AURT Attune RTD (CE)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to ____

 

Commission File No. 333-163579

 

ATTUNE RTD

 (Exact name of registrant as specified in its charter)

 

Nevada		32-0212241
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

3700 E. Tachevah Dr., #B117

Palm Springs, California 92262

(Address of principal executive offices, zip code)

 

(760) 323-0233

(Registrant’s telephone number, including area code)

   

(Former name, former address and former fiscal year,

if changed since last report)

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ] No [X]

 

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	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[  ]  (Do not check if a smaller reporting company)	Smaller reporting company	[X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act):

Yes [  ] No [X]

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [  ] No [  ]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of November 15, 2012, there were 32,126,727 shares of Class A common stock, $0.0166 par value per share, outstanding; and 1,000,000 shares of Class B preferred cumulative participating super voting stock, $0.0166 par value per share, outstanding.

 

  

  

ATTUNE RTD

(A Development Stage Company)

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER, 2012

 

INDEX

 

Index				Page
Part I.	Financial Information
	Item 1.	Financial Statements		4
		Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011		F-2
		Statements of Operations for the three and nine months ended September 30, 2012 and 2011, and the period from July 14, 2007 (Inception) to September 30, 2012 (unaudited)		F-3
		Statements of Cash Flows for the nine months ended September 30, 2012 and 2011, and the period from July 14, 2007 (Inception) through September 30, 2012 (unaudited)		F-4
		Notes to Financial Statements (unaudited)		F-5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		5
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		6
	Item 4T.	Controls and Procedures		7
Part II.	Other Information
	Item 1.	Legal Proceedings		7
	Item 1A.	Risk Factors		7
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		7
	Item 3.	Defaults Upon Senior Securities		7
	Item 4.	(Removed and Reserved)		7
	Item 5.	Other Information		8
	Item 6.	Exhibits		8
Signatures				9

 

  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q of Attune RTD, a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: our ability to generate meaningful revenues, whether our products will ever be sold on a mass market commercial basis, our ability to protect our intellectual property, the Company’s need for and ability to obtain additional financing, the exercise of the approximately 94.2% control the Company’s officers and directors collectively hold of the Company’s voting securities, other factors over which we have little or no control, and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

 

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONDENSED FINANCIAL STATEMENTS.

 

ATTUNE RTD

(a development stage company)

 

Financial Statements

 

For the Three And Nine Months Ended September 30, 2012 and 2011

and the Period from July 14, 2007 (Inception of Development Stage) to September 30, 2012

 

 

TABLE OF CONTENTS

 

		Page
Condensed Balance Sheets at September 30, 2012 (Unaudited) and December 31, 2011		F-2
Condensed Statements of Operations for the three and nine months ended September 30, 2012 and 2011 and the period from July 14, 2007 (Inception of Development Stage) to September 30, 2012 (Unaudited)		F-3
Condensed Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 and the period from July 14, 2007 (Inception of Development Stage) to September 30, 2012 (Unaudited)		F-4
Notes to Unaudited Condensed Financial Statements		F-5

 

 

Attune RTD

(a development stage company)

Condensed Balance Sheets

 

		September 30, 2012				December 31, 2011
		(Unaudited)
Assets
Current Assets
Cash		$	1,306			$	254,137
Accounts Receivable			-				9,783
Prepaid Expenses			-				2,706
Total Current Assets			1,306				266,626
Property and Equipment, net			85,723				107,210
Other Assets
Software License, net of amortization			80,133				97,725
Deferred Financing Costs			-				1,795
Security Deposit			1,800				1,800
Total Other Assets			81,933				101,320
Total Assets		$	168,962			$	475,156
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts Payable		$	92,552			$	132,323
Accrued Salaries			103,895				120,068
Accrued Expenses			13,839				844
Liability to Guarantee Equity Value			90,980				90,980
Capital lease obligation			1,458				1,932
Convertible note payable-net of discount			77,000				11,377
Current Portion of Long Term Debt			49,791				42,349
Derivative Liability			140,223				121,546
Total Current Liabilities			569,738				521,419
Long Term Liabilities
Long-term debt - less current portion			133,297				152,770
Total Liabilities			703,035				674,189
Commitments and Contingencies (See Note 7)
Stockholders’ Equity (Deficit)
Class B Participating Cumulative Preferred Super voting Stock, $0.0166 par value; 1,000,000 shares authorized; 1,000,000 issued and outstanding at September 30, 2012 and December 31, 2011 respectively			16,600				16,600
Class A Common Stock, $0.0166 par value; 59,000,000 shares authorized; 32,126,727 and 28,832,396 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively			532,781				481,548
Additional Paid-in Capital			3,498,163				3,229,233
Deficit accumulated during development stage			(4,581,617	)			(3,926,414	)
Total Stockholders’ Equity (Deficit)			(534,073	)			(199,033	)
Total Liabilities and Stockholders’ Equity (Deficit)		$	168,962			$	475,156

 

The accompanying unaudited notes are an integral part of these Financial Statements

 

 

Attune RTD

(a development stage company)

Condensed Statements of Operations

 (unaudited)

 

																		Period from July 14, 2007
		Three Months Ended								Nine Months Ended								(Inception of Development Stage)
		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011				to September 30, 2012
Revenues		$	375			$	9,610			$	11,877			$	23,325			$	59,627
			-
Operating Expenses			-
Advertising and Promotions			30,700				-				30,700				607				124,867
Contributed Services			-				-				-				-				111,781
Depreciation Expense			6,342				6,760				21,488				12,332				48,508
Legal Expense			545				22,696				-				42,893				104,876
Marketing Expense			2,965				4,668				44,575				15,141				223,042
Payroll Expense			63,583				79,081				204,761				254,995				1,232,357
Product Development			-				112,149				-				201,779				371,990
Professional Fees			12,879				16,907				47,118				46,422				315,173
Rent Expense			1,400				4,200				9,800				12,600				79,481
Research and Development			6				-				62				-				15,744
Subcontracted Services			-				-				160				-				158,359
Other Operating Expenses			108,921				87,357				239,657				462,235				1,563,079
Total Operating Expenses			227,341				333,818				598,321				1,049,004				4,349,257
Loss from Operations			(226,966	)			(324,208	)			(586,444	)			(1,025,679	)			(4,289,630	)
Other income (expense)
Income Tax			-				-				(800	)			(1,966	)			(3,616	)
Gain on asset theft, net			-				-				-				-				29,125
Change in Fair Value-Derivative			13,944				-				6,297				-				(80,819	)
Impairment of Patent and Trademarks			-				-				-				-				(62,634	)
Interest Expense			(26,753	)			(1,783	)			(73,506	)			(3,674	)			(87,040	)
Interest Income			-				-				-				-				15,999
(Loss) Gain on Debt conversion, net			(750	)			25,000				(750	)			25,000				(103,002	)
Total Other income (expense)			(13,559	)			23,217				(68,759	)			19,360				(291,987	)
Net Loss		$	(240,525	)			(300,991	)			(655,203	)			(1,006,319	)			(4,581,617	)
Preferred stock dividends		$	(5,049	)			(5,049	)			(15,091	)			(15,091	)			(105,578	)
Net loss applicable to common stock		$	(245,574	)		$	(306,040	)		$	(670,294	)		$	(1,021,410	)		$	(4,687,195	)
Net loss per common share applicable to common stock:
Basic and diluted		$	(0.01	)		$	(0.01	)		$	(0.02	)		$	(0.04	)		$	(0.14	)
Weighted average number of common shares outstanding:
Basic and diluted			29,401,192				28,792,537				29,401,192				25,870,683				31,987,827

 

The accompanying unaudited notes are an integral part of these Financial Statements

 

  

Attune RTD

(a development stage company)

Condensed Statements of Cash Flows

(Unaudited)

 

		Nine Months Ended								Period from July 14, 2007
		September 30,								(Inception of Development Stage)
		2012				2011				to September 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(655,203	)			(1,006,319	)		$	(4,581,617	)
Adjustments to Reconcile Net loss to Net Cash Used in Operating Activities:
Class A Common stock and preferred stock granted for services			152,390				230,050				1,089,955
Contributed Capital			-				-				111,781
Depreciation and Amortization			102,829				29,788				156,934
Interest expense on conversion to Class A common stock			-				-				449
Loss (Gain) on conversions of debt to Class A common stock, net			-				(25,000	)			147,252
Gain on asset theft, net			-				-				(29,125	)
Impairment of Patent and Trademarks			-								62,634
Change in Fair Value-Derivative			(6,297	)							80,819
Bad Debt Expense			-								9,000
Gain on Forgiveness of Debt			-								(25,000	)
Changes in Assets and Liabilities:
Accounts Receivable			9,783				18,812				(9,000	)
Prepaid Expenses			2,706				(4,138	)			-
Security Deposit			-				-				(1,800	)
Accounts Payable and Accrued Expenses			(42,893	)			(159,119	)			318,828
Deferred Financing Costs			857								1,562
Liability to Guarantee Value			-				-				35,000
NET CASH USED IN OPERATING ACTIVITIES			(435,828	)			(915,926	)			(2,632,328	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment			-				(11,500	)			(16,320	)
Deferred Patent costs			-				-				(41,378	)
Loans receivable from Officers			-				-				(175,825	)
Trademark Costs			-				-				(21,254	)
Insurance proceeds on asset theft			-				-				30,961
Cash Received for sale of fixed assets			-				-				1,500
Purchase of Software License			-				-				(11,500	)
NET CASH USED IN INVESTING ACTIVITIES			-				(11,500	)			(233,816	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Class A - Common Stock			153,000				1,296,251				2,747,616
Offering costs related to the Sale of Class A - Common Stock			-				-				(11,000	)
Sale of Class B - Preferred Stock			-				-				45,000
Principal Payments on Capital Lease Obligations			(530	)			-				(5,809	)
Loan Payable to Principal Stockholder			-				-				60,000
Repayment of Loan Payable to Principal Stockholder			-				-				(4,800	)
Borrowings on Debt			52,500								92,500
Principal Payment on Truck Loans			(12,289	)			(4,999	)			(21,829	)
Principal Payments on Software Financing			(9,684	)			(13,682	)			(29,229	)
Cash Paid for Redemption of common Stock			-				(6,134	)			(5,000	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			182,997				1,271,436				2,867,449
NET INCREASE (DECREASE) IN CASH			(252,831	)			344,010				1,305
CASH AT BEGINNING OF PERIOD			254,137				35,495				-
CASH AT END OF PERIOD		$	1,306				379,505			$	1,305
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest Expense		$	73,506			$	1,783			$	73,728
Income Tax		$	800			$	800			$	1,650
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Conversion of a Vendor Liability into Shares of Class A Common Stock		$	15,000			$	-			$	55,000
Capital Lease Obligation Recorded as Property and Equipment		$	-			$	-			$	7,058
Conversion of a shareholder loan into shares of Class A common stock		$	-			$	-			$	55,200
Reclassification of equity to liability to guarantee equity value due to price guarantee upon conversion		$	-			$	-			$	70,000
Reclassification of accounts payable to liability to guarantee equity value due to price guarantee upon conversion		$	-			$	-			$	48,980
Redemption of stock by officers for loan repayment		$	-			$	-			$	175,828
Financing of Software License		$	-			$	117,270			$	117,270
Capitalization of Deferred Financing Costs		$	-			$	-			$	2,500
Capitalization of Derivative Liability		$	-			$	-			$	-
Financing of Truck Purchase		$	-			$	114,190			$	114,190
Conversion of Convertible Note		$	8,000			$	-			$	8,000

 

The accompanying unaudited notes are an integral part of these Financial Statements

 

  

ATTUNE RTD

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2012

(Unaudited)

 

1.

NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

The Company was incorporated on December 19, 2001 under the name Catalyst Set Corporation and was dormant until July 14, 2007. On September 7, 2007, the Company changed its name to Interfacing Technologies, Inc. On March 24, 2008, the name was changed to Attune RTD.

 

Attune RTD (“The Company”, “us”, “we”, “our”) was formed in order to provide developed technology related to the operations of energy efficient electronic systems such as swimming pool pumps, sprinkler controllers and heating and air conditioning controllers among others.

 

The Company is presented as in the development stage from July 14, 2007 (Inception of Development Stage) through September 30, 2012. To-date, the Company’s business activities during development stage have been corporate formation, raising capital and the development and patenting of its products with the hopes of entering the commercial marketplace in the near future.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the estimates of depreciable lives and valuation of property and equipment, allowances for losses on loans receivable, valuation of deferred patent costs, valuation of equity based instruments issued for other than cash, valuation of officer’s contributed services, and the valuation allowance on deferred tax assets.

 

CASH AND CASH EQUIVALENTS

 

For the purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at September 30, 2012 and December 31, 2011

 

PROPERTY AND EQUIPMENT

 

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of five years. Expenditures for additions and improvements are capitalized while maintenance and repairs are expensed as incurred.

 

REVENUE RECOGNITION

 

We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed or determinable, no significant company obligations remain, and collection of the related receivable is reasonably assured.

 

The company recognizes revenue in the same period in which they are incurred from its business activities when goods are transferred or services rendered. The company’s revenue generating process consists of the sale of its proprietary technology or the rendering of professional services consisting of consultation and engineering relating types of activity within the industry. The company’s current billing process consists of generating invoices for the sale of its merchandise or the rendering of professional services. Typically, invoices are accepted by vendor and payment is made against the invoice within 60 days upon receipt.

 

  

Revenues for the nine months ending September 30, 2012 were concentrated solely from one customer.

 

DEFERRED PATENT COSTS AND TRADEMARK

 

Patent costs are stated at cost (inclusive of perfection costs) and will be reclassified to intangible assets and amortized on a straight-line basis over the estimated future periods to be benefited (twenty years) if and once the patent has been granted by the United States Patent and Trademark office (“USPTO”). The Company will write-off any currently capitalized costs for patents not granted by the USPTO. Currently, the Company has four patents pending with the USPTO.

 

Trademark costs are capitalized on our balance sheet during the period such costs are incurred. The trademark is determined to have an indefinite useful life and is not amortized until such useful life is determined no longer indefinite. The trademark is reviewed for impairment annually. On December 31, 2011, the company evaluated and fully impaired all patents and trademarks due to uncertainty regarding funding of future cost.

 

SOFTWARE LICENSE

 

The Company capitalized its purchase of a software license in March 2011. The license is being amortized over 60 months following the straight-line method and included in Other Assets on the balance sheet in accordance to ASC 350. During the three months ended September 30, 2012, the company recorded $5,864 of amortization expense related to the license .

 

ACCOUNTING FOR DERIVATIVES

 

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

 

We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions.

 

The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model.

 

The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

 

  

IMPAIRMENT OF LONG-LIVED ASSETS

 

The Company accounts for long-lived assets in accordance with “Accounting for the Impairment or Disposal of Long-Lived Assets” (ASC 360-10). This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

In December 2011, the Company assessed its patents and trademarks and based on uncertainty of future funding and commercialization the Company recognized a loss on its trademark and patents in the amount of $62, 634, the carrying value at the time of impairment.

 

RESEARCH AND DEVELOPMENT

 

In accordance generally accepted accounting principles (ASC 730-10), expenditures for research and development of the Company’s products are expensed when incurred, and are included in operating expenses.

 

ADVERTISING

 

The Company conducts advertising for the promotion of its products and services. In accordance with generally accepted accounting principles (ASC 720-35), advertising costs are charged to operations when incurred; such amounts aggregated $30,700 and $607 for the nine months ended September 30, 2012 and 2011, respectively.

 

STOCK-BASED COMPENSATION

 

Compensation expense associated with the granting of stock based awards to employees and directors and non-employees is recognized in accordance with generally accepted accounting principles (ASC 718-20) which requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis.

 

BASIC AND DILUTED NET LOSS PER COMMON SHARE

 

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental common shares issuable upon exercise of common stock equivalents such as stock options and convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result; the basic and diluted per share amounts for all periods presented are identical.

 

  

NEW ACCOUNTING PRONOUNCEMENTS

 

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.

 

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements.

 

Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements.

 

2.

GOING CONCERN

 

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. For the nine months ended September 30, 2012, the Company had a net loss of $655,203; net cash used in operations of $435,828 and was a development stage company with limited revenues. In addition, as of September 30, 2012, the Company had a deficit accumulated during the development stage of, $ 4,581,617.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

 

In order to execute its business plan, the Company will need to raise additional working capital and generate revenues. There can be no assurance that the Company will be able to obtain the necessary working capital or generate revenues to execute its business plan.

 

Management’s plan in this regard, includes completing product development, generating marketing agreements with product distributors and raising additional funds through a private placement offering of the Company’s common stock.

 

  

Management believes its business development and capital raising activities will provide the Company with the ability to continue as a going concern.

 

3.

SOFTWARE LICENSE

 

The terms and conditions of the license arrangement that we have in place with our vendor for software is based on a sixty month buyout agreement for a Perpetual License payable in equal consecutive monthly installments in the amount of $5,650. The monthly payment includes interest, a one-time software license fee of $142,669 and associated maintenance fees, “the rider”. This agreement grants Attune the non exclusive, non transferable right to use the specified software in object code form only on its designated servers. The Rider and the installments may not be cancelled. If installments are not made when due, and the default continues for 30 days after notice, the remaining unpaid balance of the One-Time License Fee shall be immediately due and payable. The company may prepay the balance of remaining installments at any time, with an appropriate credit, as determined by IBI, for the future portion of the interest. Maintenance will be provided for the balance of the designated period. Vendor may transfer and assign the Licensee’s payment obligation hereunder. The “Buyout Fee” is subject to adjustment in the event of upgrades. As of September 30, 2012, under the terms and conditions of the agreement, the company is in default on the license agreement. Company contacted both IBI to make them aware of the non-payment situation and an outside contractor to evaluate the software as a result of problems encountered during the programming phase of the BrioWave registration process. As of the date of this filing, IBI has not prevented access to the software and continues to bill company.

 

A portion of the payments as relating to the one time license fee are capitalized and included in Other Assets on the balance sheet in accordance with ASC 350, whereas the amount due over the course of the license agreement for this one time fee is included as long term debt on the balance sheet (net of discount and current portion). The portion of the monthly installments as relating to maintenance fees are expensed as incurred

 

4.

CONVERTIBLE NOTE AND FAIR VALUE MEASUREMENTS

 

On October 2011, the Company issued convertible promissory note in the amount of $42,500. The convertible note has a maturity date of July 2012 and an annual interest rate of 8% per annum. The holder of the note has the right to convert any outstanding principal and accrued interest into fully paid and non-assessable shares of Common Stock. The note has a conversion price of 58% of the average of the three lowest closing bid stock prices over the last ten days and contains no dilutive reset feature. Due to the indeterminable number of shares to be issued at conversion the company recorded a derivative liability. The derivative feature of the note taints all existing convertible instruments, specifically the 900,000 warrants (term of 3 years) the company issued on April 2010 with an exercise price of $0.40. As of September 30, 2012, this convertible note is in default under the terms of the note agreement.

 

On January 5, 2012, the Company issued convertible promissory note in the amount of $42,500. The convertible note has a maturity date of July 2012 and an annual interest rate of 8% per annum. The holder of the note has the right to convert any outstanding principal and accrued interest into fully paid and non-assessable shares of Common Stock. The note has a conversion price of 58% of the average of the three lowest closing bid stock prices over the last ten days and contains no dilutive reset feature. Due to the indeterminable number of shares to be issued at conversion the company recorded a derivative liability. The derivative feature of the note taints all existing convertible instruments, specifically the 900,000 warrants (term of 3 years) the company issued on April 2010 with an exercise price of $0.40. As of September 30, 2012, this convertible note is in default under the terms of the note agreement.

 

On May 16, 2012, the Company issued 137,931 shares of Class A Common Stock to convert $8,000 of the convertible note into equity. The note was converted in accordance with the conversion terms, therefore, no gain of loss was recognized.

 

Fair Value Measurements:

 

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

  

The Company has convertible notes that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets as of September 30, 2012 and December 31, 2011:

 

		Fair Value Measurement at September 30, 2012
		Level 1				Level 2				Level 3
Derivative Liability		$	-			$	-			$	140,223

 

		Fair Value Measurement at December 31, 2011
		Level 1				Level 2				Level 3
Derivative Liability		$	-			$	-			$	121,546

 

Derivative liability:

 

As discussed above, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible note is variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

 

Further, and in accordance with ASC 815, the embedded derivatives are revalued at each balance sheet date and marked to fair value with the corresponding adjustment as a “gain or loss on change in fair value of derivatives” in the consolidated statement of operations. As of September 30, 2012 and December 31, 2011, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was $140,223 and $121,546, respectively. During the quarter ended September 30, 2012 the Company recognized a gain of $6,297 on the change in fair value of derivative liability and for the year ended December 31, 2011, the Company recognized a loss on change in fair value of derivative liability totaling $87,116.

 

  

The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 2012 and the year ended December 31, 2011:

 

Balance at December 31, 2011		$	121,546
Increase in liability due to debt issuance		$	31,748
Derivative loss - Convertible note		$	4,694
Conversion of Note		$	(6,774	)
Derivative gain- Tainted Warrants		$	(10,991	)
Balance September 30, 2012		$	140,223

 

Key assumptions used in the valuation of derivative liabilities associated with the convertible notes were as follows:

 

-

The note face amount as of 9/30/12 is $77,000 with an initial conversion price of 58% of the 3 lowest lows out of the 10 previous days (effective rate of 43.56%).

-

The projected volatility curve for each valuation period was based on the historical volatility of the company;

-

An event of default would occur 10% of the time, increasing 5.00% per quarter to a maximum of 50%;

-

The Holder would redeem based on availability of alternative financing, increasing 2.0% monthly to a maximum of 2.0%; and

-

The Holder would automatically convert the notes at maturity if the registration was effective and the company was not in default.

 

The 3 year warrants with an exercise price of $0.40 and no reset features were valued using the Black Scholes model and the following assumptions: stock price at valuation, $0.10; strike price, $0.40; risk free rate 0.12%; 3 year term; and volatility of 522% resulting in a relative fair value of $78,762 relating to these warrants.

 

5.

COMMON STOCK

 

Class A Common Stock

 

Issuances of the Company’s common stock during the years ended December 31, 2007, 2008, 2009, 2010. 2011 and for the nine months ended September 30, 2012 included the following:

 

Shares Issued for Cash

 

During 2007, 224,000 shares of Class A common stock were issued for $36,000 cash with various prices per share ranging from $0.15 to $0.25. Additionally, the Company paid cash offering costs of $2,500.

 

During 2008, 2,352,803 shares of Class A common stock were issued for $360,250 cash with various prices per share ranging from $0.13 to $0.25. Additionally, the Company paid cash offering costs of $1,500.

 

In 2009, 3,688,438 shares of Class A common stock were issued for $437,435 cash with various prices per share ranging from $0.04 to $0.35. Additionally, the company paid cash offering costs of $7,000.

 

In 2010, 2,138,610 shares of Class A common stock were issued for $442,181 cash with various prices per share ranging from $.18 to $.35.

 

In 2011, 6,349,750 shares of Class A common stock were issued for $1,318,751 cash with various prices per share ranging from $.20 to $.35.

 

In March 2012, 50,000 shares of Class A common stock were issued for $5,000 cash with a share price of $0.10.

 

In April 2012, 50,000 shares of Class A common stock were issued for $5,000 cash with a share price of $0.10.

 

  

In May 2012, 180,000 shares of Class A common stock were issued for $18,000 cash with a share price of $0.10.

 

In June 2012, 1,000,000 shares of Class A common stock were issued for $100,000 cash with a share price of $0.10.

 

In August 2012, 100,000 shares of Class A common stock were issued for $10,000 cash with a share price of $0.10.

 

In September 2012, 150,000 shares of Class A common stock were issued for $15,000 cash with a share price of $0.10.

 

Shares Issued for Services

 

In 2007, 14,000,000 vested shares of Class A common stock were issued to founders having a fair value of $232,400, based on a nominal value of $0.0166 per share. The $232,400 was expensed upon issuance as the shares were fully vested.

 

In 2007, 50,000 shares of Class A common stock were issued for legal services provided to the company with a value of $7,500 or $0.15 per share, based on a contemporaneous cash sales price.

 

In 2008, 169,000 shares of Class A common stock were issued for services having a fair value of $34,530 ranging from $0.13 to $0.25 per share, based on contemporaneous cash sales prices.

 

In March 2009, 8,000 shares of Class A common stock were issued for services provided to the Company with a value of $2,400 or $0.07 per share, based on a contemporaneous cash sales price.

 

In June 2009, 17,333 shares of Class A common stock were issued for services provided to the Company with a value of $2,600 or $0.15 per share, based on a contemporaneous cash sales price.

 

In August 2009, 41,000 shares of Class A common stock were issued for services provided to the Company with a value of $6,150 or $0.15 per share, based on a contemporaneous cash sales price.

 

In February 2009, 500,000 shares of contingently returnable Class A common stock were issued to a consultant pursuant to an agreement whereby the consultant must establish a contract with a specific distributor and produce a sale of the Company’s product through such distribution channel. As of the date of this filing, no sales have occurred under the contract and the shares are not considered issued or outstanding for accounting purposes.

 

In January 2010, 21,000 shares of Class A common stock were issued for services provided to the Company with a value of $5,250 or $0.25 per share, based on a contemporaneous cash sales price.

 

In June 2010, 750,000 shares of Class A common stock were issued for services provided to the Company with a value of $270,200 at values ranging from $0.20 to $0.50 per share, based on a contemporaneous cash sales price.

 

In July 2010, 250,000 shares of Class A common stock were issued for services provided to the Company with a value of $37,500 or $0.15 per share, based on a contemporaneous cash sales price.

 

In December 2010, 55,000 shares of Class A common stock were issued to 2 vendors for services with a value of $28,050, based on based on a contemporaneous cash sales price.

 

In June 2011, 815,000 shares of Class A common stock were issued for services provided to the Company with a value of $220,050 at $0.27 per share, based upon the fair value of the common stock on a quoted exchange at the date of grant.

 

In August 2011, 50,000 shares of Class A common stock were issued for services provided to the Company with a value of $10,000 at $.20 per share, based upon the fair value of the common stock on a quoted exchange at the date of grant.

 

In November 2011, 100,000 Shares of Class A common stock were issued for services provided to the Company with a value of $20,000 at $0.20 per share, based upon the fair value of the common stock on a quoted exchange at the date of grant.

 

  

In March 2012, 125,000 shares of Class A common stock were issued for services provided to the Company with a value of $12,500 at $0.10 per share, based upon the fair value of the common stock on a quoted exchange at the date of grant.

 

In September 2012, 1,163,900 shares of Class A common stock were issued for services provided to the Company with a value of $152,390 at $0.10 per share, based upon the fair value of the common stock on a quoted exchange at the date of grant.

  

Shares Issued in Conversion of Other Liabilities

 

During 2008, 100,000 shares of Class A common stock were issued upon conversion of a $35,000 liability to a vendor. The shares were valued at $0.15 per share or $15,000, based on a contemporaneous cash sales price and the Company recorded a $20,000 gain on conversion of debt.

 

In July 2009, 139,944 shares of Class A common stock were issued upon conversion of a $48,980 liability from a vendor. The shares were valued at $16,793 or $0.12, based on a contemporaneous cash sales price. The Company agreed with the vendor, prior to conversion, that it would guarantee the value of the stock, when sold by the vendor, up to the dollar value for the 2009 liability converted ($48,980) and the above mentioned 2008 conversion as it was the same vendor ($35,000) and any difference in value, if less than the liability, would be paid in cash by the Company. As a result, the Company recorded the $48,980 conversion as a liability along with the prior year conversion of $35,000 which resulted in an additional loss on conversion of $35,000. The total cumulative liability to guarantee equity value from fiscal 2009 totaled $83,980 as relating to the above shares at December 31, 2009. These shares were actually issued in 2010; however the liability was recorded in 2009 based on this guarantee

 

In August 2009, the Company converted $55,200 of loans due to a shareholder into 788,571 shares of common stock, which were valued at $118,286 or $0.15 per share, based on contemporaneous cash sales prices of the Company’s common stock. The Company recognized a loss on conversion of $62,637 and charged $449 to interest expense.

 

During 2010, 247,249 shares of Class A common stock were issued upon conversion of $39,272 of vendor liabilities. The shares were valued from $0.10 to $.36 per share, based on a contemporaneous cash sales price and the Company recorded a $49,615 loss on conversion of debt.

 

In March 2010, 120,000 shares of Class A common stock were issued upon conversion of a $24,000 liability from a vendor. The shares were valued at $42,000 or $0.35 per share, based on a contemporaneous cash sales price and the Company recognized a loss on conversion of $18,000. We agreed with the vendor, prior to conversion, that we would guarantee the value of the stock, when sold by the vendor, up to the dollar value for the 2009 liability converted in 2010 of $24,000, plus an additional $11,000 for a total sales price of $35,000 when sold by the vendor. Any difference in value, if less than the liability, will be paid by us in cash or through the issuance of additional common stock. As a result, we recorded the $24,000 conversion as a liability along with the additional $11,000 guarantee for a total guarantee liability of $35,000. During 2011, the vendor forgave $25,000 of the payable where the company recorded as gain on forgiveness of debt. A cash payment of $3,000 was also made in relation to the total payable outstanding.

 

The total cumulative liability to guarantee equity value totaled $90,980 as of December 31, 2011. No shares have been sold by the vendor through December 31, 2011. 259,942 shares of the Company’s common stock are guaranteed to cover the existing liability.

 

In 2010 the Company issued 900,000 warrants to several investors in the Company. These warrants are attached to issuances of common stock.

 

 

Warrant Activity for the Quarter Ended September 30, 2012 is as follows:

 

		Warrant Shares				Exercise Price				Value if Exercised				Expiration Date
April 15, 2010			900,000			$	.040			$	360,000				April 15, 2013

 

In October 2011 and January 2012, the Company issued a Convertible Notes which as a result taints all convertible instruments outstanding. As such the Company recorded a derivative liability of $194,048 for warrant outstanding,

 

In May 2012, the Company issued 137,931 shares of Class A Common Stock to convert $8,000 of the Convertible note, per the terms of the agreement. The company recognized a loss on the conversion of $6,198.

 

In September 2012, 150,000 shares of Class A common stock were issued upon conversion of $14,250 of vendor liabilities. The shares were valued at $0.10 per share, based on a contemporaneous cash sales price and the Company recorded a $750 loss on conversion of debt.

 

2010 Equity Incentive Plan

 

In June 2010, we registered 4,000,000 shares of our Class A Common Stock pursuant to our 2010 Equity Incentive Plan which was also enacted in June 2010. Our Board of Directors have authorized the issuance of the Class A Shares to employees upon effectiveness of a recently issued Registration Statement. The Equity Incentive Plan is intended to compensate Employees for services rendered. The Employees who will participate in the 2010 Equity Incentive Plan have agreed or will agree in the future to provide their expertise and advice to us for the purposes and consideration set forth in their written agreements pursuant to the 2010 Equity Incentive Plan. The services to be provided by the Employees will not be rendered in connection with: (i) capital-raising transactions; (ii) direct or indirect promotion of our Class A Common Shares; (iii) maintaining or stabilizing a market for our Class A Common Shares. The Board of Directors may at any time alter, suspend or terminate the Equity Incentive Plan.

 

As of September 30, 2012, 800,000 shares were approved under this plan for issuance by the Board of Directors.

 

As of September 30, 2012, the balance sheet date, none of the shares under this plan were granted or issued.

 

Class B Participating Cumulative Preferred Super-voting Stock

 

Issuances of the Company’s preferred stock during the years ended December 31, 2007, 2008 and 2009 included the following:

 

Shares Issued for Cash

 

In 2007, 133,333 shares of Class B preferred stock were issued for $45,000 cash or $0.3375 per share.

 

Shares Issued for Services

 

In 2007, 866,667 shares of Class B preferred stock were issued to founders for services rendered during 2007 with a value of $0.3375 per share based on the above contemporaneous sale of Class B preferred stock.

 

6.

COMMITMENTS AND CONTINGENCIES

 

Employment Agreements

 

Effective March 26, 2008, the Company entered into two employment agreements with its Chief Executive Officer and Chief Financial Officer. These agreements established a yearly salary for each of $120,000. As of September 30, 2012 and December 31, 2011, the Company owed its officers $114,863 and $242,636, respectively, based on the terms of the agreement.

 

  

Stock Issuance Commitment

 

The Company entered into an agreement with one of its vendors, whereby the vendor will provide source code applications to the Company. Upon successful completion of the development of the source code the vendor will be entitled to receive 100,000 shares of Class A common stock with a share price of $0.20 per share. The source code must be completed by November 18, 2011 in order for the vendor to receive the stock.

 

Operating Leases

 

The company currently leases office space. The monthly cost of the lease is approximately $1,400. The original lease agreement expired on September 30th, 2011. Company management executed a Lease Modification and Extension Agreement dated March 15th, 2010, reducing the monthly lease payment from $1,783.19 to $1,400.00 per month, extending the lease term for an additional one year commencing October 1, 2010 and ending on September 30, 2011. On August 17, 2011, the lease was extended for a period of one year beginning on October 1, 2011 and ending on September 30, 2012. With the extension, the Company has the option to extend the lease for one more 24 month period commencing in 2012, but will negotiate rent at a market rate agreed to by lessor and lessee. On or about October 22, 2012, company management notified lessor that it would not be renewing or renegotiating the lease. Company management has been working with the Coachella Valley Economic Partnership (CVEP), and is planning to relocate its facilities to a larger location once occupational permits are issued on or about January 2013.

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

 

In March of 2010, Attune RTD engaged the services of a vendor to complete work described in the Scope of Services portion of a March 2010 agreement. Pursuant to the Agreement, the company paid the vendor a total of $70,618 towards the completion of services. The agreement contained a “not to exceed cost” of $89,435. On or about September 21, 2010 the company issued vendor 250,000 shares of Restricted Class A Common Stock as an incentive for vendor to deliver services not later than March 1, 2011. Vendor agreed to incrementally deliver work in process. No work in process or finished work of any kind was received from vendor. Vendor requested the company pay an additional $18,818.On or about October 4, 2010, vendor repudiated the agreement. On February 23, 2011 The Company engaged the services of legal counsel and made written demand for the return of the stock certificate and attempted to initiate settlement negotiations. Vendor did not acknowledge receipt of letter. The company has issued a “Stop” on vendor’s certificate.

 

On September 25, 2011, the company received Notice of Chapter 7 Bankruptcy Case filed personally by vendor. Company is discussing with counsel the filing of an adversary proceeding to be filed on or before December 5th, 2011. Additionally, company is currently contemplating litigation with counsel for legal remedies to obtain the return of the unearned stock certificate and compensation for Attune’s alleged damages resulting from vendors failure to perform and subsequent repudiation of the contract, including the companies lost opportunity costs. Should company pursue litigation against vendor these costs will need to be established by an economic expert. Vendor could conceivably pursue litigation against the company for the $18,818, however the Company believes this is not probable and therefore a contingent liability is not warranted.

 

On August 28, 2012, the Company was notified by one of its vendors that legal proceedings were to commence by the vendor for lack of payment. The amount in question was approximately $5,018. As of September 30, 2012 the company has accrued approximately $5,018 as the amount the invoice will be settled for.

 

  

7.

RELATED PARTY TRANSACTIONS

 

As of September 30, 2012 and December 31, 2011, the Company owed its officers $103,895 and $120,068, respectively, based on the terms of their employment agreements.

 

In the quarter ended September 30, 2012, the Company borrowed $10,000 from its Corporate Secretary. The loan is non interest bearing and does not have a due date.

 

8.

SUBSEQUENT EVENTS

 

Management evaluated all activity of the Company through November 13, 2012 (the issuance date of the Company’s financial statements) and concluded that no subsequent events have occurred that would require recognition in the financial statements.

 

On or about October 18, 2012, company management received the fifth and final generation of BrioWave Enclosures that will be used to house the first fifty printed circuit boards coming off the production line from our vendor in Milwaukee, Wisconsin that will be assembled and packed at our facilities in California for commercial resale.

 

The company has finalized two sku’s for its BrioWave Technology. The first sku is a BrioWave controller that is packaged without the dipole antennas and wireless communication module. This version is wifi upgradable at additional cost, and includes the zigbee smart meter socket built-in. The second sku is a smart meter capable BrioWave controller that comes fully equipped with a dipole antennae system and the wireless module to be able to communicate through a residential home router and to the companies server accessing value added functionality that allows for remote monitoring and other functionality such as firmware updates over the net that will be available for a nominal licensing fee which allows the company a greater share of pocket, possible marketing revenue, customer stickiness and annual recurring revenue from licensing.

 

The company is in the process of negotiating a vendor agreement with a large commercial vendor that has 670 retail locations throughout the United States. Company management met with vendor on November 13, 2012 at 10:20 am in Phoenix Arizona. Company management discussed plans to install one of its BrioWave Controllers at a yet to be determined location directed by vendor. Vendor indicated an interest in moving forward and continuing discussions surrounding the sale of company’s BrioWave technology. At the conclusion of the meeting it was discussed that management and vendor would agree to further collaboration and discussion surrounding marketing and planning activities as well as discussion surrounding activities setting up a test market in the Grapevine or Plano area of Texas to test consumer demand and extrapolate information related to forecasts.

 

Company management continues to work with a vendor in the state of Texas. Negotiations are ongoing and continue around the development of a marketing or commissioned based sales program involving the sale of its BrioWave technology.

 

BrioWave technology has been installed and operating in the states of Arizona, Texas and California delivering savings as high as 68% controlling dual and single speed motor technology. Company management is currently working with engineers on software that will allow BrioWave technology to control variable speed motor technology.

 

The companies BrioWave technology will be on display at the Home Show with one of its vendors, Desert Electric Supply from November 16 ^th through the 18 ^th at the Palm Springs Convention Center. Desert Electric Supply has multiple resale locations throughout the Coachella Valley.

 

Company management is aggressively seeking three hundred and twenty five thousand dollars in capital to produce the first complete commercially packaged BrioWave devices and three hundred twenty five thousand dollars to cover immediate operational expenses over the next ninety days.

 

  

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Results of Operations for the Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

 

Revenue. For the quarters ended September 30, 2012 and 2011, the company had limited revenues in 2012 of $375 and $9,610 for the same period in 2011. The Company is in the development stage and the Company has been involved in locating customers to carry and market the products in both the Texas and California markets.

 

Gross Profit. Since the company has yet to record and or achieve any significant revenues, it does not have any costs associated with sales, therefore there are no gross profits to report.

 

Operating Expenses. Total operating expense was $227,341 for the three months ended September 30, 2012, compared to $333,818 for the same period in 2011 a decrease of approximately 32%. This decrease was primarily caused by decreased operating expenses related to the Company moving towards finalizing the first of its products and moving into field testing. Of this decrease, $22,151 was related to reduced legal fees, $33,500 of this decrease was related to lower consulting costs. Provision for Income Taxes. Our income taxes for the three months ended September 30, 2012 were $0, compared to $0 for the same period in 2011. We did not incur any federal tax liability for the three months ended September 30, 2012 and 2011 because we incurred operating losses in these periods.

 

Net Earnings. We generated net losses of approximately $240,525 for the three months ended September 30, 2012 compared to approximately $300,991 for the same period in 2011, a decrease of 15.4%.

 

Results of Operations for the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

 

Revenue. For both nine months ended September 30, 2012 and 2011, the company has had limited revenues. The Company is in the development stage and for the first nine months of 2012 had revenues of $11,877 from one customer, while for the same period in 2011 had revenues of $23,325.

 

Gross Profit. Since the company has yet to record any significant revenues, it does not have any costs associated with sales, therefore there are no gross profits to report.

 

Operating Expenses. Total operating expense was $598,318 for the nine months ended September 30, 2012, compared to $1,049,004 for the same period in 2011, a decrease of approximately 43.1%. This decrease was primarily caused by decreased operating expenses related to the Company moving towards marketing the first of its products upon completion of field testing. Of this decrease, $279,255 is related solely to consulting and another $228,000 in product development costs were eliminated in the nine months ended September 30, 2012. Legal fees were also significantly lower in 2012, by approximately $46,000.

 

Provision for Income Taxes. Our income taxes for the nine months ended September 31, 2012 were $800, compared to $1,966 for the same period in 2011. We did not incur any federal tax liability for the nine months ended September 30, 2012 and 2011 because we incurred operating losses in these periods. The income tax relates solely to the minimum tax due to the State of California.

 

  

Net Earnings (Loss). We generated net losses of approximately $655,203 for the nine months ended September 30, 2012 compared to approximately $1,006,319 for the same period in 2011, a decrease of 53.6%.

 

Liquidity and Capital Resources

 

General. At September 30, 2012, we had cash of $1,306. We have historically met our cash needs through a combination of proceeds from private placements of our securities and from loans. Our cash requirements are generally for operating activities.

 

Our operating activities used cash in operations of approximately $435,828 for the nine months ended September 30, 2012, and we used cash in operations of approximately $915,926 for the same period in 2011. The principal elements of cash flow from operations for the nine months ended September 30, 2011 included a net loss of $655,203 offset by; depreciation and amortization expense of $102,829, and stock-based expenses of $152,390.

Cash used in investing activities during the nine months ended September 30, 2012 was $0 compared to $11,500 during the same period in 2011.

 

Cash received in our financing activities was $182,997 for the nine months ended September 30, 2012, compared to cash received of approximately $1,271,436 during the same period in 2011

 

As of September 30, 2012, current liabilities exceeded current assets by 436 times or $568,432, compared to September 30 2011, where current assets exceeded current liabilities by 03 times or by $12,492. Current assets decreased approximately 1000% from $266,626 at December 31, 2011 to $1,306 at September 30, 2012 while current liabilities increased 4.6% to $569,738 at September 30, 2012 from $521,419 at December 31, 2011.

 

Currently, the Company has insufficient capital to meet its current cash needs. The Company will continue to seek additional capital and long term debt financing to attempt to provide working capital to meets its operating requirements. The Company is currently making a private placement of its stock to raise capital, but there is no assurance that the Company can raise sufficient capital or obtain sufficient financing to enable it to sustain monthly operations.

 

Going Concern Qualification

 

The Company has incurred significant losses from operations, and such losses are expected to continue. The Company’s auditors have included a “Going Concern Qualification” in their report for the year ended December 31, 2011. In addition, the Company has limited working capital. The foregoing raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include seeking additional capital or debt financing. There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The “Going Concern Qualification” might make it substantially more difficult to raise capital.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.

 

  

ITEM 4. CONTROLS AND PROCEDURES.

 

DISCLOSURE CONTROLS AND PROCEDURES

 

Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of September 30, 2012.

 

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. (REMOVED AND RESERVED).

 

Not applicable.

 

  

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

(a) Exhibits required by Item 601 of Regulation SK.

 

Number		Description
3.1		Articles of Incorporation*
3.2		Bylaws*
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*Filed with and incorporated by reference to the Company’s Registration Statement on Form S-1, as amended (File No. 333-163570), as filed with the Securities and Exchange Commission on December 8, 2009.

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	ATTUNE RTD
	(Name of Registrant)
Date: November 19, 2012	By:	/s/ Shawn Davis
	Name:	Shawn Davis
	Title:	Chairman and Chief Executive Officer

 

 

EXHIBIT INDEX

 

Number		Description
3.1		Articles of Incorporation*
3.2		Bylaws*
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*Filed with and incorporated by reference to the Company’s Registration Statement on Form S-1, as amended (File No. 333-163570), as filed with the Securities and Exchange Commission on December 8, 2009.