges founded VergeTech International (VTI) in 1997, a firm that
specialized in leading edge technology services. After merging VTI with IPVoice
Communications in 2002, Mr. Verges developed and implemented the Company’s new
business strategy of launching market-entry technology advancements into early
and mainstream technology products and services through established Systems
Integration relationships. Mr. Verges' early career after the Army was spent
with Electronic Data Systems (EDS) in the Computer Sciences Research and
Development Department of General Motors. Mr. Verges' first business start-up
experience was with EDS in a new division concentrating on call center
technology in financial institutions. He later added to this experience
with the
task of opening an entirely new geographic region for a $30 million technology
services business. Finally, with the launch of his own company in 1997, Mr.
Verges accomplished professional independence. He grew his firm from $300,000 in
first year sales to over $11 million in year four; growth funded primarily from
operational income. After merging VTI into the now NewMarket Technology, Inc.,
Mr. Verges continued to grow the new company to over $50 million in annual
sales. Today, NewMarket employs over 400 people in six countries around
the globe.
The
following information is included in the Company’s Notice of Annual Meeting of
Stockholders and Proxy Statement to be filed within 120 days after the Company’s
fiscal year end of December 31, 2008 (the “Proxy Statement”) and is
incorporated herein by reference:
Information
regarding directors of the Company is set forth under “Election of Directors.”
Information
regarding the Company’s Audit Committee and designated “audit committee
financial expert” is set forth under “Election of Directors—Meetings and
Committees of the Board.”
Information
on the Company’s code of business conduct and ethics for directors, officers and
employees, is set forth under “Election of Directors—Code of Business Conduct
and Ethics.”
Information
under Section 16A beneficial ownership reporting compliance is set forth
under “Stock Ownership” and “Section 16(A) Beneficial Ownership Reporting
Compliance.”
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors,
and persons who beneficially own more than 10% of our common stock to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% beneficial owners are also required by rules promulgated by the SEC to
furnish us with copies of all Section 16(a) forms they file.
Based
solely upon a review of the copies of such forms furnished to us, or written
representations that no Form 5 filings were required, we believe that during the
fiscal year ended December 31, 2007, there was compliance with all Section 16(a)
filing requirements applicable to our officers, directors and greater than 10%
beneficial owners.
The
following table sets forth information in respect of the compensation of the
Principal Executive Officer, and our three most highly compensated executive
officers who were serving as executive officers as of December 31,
2008.
Item
11. Executive Compensation.
SUMMARY COMPENSATION
TABLE
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Joseph
Visconti,
Chairman,
President and
Chief
Executive Officer
|
|
|
2008
2007
|
|
187,940
196,763
|
|
|
42,000
200,000
|
|
—
—
|
|
|
229,940
396,763
|
|
No stock
options were issued to or exercised by our senior executive officers during the
last fiscal year.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table states certain information with respect to our equity
compensation plans as of December 31, 2008:
Plan
category
|
|
Number
of securities to
be
issued upon exercise
of
outstanding options
|
|
Weighted-average
exercise
price of
outstanding
options
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans
|
Equity
compensation plans
approved
by security holders
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,000,000
|
|
Total
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,000,000
|
|
Item 12.
Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth, as of December 31, 2008 the number and
percentage of shares of our outstanding common stock which are beneficially
owned, directly or indirectly, by each director, executive officer and
shareholder who owns more than 5% of the outstanding shares.
We
determine beneficial ownership based on the rules of the Securities and Exchange
Commission. In general, beneficial ownership includes shares over
which a person has sole or shared voting or investment power and shares which
the person has the right to acquire within 60 days. Unless otherwise
indicated, the persons listed below have sole voting and investment power over
the shares beneficially owned.
Name
and Address(1)
|
|
Amount
and Nature
Of
Beneficial Ownership
|
|
Percentage
of
Class
|
Joseph
Visconti
|
|
|
3,666,425
|
|
42.29%
|
Vision
Capital Advisors LLC
|
|
|
464,286
|
|
5.35%
|
Spencer
Trading
|
|
|
300,000
|
|
3.46%
|
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
None of
our directors nor any of our executive officers nor any person who
beneficially owns, directly or indirectly, shares carrying more than 5% of our
common stock, nor any members of the immediate family (including spouse,
parents, children, siblings, and in-laws) of any of the foregoing persons, has
any material interest, direct or indirect, in any transaction, or series of
transactions, that we have entered into since our incorporation or any proposed
transaction or series of transactions worth over $120,000 per
year. However, we do lease office space from our Chief Executive
Officer at $34,200 per year.
Item
14. Principal Accounting Fees and Services
Audit
Fees
For the
year ended December 31, 2008, the aggregate fees billed by Chisholm, Bierwolf
& Nilson, LLC for professional services rendered for the audit of our annual
financial statements included in our annual report on Form 10-K and our Forms
10-Q were estimated to be approximately $36,000.
For the
year ended December 31, 2007, the aggregate fees billed by Chisholm, Bierwolf
& Nilson, LLC for professional services rendered for the audit of our annual
financial statements included in our annual report on Form 10-K and our Forms
10-Q were $24,000.
Audit
Related Fees
For the
year ended December 31, 2008, the aggregate fees billed for assurance and
related services by Chisholm, Bierwolf & Nilson, LLC relating to the
performance of the audit of our financial statements which are not reported
under the caption “Audit Fees” above, was $0.
For the
year ended December 31, 2007, the aggregate fees billed for assurance and
related services by Chisholm, Bierwolf & Nilson, LLC relating to the
performance of the audit of our financial statements which are not reported
under the caption “Audit Fees” above, was $10,000.
Tax
Fees
For the
year ended December 31, 2008 and 2007, Chisholm, Bierwolf & Nilson, LLC did
not perform other non-audit professional services, other than those services
listed above.
We do not
use Chisholm, Bierwolf & Nilson, LLC for financial information system design
and implementation. These services, which include designing or implementing a
system that aggregates source data underlying the financial statements or
generates information that is significant to our financial statements, are
provided internally or by other service providers. We do not engage Chisholm,
Bierwolf & Nilson, LLC to provide compliance outsourcing
services.
Pre-Approval
Policies and Procedures
Effective
May 6, 2003, the Securities and Exchange Commission adopted rules that require
that before Chisholm, Bierwolf & Nilson, LLC is engaged by us to render any
auditing or permitted non-audit related service, the engagement be:
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approved
by our entire board of directors;
or
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entered
into pursuant to pre-approval policies and procedures established by the
board of directors, provided the policies and procedures are detailed as
to the particular service, the board of directors is informed of each
service, and such policies and procedures do not include delegation of the
board of directors' responsibilities to
management.
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The board
of directors pre-approves all services provided by our independent auditors. All
of the above services and fees were reviewed and approved by the board of
directors either before or after the respective services were
rendered.
The board
of directors has considered the nature and amount of fees billed by Chisholm,
Bierwolf & Nilson, LLC and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining Chisholm,
Bierwolf & Nilson, LLC’s independence.
PART
IV
Item
15. Exhibits and Financial Statement Schedules
(a)(3) Exhibits
The
exhibits required by this item and included in this report or incorporated
herein by reference are as follows:
31.1
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Certification
of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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32.1
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Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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49
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