UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
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x
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31,
2008
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¨
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ______ to
______
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Commission
file number:
000-52490
Beyond
Commerce, Inc.
(Exact
name of registrant as specified in its charter)
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Nevada
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98-0512515
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(State
of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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9029
South Pecos
Suite
2800
Henderson,
Nevada 89074
(Address
of principal executive offices, including zip code)
(702)
463-7000
(Registrant’s
telephone number, including area code)
Securities
Registered Pursuant To Section 12 (b) Of The Act
Title
of each class
NONE
Securities
Registered Pursuant To Section 12 (g) Of The Act:
Common
Stock $0.001 Par Value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
¨
Yes
x
No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.
¨
Yes
x
No
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x
No
¨
Indicate
by check mark 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 the 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.
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.
|
Large
accelerated filer
¨
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Accelerated
filer
¨
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Non-accelerated
filer
¨
(Do
not check if a smaller reporting company)
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Smaller
reporting company
x
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).Yes
¨
No
x
The
aggregate market value of the common stock held by non-affiliates of the
registrant as of June 30, 2008 (the last business day of the registrant’s most
recently completed second fiscal quarter) was approximately
$48,987,860.
As of
March 30, 2009 there were outstanding 41,355,753 of the registrant’s common
stock.
BEYOND
COMMERCE, INC.
FORM
10-K FOR THE YEAR ENDED
December
31, 2008
Table of
Contents
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PART
I
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1
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ITEM
1.
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DESCRIPTION
OF BUSINESS
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1
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ITEM
1A.
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RISK
FACTORS.
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7
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ITEM
1B.
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UNRESOLVED
STAFF COMMENTS.
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14
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ITEM
2.
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DESCRIPTION
OF PROPERTY
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14
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ITEM
3.
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LEGAL
PROCEEDINGS
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15
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ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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15
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PART
II
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15
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ITEM
5.
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
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15
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ITEM
6.
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SELECTED
FINANCIAL DATA.
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16
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ITEM
7.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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16
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ITEM
7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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21
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ITEM
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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21
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ITEM
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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22
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ITEM
9A(T).
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CONTROLS
AND PROCEDURES
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22
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ITEM
9B.
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OTHER
INFORMATION
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23
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PART
III
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23
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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23
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ITEM
11.
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EXECUTIVE
COMPENSATION
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26
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ITEM
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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28
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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29
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ITEM
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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30
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PART
IV
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31
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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31
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Throughout
this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “our company,”
“the Company” and “the Registrant” refer to Beyond Commerce, Inc., a Nevada
corporation formerly known as Boomj, Inc. and Reel Estate Services, Inc., and,
unless the context indicates otherwise, also include our two wholly-owned
subsidiaries, Boomj.com, Inc., a Nevada corporation, and LocalAdLink, Inc., a
Nevada corporation.
“Safe
Harbor” Statement
From time
to time, we make oral and written statements that may constitute
“forward-looking statements” (rather than historical facts) as defined in the
Private Securities Litigation Reform Act of 1995 or by the Securities and
Exchange Commission (the ”SEC”) in its rules, regulations and releases,
including Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We
desire to take advantage of the “safe harbor” provisions in the Private
Securities Litigation Reform Act of 1995 for forward-looking statements made
from time to time, including the forward-looking statements made in this Annual
Report, as well as those made in our other filings with the SEC.
All
statements in this Annual Report, including under the captions “Description of
Business,” “Risk Factors,” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” other than statements of
historical fact are forward-looking statements for purposes of these provisions,
including statements of our current views with respect to our business strategy,
business plan and research and development activities, our future financial
results, and other future events. These statements include
forward-looking statements both with respect to us, specifically, and the
Internet and on-line e-commerce industries, in general. In some
cases, forward-looking statements can be identified by the use of terminology
such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,”
“potential” or “could” or the negative thereof or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements contained herein are reasonable, there can be no assurance that such
expectations or any of the forward-looking statements will prove to be correct,
and actual results could differ materially from those projected or assumed in
the forward-looking statements.
All
forward-looking statements involve inherent risks and uncertainties, and there
are or will be important factors that could cause actual results to differ
materially from those indicated in these statements. If one or more
of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what
we anticipate. Please consider our forward-looking statements in
light of those risks as you read this Annual Report. We undertake no
obligation to publicly update or review any forward-looking statement, whether
as a result of new information, future developments or otherwise.
PART
I
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ITEM
1.
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DESCRIPTION
OF BUSINESS
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Beyond
Commerce, Inc., formerly known as BoomJ, Inc. (the “Company”), is an Internet
company that has three interrelated business models aimed at generating revenues
primarily from website advertising and E-commerce transactions. Our
initial business was
BOOMj
,
www.BOOMj.com
, the leading
niche portal and social networking site for Baby Boomers and Generation
Jones. Our Boomj.com website provides social, political, financial,
and lifestyle content to the Baby Boomer/Generation Jones target audience as a
platform for our advertising and E-commerce businesses. Our
LocalAdLink
subsidiary
operates a website,
www.LocalAdLink.com
, and a
local search directory and advertising network that brings local advertising to
geo-targeted consumers. We are currently releasing
i-SUPPLY
,
www.i-SUPPLY.com
, a retail
storefront that offers easy to use, fully customizable E-commerce services, and
revenue solutions for any third party Website large or small, and hosts local
ads, providing extensive reach for our proprietary advertising partner network
platform.
History
of the Company
This
company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated
in Nevada on January 12, 2006. As of December 28, 2007, RES was a
public shell company, defined by the Securities and Exchange Commission as an
inactive, publicly quoted company with nominal assets and
liabilities.
On
December 28, 2007, RES entered into an Agreement and Plan of Reorganization (the
“Reorganization Agreement”), with Time Lending Sub, Inc., a newly-formed Nevada
corporation (hereinafter “RES Sub”), and Linda Rutter, the owner of 1,500,000
shares of RES Common Stock and the sole Director and officer of RES, and
BOOMj.com, Inc., a Nevada corporation (“BOOMj.com”), pursuant to which RES Sub
agreed to merge with and into BOOMj.com (the “Merger”). In connection
with the Merger, RES agreed to issue its shares of common stock, at a rate of
2.02 shares of RES common stock for each share of BOOMj.com common stock, in
exchange for all of the issued and outstanding stock of BOOMj.com.
In
addition, prior to the Merger, RES agreed to cancel 1,500,000 shares (which were
held by Linda Rutter) of the 3,150,000 issued and outstanding shares of RES. The
cancellation was performed in two tranches: In exchange for $125,000 paid at the
closing of the Merger, 750,000 shares of RES Common Stock were cancelled; the
remaining 750,000 shares were cancelled upon payment to Ms. Rutter of $125,000
on January 31, 2008. All share amounts presented in these financial statements,
unless otherwise noted, reflect the foregoing recapitalization.
Upon the
closing of the Merger, Linda Rutter received a five-year warrant to purchase
825,000 shares of the Company’s Common Stock at an exercise price of $0.93 per
share.
Prior to
the Merger, BOOMj.com had 17,058,448 shares of common stock (“BOOM Common
Stock”) outstanding, which were exchanged for 34,458,067 shares of RES Common
Stock through RES Sub. All warrants that were issued by BOOMj.com
prior to the Merger remained outstanding as of December 31, 2007. However,
pursuant to the terms of those warrants, the warrants were subsequently
exchanged for warrants to purchase the Company’s common stock. The
exchange of the warrants was completed during the fiscal quarter ended June 30,
2008.
Subsequent
to the Merger, RES changed its name to BoomJ, Inc.
In the
Reorganization Agreement, concurrent with the closing of the Merger, (a) all
current officers of RES resigned from their positions with RES and (b)
BOOMj.com’s officers were appointed by the then existing members of the Board of
Directors of RES to replace the former RES officers, and (c) the members of the
RES board of directors appointed the members of BOOMj.com’s current board of
directors of the Company and thereafter resigned.
RES is
the legal acquirer of BOOMj.com. However, since RES was a public
shell company with a nominal amount of net assets, the Merger has been treated
as a recapitalization of BOOMj.com and an acquisition of the assets and
liabilities of RES by BOOMj.com. Although RES was the legal acquirer
in the Merger, BOOMj.com was the accounting acquirer since its shareholders
ended up owning a majority of the outstanding common shares of RES. Therefore,
at the date of the Merger the historical financial statements of BOOMj.com
became those of RES for the period prior to the Merger. Subsequent to the
Merger, the consolidated financial statements include both entities. Unless
otherwise specified, all references to the Company prior to the Merger refer to
BOOMj.com, and all references to the Company after the Merger refer to Beyond
Commerce, Inc. (formerly BOOMj, Inc.) and its subsidiaries on a consolidated
basis.
In
December 2008, the Company changed its name from BoomJ, Inc. to Beyond Commerce,
Inc. to more accurately reflect the new structure of the Company consisting of
three operating divisions: i-SUPPLY, LocalAdLink, and BOOMj.com.
The
Company currently maintains its corporate office in Henderson, Nevada, and has
its LocalAdLink customer service department located in Irvine,
California.
Our
Three Businesses
Our three
business divisions are (i) BOOMj.com, (ii) LocalAdLink, and (iii)
i-SUPPLY.
BOOMj.com
Our
Boomj.com, Inc. subsidiary operates www.BOOMj.com , the leading online community
for Baby Boomers and Generation Jones. “Baby Boomer” is a term used
to describe a person who was born during the Post-World War II baby boom between
1946 and 1964, while “Generation Jones” is a term generally used to describe
people born between the years 1954 and 1965. www.BOOMj.com delivers
content that meets the interests, passions and needs of our members with easy to
use social-networking and shopping tools. The BOOMj website contains
advertising from both national and local advertisers. In addition, it
contains a store that permits users to purchase over 1.8 million
products.
We
believe that the BOOMj website currently is the most visited Baby Boomer social
network on the Web and one of the top 50 global social networks. This
website currently has over 80,000 active members.
Social Networking
Site
www.BOOMj.com
principally is a social networking site that allows members to network with
their friends, family and colleagues for free. Users need to be
registered www.BOOMj.com members to utilize any of the social networking
tools. Every member on www.BOOMj.com creates a member profile that
allows the users to share their interests, beliefs, hobbies, education, marital
status, birthday or any other information that they wish to tell the community
about. These profiles can consist of a personal profile, a business
profile or both. Members can also post their photos or videos and
choose to share them with selected members or the entire community. Our
easy-to-use suite of tools allows BOOMj members to upload pictures of their
families, pets or their most recent trip. Members can also share home videos or
their favorite videos from popular video sites like Google Video and
YouTube. Members are encouraged to invite friends who have not yet
joined BOOMj to sign up, search for friends already enrolled, or browse through
our entire network of members by specific criteria (i.e. location, marital
status, interests, etc.).
www.BOOMj.com’s
internal messaging and commenting features allow Boomers to exchange
information. Our members can send public comments to any of their
friends by simply visiting their profile pages. If they prefer to write private
messages they can easily utilize our internal messaging system to send notes to
their friends in the community.
The BOOMj
blog network lets our members write journal entries on any topic. The blogs are
organized in the BOOMj Blog Directory and if members wish to share their
thoughts each entry can be populated within their profile. To date, this
exciting feature has been a launching board for all types of discussions and
connections.
BOOMj
members also have the opportunity to create and join groups and organizations.
Our groups can be as broad or as specific as the member who creates them wants -
allowing members with similar interests to congregate and discuss the issues and
activities that are most important to them. BOOMj members can also engage any of
our not for profit organization partners, that are comprised of leading
charities and affinity groups, to share their thoughts, join or contribute
dollars and services.
The BOOMj
Events and Bulletin Board lets members share information on events that they
plan to attend or are putting on themselves. This provides our members with a
stepping stone to the “real world,” and lets them notify the community about a
host of different activities.
The site
also provides members with access to an assortment of online games, such as
Brain Games and Sudoku, as well as multi-player that allow our members to
interact in real time with other members.
BOOMj
Content
The BOOMj
website provides our members with the relevant and targeted content surrounding
the issues that are important to them through two primary sources - our BOOMj
Expert Network and Tribune Media Services. Every article that appears
on www.BOOMj.com, whether it is written by one of our in house experts or
Wolfgang Puck, has been outfitted with an assortment of social networking tools
– driving related product sales, targeted advertising and allowing the Boomer
and Joneser generations to interact.
The BOOMj
Expert Network is comprised of over sixty leading authors and experts in
categories ranging from Retirement & Financial Planning to Fitness and
Health. BOOMj Experts offer customized content, advice and insight on
topics that are important to our members. Each expert is also a
member of the BOOMj community, which allows members to interact and converse
with leading Boomer experts.
We have
established an exclusive relationship with Tribune Media Services in order to
provide the best in current events, health and lifestyle related content to our
members. This allows us to publish content from a broad array of sources
including the LA Times, US News and World Report and Chicago Tribune. This
relationship also enables us to have complete access to content from celebrity
personalities such as Andy Rooney, Wolfgang Puck, Mitch Albom, and many
more.
Social
Shopping
The BOOMj
website also provides the website visitors with an on-line store (the BOOMj
Store) from which they can purchase over 1.8 million brand name products at
affordable prices. The store is available to both our members and the general
public and offers best selling products in 13 major categories: Beauty products,
books, boutique stores, camera and photo products, computers, DVDs, electronics,
garden and patio products, kitchen appliances and products, music, office
supplies, pet products and supplies, and wellness products. The
on-line store leverages current social shopping trends and allows members to
interact during the shopping experience by posting reviews and feedback on
products in the BOOMj Store. Products can also be tagged and stored
with popular social bookmarking sites such as Del.icio.us or pushed to other
social media channels such as Twitter. We integrate E-commerce into
the social network by creating brand and product profiles within the network
allowing members to become “friends with their favorite products” – this gives
us opportunities to target very specific niche segments.
We also
integrate commerce and community with content. Within our health and lifestyle
channels, we have articles, commentaries and news about specific topics.
Throughout these channels we feature related products and services available in
the store (through our contextual E-commerce widgets) and with a click-to-buy
option on the same page.
Members
can earn and accrue reward points for all of their activity on the site. These
BOOMj Reward Points are redeemable as discounts towards purchases in the BOOMj
store and are a valuable tool for increasing our brand loyalty.
Revenue
Sources
We
generate revenue from our BOOMj website from advertising by both national and
local advertisers. In addition, we also receive a small percentage of
the purchase price of products purchased through our BOOMj Store.
LocalAdLink
LocalAdLink
is an online advertising service that enables local businesses to reach local
customers. The public Web site wwwLocalAdLink.com is a local search directory
and acts as the central hub for the LocalAdLink technology. When a customer
visits LocalAdLink.com, our proprietary geo-targeting technology identifies
their location and serves up local businesses in their zip code. Once here, a
customer can perform additional searches for local businesses and services
across a complete selection of categories and get the information they
require.
When a
business owner partners with LocalAdLink, the local business receives a suite of
easy-to-use tools that allows it to completely manage its business listing and
advertisements on its own website. Depending on the service level
selected, a business owner can add and manage all of the information it wishes
to display, including contact information, such as name, address, phone number
and driving directions. LocalAdLink.com also provides business owners
with the ability to easily create discount coupons, add multiple photos to an
image gallery and upload videos. All of the management tools have
been designed to be intuitive, so that business owners with little or no
technology experience can effectively manage their business
listings.
The
LocalAdLink service also incorporates an Advertising Network. The business
listings that are created on LocalAdLink.com are also populated through both
owned and operated Web sites and third party affiliates. Using proprietary
geo-targeting technology, the owned and operated Web sites display business
listings targeted to the user's zip code, thus providing more qualified
customers. Our partner Web sites include photography.com, tarot.com,
davesgarden.com, cnn.com, facebook.com, myspace.com.
LocalAdLink
has partnered with over 100 Search Engines, such as Google, Yahoo and MSN,
allowing local business owners to be displayed in searches targeted to the zip
code of the local business.
We
generate revenues from LocalAdLink by charging the business users a monthly
fee. We have engaged over 30,000 independent sales representatives
who sell local advertising to their local business customers. We
share the advertising revenues that we receive through these representatives
with the representatives that generated the customer.
i-SUPPLY
Our
i-SUPPLY division specializes in providing state of the art E-commerce tools and
solutions for high traffic Web sites. The i-SUPPLY widget store will
allow any Web site that is operated by a third party to use our storefront tool
to monetize visitors of their website by simply cutting and pasting a few lines
of code to instantly create a storefront on their site. Using the i-SUPPLY tool,
participating Web sites will be able to offer 1.8 million brand name products on
their own website and will be able to customize the look and feel of their
storefront. i-SUPPLY creates a value-add to these owners by handling
product selection, pricing, customer support, billing and shipping for any sales
generated by its widget. In March 2009, we launched the beta
version of the i-SUPPLY storefront tool. An advance version of the
storefront tool with additional functionality and features is scheduled to be
released during the second quarter of 2009.
i-SUPPLY
offers E-commerce solutions that combine the best features of today’s hottest
online storefronts with social shopping platforms, offering users of i-SUPPLY
highly valuable technology, products and information to monetize their
traffic. For example, a third party site dedicated to a specific
interest (such as photograph, gardening, electronics, etc.) can now use the
i-SUPPLY storefront to offer a store on that site that offers thousands of
products related to that interest (such as photo equipment, gardening tools, or
electronic products). Users of the tool will be able to generate
sales from their website without having to set up and operate a
store.
The core
of i-SUPPLY is our proprietary Widget store technology. This technology allows
users to instantly create a store that is hosted on their platform by simply
copying and pasting a few lines of code into a blank page on their site. This
means that third party websites will retain traffic and be able to record
statistics through our innovative live reporting and sales tools. This unique
service allows any Web site to integrate customizable Web stores with tailored
assortments of products from over 1.8 million brand names.
i-SUPPLY’s team completely manages all backend fulfillment issues
following a sale of any of the products, including shipping, customer service,
returns, and refunds.
To date,
only the beta version of the i-SUPPLY product has been
launched. However, users of the storefront include websites such as
NameMedia, operator of over 2 million unique domain names (Tarot.com,
Photography.com and Davesgarden.com); Rackspace Hosting, 70,000 client base;
Mosso Cloud Storage, 100,000 Domains; Wpromote, 17,000 clients; and UVU
Networks.
i-SUPPLY
provides us with a business model that produces a revenue stream generated
through product sales on third party websites. In addition, the third
party storefronts are built with customized advertising space dedicated to local
advertising. This remnant ad inventory is filled by our LocalAdLink
division, thereby providing our other division with the ability to extend its
advertising reach to the hundreds of thousands of Web properties who use the
i-SUPPLY platform.
Competition
BOOMj.com
social network has intense competition in the social network and niche community
space. Many internet users belong to more than one social network and
divide their time between those networks. We expect this competition to continue
to increase as new social networking sites open. As a result, we face
formidable competition in every aspect of our social networking business, and
particularly from other companies that seek to connect people with information
and entertainment on the Web. Competitors include Eons.com,
TeeBeeDee.com, AARP.com, Facebook.com, Myspace.com, Boomergirl.com and
Boomer411.com. In addition, we will continue to compete with large
portals like Yahoo.com, MSN.com, Aol.com and professional social communities
like LinkedIn and Plaxo. We also expect competition from traditional magazine
and newspaper publishers, as they begin to integrate social networking features
into their current digital properties.
BOOMj.com
media and advertising
competes for both the
national and local advertisers. While advertising on the Web
continues to grow, so does the competition for the national and local
advertising dollars. Large web advertisers, such as Google and Yahoo,
dominate major advertising. In order to avoid head-to-head
competition with these larger competitors, we are trying to foster both agency
and direct brand relationships while still offering competitive and unique
advertising and sponsorship packages. In addition, we will also be
competing for advertising revenues with other E-commerce companies, with general
purpose consumer online services such as America Online and Microsoft Network,
with websites that target specific markets in which we also provide content
(such as, for example, business and financial needs that are served by
TheStreet.com and Motley Fool and other web “portal” companies, such as Excite,
Infoseek, Yahoo! and Lycos).
LocalAdLink.com
is our consumer-facing local search directory and competes directly with
Yellowpages.com, ZipWeb.com and Superpages.com, some of whom have a substantial
head start and brand awareness. We believe that by creating a
expansive independent sales force to directly sell ads to local businesses, we
are able to offset some of the financial and other advantages of our larger
competitors in the local advertising marketplace. The LocalAdLink Advertising
Network is not in direct competition with the above-mentioned directories and no
other local search company offers this solution; there is some overlap with
Google but rather than compete, we work directly with Google to enhance our
offering. Also, while there are several competitors who offer a part
of the LocalAdLink solution, but to our knowledge there are none that offer
package of both local business tools and local advertising, which we believe
gives LocalAdLink an advantage.
We
believe that i-SUPPLY provides unique value for third party websites that use
our storefront. However other large E-commerce platforms, such as
Amazon.com and Buy.com may be able to create similar
opportunities. Our i-SUPPLY product offering competes against other
E-commerce stores and against traditional brick and mortar retailers that have
the advantage of the brand awareness inherent with their brick and mortar
presence. In today’s economic climate brick and mortar retailers are
expanding their sales outreach, not by adding physical locations, but by
investing in the E-commerce strategy.
Marketing
Strategy
Our
LocalAdLink strategy uses independent sales agents, also called ‘brand builders’
and are located throughout the country. The independent agents
solicit ads from local businesses for regional online
advertising. Our domain name “www.localadlink.com” is included in all
promotional materials used by the sales agents.
Our
Boomj.com strategy uses a phased-in marketing approach that begins with
collecting data about each of our members. We then target relevant profile
groups based on answers to questions about their interests concerning
participation in social, financial, political, health and travel
communities.
Our
i-SUPPLY marketing strategy includes an email marketing campaign, free trips to
Hawaii and Las Vegas and free name brand electronics such as Sony LCD
televisions, Casio digital cameras, Apple iPods and Microsoft’s Zune
player.
Our
offline marketing strategy involves advertising through print media, television,
radio and trade shows. Our domain name “www.boomj.com” will be included in all
of our radio and or TV advertising we do. We plan to attend and exhibit at
selected tradeshows to gain exposure and market share.
Government
Regulation
We are
subject to a number of foreign and domestic laws and regulations that affect
companies conducting business on the internet, including laws and regulations
relating to user privacy, freedom of expression, content, advertising,
information security and intellectual property rights. In the U.S.,
laws relating to the liability of providers of online services for activities of
their users and other third parties are currently being tested by a number of
claims, which include actions for defamation, libel, invasion of privacy and
other data protection claims, tort, unlawful activity, copyright or trademark
infringement and other theories based on the nature and content of the materials
searched, the ads posted or the content generated by users. Certain foreign
jurisdictions are also testing the liability of providers of online services for
activities of their users and other third parties. Any court ruling that imposes
liability on providers of online services for activities of their users and
other third parties could harm our business. Likewise, a range of other laws and
new interpretations of existing laws could have an impact on our business. For
example, in the U.S. the Digital Millennium Copyright Act has provisions that
limit, but do not necessarily eliminate, our liability for listing, linking or
hosting third-party content that includes materials that infringe copyrights or
other rights. The costs of compliance with these laws may increase in the future
as a result of changes in interpretation. Furthermore, any failure on our part
to comply with these laws may subject us to significant
liabilities.
Similarly,
the application of existing laws prohibiting, regulating or requiring licenses
for certain businesses of our advertisers, including, for example, online
gambling, distribution of pharmaceuticals, adult content, financial services,
alcohol or firearms, can be unclear. Application of these laws in an
unanticipated manner could expose us to substantial liability and restrict our
ability to deliver services to our users. For example, some French courts have
interpreted French trademark laws in ways that would, if upheld, limit the
ability of competitors to advertise in connection with generic
keywords.
We are
also subject to federal, state and foreign laws regarding privacy and protection
of user data. We post on our website our privacy policies and practices
concerning the use and disclosure of user data. Any failure by us to comply with
our posted privacy policies or privacy-related laws and regulations could result
in proceedings against us by governmental authorities or others, which could
potentially harm our business. In addition, the interpretation of data
protection laws, and their application to the internet, in Europe and other
foreign jurisdictions is unclear and in a state of flux. There is a risk that
these laws may be interpreted and applied in conflicting ways from country to
country and in a manner that is not consistent with our current data protection
practices. Complying with these varying international requirements could cause
us to incur additional costs and to have to change our business practices.
Further, any failure by us to protect our users’ privacy and data could result
in a loss of user confidence in our services and ultimately in a loss of users,
which could adversely affect our business.
In
addition, because our services are accessible worldwide, certain foreign
jurisdictions may claim that we are required to comply with their laws, even
where we have no local entity, employees or infrastructure.
Intellectual
Property
Our
trademarks, trade secrets, copyrights and other intellectual property rights are
important assets for us. We believe that we own the trademarks to
“boomj,” “boomj.com,” “localadlink,” “localadlink.com,”
“iSUPPLY” and “i-SUPPLY.com.” We intend to register these
and possibly other trademarks. We hold the Internet domain names www.boomj.com,
www.boomj.net , www.boomj.org, www.beyondcommerce.com, www.localadlink.com,
www.localadlink.net, and www.i-supply.com. We also hold the Internet
domain names www.myboomj.com, myboomj.net, and myboomj.org. Under current domain
name registration practices, no one else can obtain an identical domain name,
but someone might obtain a similar name, or the identical name with a different
suffix, such as “.org,” or with a country designation.
Employees
As of
December 31, 2008 we had 43 full-time employees, including our four executive
officers. None of our employees are represented by a labor union. We have not
experienced any work stoppages and consider our relations with our employees to
be good.
An
investment in our securities involves a high degree of risk. You
should carefully consider the risks described below before deciding to invest in
or maintain your investment in our company. The risks described below
are not intended to be an all-inclusive list of all of the potential risks
relating to an investment in our securities. If any of the following
or other risks actually occur, our business, financial condition or operating
results and the trading price or value of our securities could be materially and
adversely affected.
Risks
Related to Our Business and Industry
We
have a limited operating history upon which an evaluation of our prospects can
be made. For that reason, it is difficult to judge our prospects.
The
Company has a limited operating history as a result, investors do not have
access to the same type of information in assessing their proposed investment as
would be available to investors in a company with a history of prior
operations. Although we have operated our
Boomj.com website for the past two years, because of our lack of
funding we have not been able to maintain vendor credit lines with the suppliers
of our on-line products. As a result, we have not been able to
maintain and generate sales through the on-line store on our BOOMJ.com
website. In addition, our LocalAdLink product was introduced only a
few months ago, and the formal launch of the fully functional i-SUPPLY
storefront will occur in the second quarter of 2009. Accordingly, to
date, we have operated as an early stage company that is developing and now
introducing its business. As a developing new company, we face all
the risks inherent in a new business, including the expenses, difficulties,
complications and delays frequently encountered in connection with commencing
new operations, including capital requirements and management’s potential
underestimation of initial and ongoing costs. We also face the risk that we not
be able to effectively implement our business plan or successfully roll out new
products. If we are not effective in addressing these risks, we may
not develop a viable business or may not operate profitably. We
expect to incur operating losses for the near future, and there can be no
assurance that we will be able to generate revenues or that any revenues
generated will be sufficient for us to become profitable or thereafter maintain
profitability.
We
have had operating losses since formation and expect to incur net losses for the
near term.
We
reported net losses of $12,857,990 and $4,785,000 for the fiscal years ended
December 31, 2008 and 2007, respectively. Although we generate
revenues (we generated $1,843,231 in 2008 and have already generated over
$5,000,000 during the first two months of 2009), our revenues and gross profits
currently are not sufficient to cover our operating
expenses. Although we currently anticipate that our sales will
significantly increase in 2009 compared to prior years, we anticipate that we
will continue to incur net losses in the near term, and we may never be able to
achieve profitability. In order to achieve profitable operations we
need to significantly increase our revenues from advertising and product
sales. We cannot be certain that our business will ever be
successful or that we will generate significant revenues and become
profitable.
We
will need significant additional capital, which we may be unable to
obtain.
We
currently do not have sufficient cash available to fund our working capital
needs. In addition, we do not generate sufficient cash from
operations to fund our operating expenses, nor do we have any credit facilities
available to us from which we can fund our operating deficits. Our
capital requirements in connection with our commercial operations have been and
will continue to be significant. Also, we have to date funded many of
our operating expenses from short-term loans, of which over $4,750,500 will
mature by September 30, 2009. Accordingly, we will need to obtain a
significant amount of additional capital (from operations or from investors) to
continue to fund our operating expenses and to repay our currently outstanding
obligations. However, in order to generate more sales from our
E-commerce stores, we need to obtain additional from our vendor credit lines
with the suppliers of the products that we sell. Because of our
current financial position, we have not received the amount of vendor credit
that we need to generate significant sales from our E-commerce
sales. We have not identified the sources for the additional
financing that we will require, and we do not have commitments from any third
parties to provide this financing. Certain investors may be unwilling
to invest in our securities since we are traded on the OTC Bulletin Board and
not on a national securities exchange, particularly if there is only limited
trading in our common stock on the OTC Bulletin Board at the time we seek
financing. There is no assurance that sufficient funding through a
financing will be available to us at acceptable terms or at all. Any
additional funding that we obtain in a financing is likely to reduce the
percentage ownership of the company held by our existing
security-holders. The amount of this dilution may be substantially
increased if the trading price of our common stock has declined at the time of
any financing from its current levels. There can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at
all. If we are unable to obtain the needed additional funding, we
will have to reduce or even totally discontinue our operations, which would
result in a total loss to all of our equity investor and a significant loss to
our promissory note holders.
We
currently have outstanding potentially convertible promissory notes that are
secured by a lien on all of this company’s assets. Accordingly, a default under
the convertible promissory notes could result in the foreclosure of all of our
assets and the termination of our business.
We
initially issued $4,280,000 (of which $4,075,000 is still outstanding) of
convertible promissory notes that are secured by a first priority security
interest on all of our assets. Of those notes, $2,100,000 were scheduled to
mature on March 31, 2009. The holders of those notes have,
however, have extended the maturity date of those notes to July 31,
2009. As a result of this extension, all $4,075,000 of the notes now
mature and must be repaid in full, both principal and interest, on July 31,
2009. Failure to make any payment as required under the convertible
promissory notes could result in the acceleration of the convertible promissory
notes and the foreclosure of our assets. If we are unable to repay the notes in
full upon their maturity, or if we otherwise default under our obligations to
the holders of those notes, the holders of the convertible promissory notes will
have the right to foreclose on all of our assets, which would materially and
adversely affect our ability to continue our operations and could terminate our
existence. No assurance can be given that we will be able to make all payments
as required or that we will be able to repay the convertible promissory
notes.
If
our strategy is unsuccessful, we will not be profitable and our stockholders
could lose their investment.
There is
no guarantee that our strategy for developing our three Internet platforms and
websites will be successful or that if successfully developed, will result in
this company becoming profitable. If our strategy is unsuccessful, we may fail
to meet our objectives and not realize the revenues or profits from the business
we pursue that may cause the value of Beyond Commerce, Inc. to decrease, thereby
potentially causing our stockholders to lose their investment.
We
may not be able to effectively control and manage our growth, which would
negatively impact our operations.
If our
business and markets grow and develop it will be necessary for us to finance and
manage expansion in an orderly fashion. We recently launched our new LocalAdLink
suite of products and are launching our i-SUPPLY business. These new
products and businesses will require additional resources and
personnel. We may face challenges in managing these and other
expanding product and service offerings and in integrating these businesses with
our other website operations. Such eventualities will increase demands on our
existing management, workforce and facilities. Failure to satisfy increased
demands could interrupt or adversely affect our operations, restrain the
potential growth of the two new businesses, and cause administrative
inefficiencies.
We
may be unable to successfully execute all of our identified business
opportunities, or other business opportunities that we determine to
pursue.
We
currently have a limited resources with which to fully develop our three
existing businesses opportunities. Our ability to successfully
develop our existing, and possible future, business opportunities will depend on
one or more of the following factors:
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our ability to raise substantial
additional capital to fund the implementation of our business
plan;
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our ability to execute our
business strategy;
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the ability of our services to
achieve market acceptance;
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our ability to manage the
expansion of our operations and any acquisitions we may make, which could
result in increased costs, high employee turnover or damage to customer
relationships;
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our ability to attract and retain
qualified personnel;
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our ability to manage our third
party relationships effectively;
and
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our ability to accurately predict
and respond to the rapid technological changes in our industry and the
evolving demands of the markets we
serve.
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Our
failure to adequately address any one or more of the above factors could have a
significant impact on our ability to implement our business plan and our ability
to pursue other opportunities that arise.
Our
businesses depend, to a large extent, on the development of strong brands, and
if we do not develop and enhance our brand, our ability to attract and retain
subscribers and customers may be impaired and our business and operating results
may be harmed.
We
believe that our brands are a critical part of our business. Developing and
enhancing our brand may require us to make substantial investments with no
assurance that these investments will be successful. If we fail to promote and
develop the “I-Supply” or “BOOMJ.com’’ or “LocalAdLink.com” brands, or if we
incur significant expenses in this effort, our business, prospects, operating
results and financial condition may be harmed. We anticipate that developing,
maintaining and enhancing our brands will become increasingly important,
difficult and expensive.
Our
intellectual property rights are valuable, and any inability to protect them
could reduce the value of our products, services and brand.
Our trademarks, trade
secrets, copyrights and other intellectual property rights are important assets
for us. Various events outside of our control pose a threat to our intellectual
property rights as well as to our products and services. For example, effective
intellectual property protection may not be available in every country in which
our products and services are distributed or made available through the
internet. Also, the efforts we have taken to protect our proprietary rights may
not be sufficient or effective. Any significant impairment of our intellectual
property rights could harm our business or our ability to compete. Also,
protecting our intellectual property rights is costly and time consuming. Any
increase in the unauthorized use of our intellectual property could make it more
expensive to do business and harm our operating results.
In
providing our services we could infringe on the intellectual property rights of
others, which may cause us to engage in costly litigation and, if we do not
prevail, could also cause us to pay substantial damages and prohibit us from
selling our services.
Third
parties may assert infringement or other intellectual property claims against
us. We may have to pay substantial damages, if it is ultimately determined that
our services infringe a third party’s proprietary rights. Even if claims are
without merit, defending a lawsuit takes significant time, may be expensive and
may divert management’s attention from our other business concerns.
Traffic
Levels on our BOOMj.com website and other websites can fluctuate, which could
materially adversely affect our business.
Traffic
levels to our websites can fluctuate significantly as a result of social,
political and financial news events. The demand for advertising, cross promotion
and subscriptions on the Company’s Websites as well as on the Internet in
general can cause changes in rates paid for Internet
advertising. Fluctuating levels of visitors to our websites and to
websites for which we provide LocalAdLink and i-SUPPLY services, could harm our
ability marketing or advertising agreements, will result in lower sales and
advertising revenues, and could raise our budgeted marketing and advertising
costs.
Our
business may be adversely affected by malicious applications that interfere
with, or exploit security flaws in, our products and services.
Our
business may be adversely affected by malicious applications that make changes
to our users’ computers and interfere with the Internet products that we
provide. These applications attempt to change our users’ internet
experience or may interfere with the operation and functionality of our web
products. Malicious interference often occurs without disclosure to
or consent from users, resulting in a negative experience that users and
customers may associate with our company’s products and
services. These applications may be difficult or impossible to
uninstall or disable, may reinstall themselves and may circumvent other
applications’ efforts to block or remove them. In addition, we offer a number of
products and services that our users download to their computers or that they
rely on to store information and transmit information to others over the
internet. These products and services are subject to attack by viruses, worms
and other malicious software programs, which could jeopardize the security of
information stored in a user’s computer or in our computer systems and networks.
The ability to reach users and provide them with a superior experience is
critical to our success. If our efforts to combat these malicious
applications are unsuccessful, or if our products and services have actual or
perceived vulnerabilities, our reputation may be harmed and our user traffic
could decline, which would damage our business.
We
rely on bandwidth providers, data centers or others in providing products and
services to our users, and any failure or interruption in the services and
products provided by these third parties could harm our ability to operate our
business and damage our reputation.
We rely
on vendors, including data center and bandwidth providers. Any disruption in the
network access or collocation services provided by these providers or any
failure of these providers to handle current or higher volumes of use could
significantly harm our business. Any financial or other difficulties our
providers face may have negative effects on our business. We exercise little
control over these vendors, which increases our vulnerability to problems with
the services they provide. We license technology and related databases to
facilitate aspects of our data center and connectivity operations including
internet traffic management services. We have experienced and expect to continue
to experience interruptions and delays in service and availability for such
elements. Any errors, failures, interruptions or delays in connection with these
technologies and information services could harm our relationship with users,
adversely affect our brand and expose us to liabilities.
Our
systems are also heavily reliant on the availability of electricity. If we were
to experience a major power outage, we would have to rely on back-up generators.
These back-up generators may not operate properly and their fuel supply could be
inadequate during a major power outage. This could result in a disruption of our
business.
Our
business depends on continued and unimpeded access to the Internet by us and our
users. Internet access providers may be able to block, degrade or charge for
access to certain of our products and services, which could lead to additional
expenses and the loss of users and advertisers.
Our
products and services depend on the ability of our users to access the internet,
and certain of our products require significant bandwidth to work effectively.
Currently, this access is provided by companies that have significant and
increasing market power in the broadband and internet access marketplace,
including incumbent telephone companies, cable companies and mobile
communications companies. Some of these providers have stated that they may take
measures that could degrade, disrupt or increase the cost of user access to
certain of our products by restricting or prohibiting the use of their
infrastructure to support or facilitate our offerings, or by charging increased
fees to us or our users to provide our offerings. These activities may be
permitted in the U.S. after recent regulatory changes, including recent
decisions by the U.S. Supreme Court and Federal Communications Commission and
under legislation being considered by the U.S. Congress. While interference with
access to our popular products and services seems unlikely, such carrier
interference could result in a loss of existing users and advertisers, increased
costs, and impair our ability to attract new users and advertisers, thereby
harming our revenue and growth.
We
face intense competition from social networking sites and other Internet
businesses and may not be able to successfully compete.
We face
formidable competition in every aspect of our business, and particularly from
other companies that seek to connect people with information and entertainment
on the web. Such competitors include seniorjournal.com boomerwomenspeak.com,
aginghipsters.com, 50Plus.com, generationjones.com, Eons.com, AARP, YouTube, My
Space, Craig’s List, Evite, Shutterfly, Facebook and
YellowPages.com.
In
addition, we will be competing with other Internet companies, such as E-commerce
companies, general purpose consumer online services, such as America Online and
Microsoft Network; online services or Websites targeting business and financial
needs, such as TheStreet.com and Motley Fool; and other web “portal” companies,
such as Excite, Infoseek, Yahoo! and Lycos.
Many of
our competitors, particularly those in the advertising marketplace, have longer
operating histories and more established relationships with customers and end
users. They can use their experience and resources against us in a variety of
competitive ways, including by making acquisitions, investing more aggressively
in research and development and competing more aggressively for advertisers and
web sites. They may have a greater ability to attract and retain users than we
do because they operate internet portals with a broad range of content products
and services. If our competitors are successful in providing similar or better
web sites, more relevant advertisements or in leveraging their platforms or
products to make their web services easier to access, we could experience a
significant decline in user traffic or in the size of our network. Any such
decline could negatively affect our revenues.
We
face competition from traditional media companies, and we may not be included in
the advertising budgets of large advertisers, which could harm our operating
results.
In
addition to Internet companies, we face competition from companies that offer
traditional media advertising opportunities, including television, radio and
print. Most large advertisers have set advertising budgets, a very small portion
of which is allocated to internet advertising. We expect that large advertisers
will continue to focus most of their advertising efforts on traditional media.
If we fail to convince these companies to spend a portion of their advertising
budgets with us, or if our existing advertisers reduce the amount they spend on
our programs, our operating results would be harmed.
If
we do not continue to innovate and provide products and services that are useful
to users, we may not remain competitive, and our revenues and operating results
could suffer.
Our
success depends on providing products and services that make using the internet
a more useful and enjoyable experience for our users. Our competitors are
constantly developing innovations in web based products and services. As a
result, we must continue to invest significant resources in research and
development in order to enhance our existing products and services and introduce
new products and services that people can easily and effectively use. If we are
unable to provide quality products and services, then our users may become
dissatisfied and move to a competitor’s products and services. Our operating
results would also suffer if our innovations are not responsive to the needs of
our users and members, are not appropriately timed with market opportunities or
are not effectively brought to market. As internet broadcasting technology and
social networks continue to develop, our competitors may be able to offer
products and services that are, or that are seen to be, substantially similar to
or better than ours. This may force us to compete in different ways and expend
significant resources in order to remain competitive.
We
need to enter into strategic relationships with other Websites. If we are unable
to do so, our revenues and operating results will suffer.
We will
need to establish and maintain strategic relationships with other Websites to
attract users, advertisers and compelling content. There is intense competition
for placements and cross promotion on these sites, and we may not be able to
enter into relationships on commercially reasonable terms or not at all. In
addition we may have to pay significant fees to establish and maintain these
relationships.
Our
business model is dependent upon continued growth in the use of the Internet by
our target demographic, and acceptance of our services by our target
demographic. If such growth and acceptance do not occur, our business will
suffer.
Our
business model depends on increasing demand for our content and e-commerce
initiatives from the Baby Boomers and the Generation Jones, as well as the
advertising revenue from small businesses. This in turn depends on this
demographic continuing to increase their use of the Internet for obtaining
information pertaining to social, political, financial and lifestyle events,
research and conducting commercial transactions. There can be no assurance that
such growth will continue, or that our services will be accepted by this
demographic. If such growth and acceptance does not occur, our business will be
materially adversely affected.
We
rely on highly skilled personnel and, if we are unable to retain or motivate key
personnel or hire qualified personnel, we may not be able to grow
effectively
The
success of this company depends in large part upon the abilities and continued
service of our executive officers and other key employees, particularly Mr.
Robert J. McNulty, Chairman &, Chief Executive Officer, Mr. Mark V. Noffke,
Executive Vice President and Chief Financial Officer, and Ms. Wendy
Borow-Johnson, President of Brand Management. There can be no
assurance that we will be able to retain the services of such officers and
employees. Our failure to retain the services of Messrs. McNulty, Noffke, and or
Ms. Borow-Johnson and other key personnel could have a material adverse effect
on our business and future prospects. At the present time, we have no employment
agreements and no key person insurance policies in place for any of
the above referenced individuals. In order to support our business plan, we will
be required to recruit effectively, hire, train and retain additional qualified
management personnel. Our inability to attract and retain the necessary
personnel could have a material adverse effect on our business.
Risks
Related to Ownership of our Common Stock
Our
stock is thinly traded, so you may be unable to sell your shares at or near the
quoted bid prices if you need to sell a significant number of your
shares.
The
shares of our common stock are thinly-traded on the OTC Bulletin Board, meaning
that the number of persons interested in purchasing our common shares at or near
bid prices at any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the fact that we are
a small company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven, early stage company such as ours or purchase or recommend the purchase
of our shares until such time as we became more seasoned and viable. As a
consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. We cannot give you
any assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained. Due to these conditions, we can give you no assurance that you will
be able to sell your shares at or near bid prices or at all if you need money or
otherwise desire to liquidate your shares.
If
a more active market for our common stock develops, there is a significant risk
that our stock price may fluctuate dramatically which could negatively impact
your investment in our common stock.
There is
only a limited market for our common stock and a viable market for our common
stock may never develop further. If a more active market for our
common stock develops, there is a significant risk that our stock price may
fluctuate dramatically in the future in response to any of the following
factors, some of which are beyond our control including:
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variations in our quarterly
operating results;
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announcements that our revenue or
income are below or that costs or losses are greater than analysts’
expectations;
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general economic
slowdowns;
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sales of large blocks of our
common stock;
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announcements by us or our
competitors of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital
commitments;
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fluctuations in stock market
prices and volumes;
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concern by potential investors
that the large number of shares of common stock which may be sold pursuant
to this prospectus may have a downward effect upon the market price of the
stock; and
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the occurrence of any of the
risks described in this
report.
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Dramatic
fluctuations in the price of our common stock may make it difficult to sell our
common stock.
Failure
to achieve and maintain effective internal controls in accordance with section
404 of the Sarbanes-Oxley act could have a material adverse effect on our
business and operating results and stockholders could lose confidence in our
financial reporting.
Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. We may be required to
document and test our internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased
control over financial reporting requirements, including annual management
assessments of the effectiveness of such internal controls and a report by our
independent registered public accounting firm addressing these assessments.
Failure to achieve and maintain an effective internal control environment,
regardless of whether we are required to maintain such controls, could also
cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on our stock price.
Because
we are subject to the “penny stock” rules, you may have difficulty in selling
our common stock.
Our
common stock is subject to regulations of the SEC relating to the market for
penny stocks. Penny stock, as defined by the Penny Stock Reform Act, is any
equity security not traded on a national securities exchange or quoted on any
market of the NASDAQ Stock Market that has a market price of less than $5.00 per
share. The penny stock regulations generally require that a disclosure schedule
explaining the penny stock market and the risks associated therewith be
delivered to purchasers of penny stocks and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. The broker-dealer must make a
suitability determination for each purchaser and receive the purchaser’s written
agreement prior to the sale. In addition, the broker-dealer must make certain
mandated disclosures, including the actual sale or purchase price and actual bid
offer quotations, as well as the compensation to be received by the
broker-dealer and certain associated persons. The regulations applicable to
penny stocks may severely affect the market liquidity for your common stock and
could limit your ability to sell your securities in the secondary
market.
As
an issuer of “penny stock”, the protection provided by the federal securities
laws relating to forward looking statements does not apply to us.
Although
federal securities laws provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, if we
are a penny stock, we will not have the benefit of this safe harbor protection
in the event of any legal action based upon a claim that the material provided
by us contained a material misstatement of fact or was misleading in any
material respect because of our failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial
condition.
Our management
and directors, together with their family members, may control a sufficient
number of shares of our common stock to be able to prevent a change in
control
.
Mr.
Robert J. McNulty, our Chairman and Chief Executive Officer, Ms. Wendy
Borow-Johnson, our President, Brand Management, Mr. Mark V. Noffke, our
Executive Vice President of Finance and CFO, and Mr. Murray Williams one of our
directors collectively beneficially own approximately 8.1% of the outstanding
shares of our Common Stock. However, approximately 41.1% of our
issued and outstanding stock is held by Linlithgow Holdings LLC, an entity owned
and controlled by the immediate family members of Mr. Robert J. McNulty. Mr.
McNulty is not a member or manager of Linlithgow Holdings LLC and he disclaims
any beneficial interests in these shares. Mr. McNulty does not exercise any
voting rights in respect of these shares nor does he have any right to dispose
of these shares. Nevertheless, Linlithgow Holdings LLC could resist
any change of control that would remove Mr. McNulty or any of the other officers
or directors and, together with Mr. McNulty, Ms. Johnson, Mr. Noffke and Mr.
Williams if they act in concert, can exercise substantial influence over our
business by virtue of their voting power with respect to the election of
directors and all other matters requiring action by stockholders. Such
concentration of share ownership may have the effect of discouraging, delaying
or preventing a change in control of this company.
Substantial sales of our common stock
could cause our common stock price to fall
.
Currently,
approximately 19,601,139
shares of our currently
outstanding common stock and another 9,411,429
shares of
our common stock issuable upon conversion of currently outstanding convertible
promissory notes are eligible to be sold pursuant to
Rule 144. The sale of these shares, or even the possibility that
substantial amounts of these shares of our common stock may be sold in the
public market, may adversely affect prevailing market prices for our common
stock and could impair our ability to raise capital through the sale of our
equity securities.
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS.
|
Not
applicable.
|
ITEM
2.
|
DESCRIPTION
OF PROPERTY
|
Our
executive offices are located at 9029 South Pecos, Suite 2800, Henderson, Nevada
89074, consist of 4,560 square feet and are leased at a monthly rate of $11,674
until December 31, 2011. We also have an office in Irvine, California. This
office consists of 2,024 square feet of space and is leased at a monthly rate of
$2,950. In February 2009 we amended this lease, effective March 16,
2009, to extend the lease term until January 31, 2009 and to lease, at a monthly
rate of $11,441, 5,634 square feet of additional office space that is adjacent
to the current Henderson, Nevada office.
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
We are
not a party to any material legal proceedings. From time to time, the
Company is a party to various legal matters in the normal course of business,
the outcome of which, in the opinion of management, will not have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
Not
applicable.
PART
II
|
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
|
On
January 15, 2008 our common stock began trading on the OTC Bulletin Board under
the symbol “RLET”. On January 31, 2008 our trading symbol changed to
“BOMJ.” Subsequently on February 23, 2009 our stock symbol changed in
conjunction with our name change to “BYOC.”
As of
December 31, 2008 there were 246 record holders of our common stock, not
including any persons who hold their stock in “street name.”
As of
December 31, 2008 we had 40,936,143 outstanding shares of common
stock.
The
following table sets forth the high and low bid prices for our common stock for
the periods indicated as reported by the OTC Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-ups, mark-downs, or
commissions and may not necessarily represent actual transactions. There was no
active trading market in our common stock until after our acquisition of
Boomj.com, Inc. in the Merger, and virtually no trades were recorded during the
fiscal year ended December 31, 2007.
|
|
|
High
|
|
|
Low
|
|
|
Year
ended December 31, 2008
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
2.75
|
|
|
$
|
1.05
|
|
|
Second
Quarter
|
|
$
|
3.25
|
|
|
$
|
1.86
|
|
|
Third
Quarter
|
|
$
|
3.30
|
|
|
$
|
2.50
|
|
|
Fourth
Quarter
|
|
$
|
2.55
|
|
|
$
|
0.55
|
|
The last
reported sales price of our common stock on the OTC Bulletin Board on March 30,
2009 was $0.51 per share.
Dividends
and Dividend Policy
We have
not previously paid any cash dividends on our common stock and do not anticipate
or contemplate paying dividends on our common stock in the foreseeable future.
We currently intend to use all available funds to develop our business. We can
give no assurances that we will ever have excess funds available to pay
dividends.
Repurchase
of Securities
We did
not repurchase any shares of our common stock during the fourth quarter of the
fiscal year ended December 31, 2008.
Recent
Sales of Unregistered Securities
On
October 9, 2008 the Company issued 5,000 shares of common stock to a vendor for
computer software services valued at the trading price of the common
stock. On October 22, 2008 the Company sold 1,100 shares to a foreign
investor for $1,108. During October 2008 the Company sold to five
qualified investors, an aggregate of 155,000 shares of its common stock for
$155,000. As part of these transactions, warrants were issued to the investors
to purchase an additional 77,500 shares of common stock at $0.70. In
December 2008 the Company sold an aggregate of 25,000 shares of its common stock
for $25,000 to four qualified investors. As part of these transactions, warrants
were issued to the investors to purchase an additional 25,000 shares of common
stock at $1.00. The issuance of the foregoing
securities was exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”), under Section 4(2) of the Securities
Act as transactions by an issuer not involving any public offering, or under
Rule 506 of Regulation D promulgated under the Securities Act.
On
October 22, 2008, a $25,000 short term convertible note was converted into
25,000 shares of common stock and the related accrued interest of $904 was also
converted into 904 shares of common stock.
Since the
adoption of 2008 Equity Incentive Plan in September 2008, we have granted a
total of 690,000 options at a strike price of $0.70-$1.50 per share to 21 of our
employees.
Equity
Compensation Plans
The
following table sets forth certain information as of December 31, 2008,
regarding securities authorized for issuance under our equity compensation
plans:
|
Plan Category
|
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
|
|
(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
|
Number of Securities
Remaining Available
for Issuance Under
Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a))
|
|
|
Equity
compensation plans approved by our security holders:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by our security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
Equity Incentive Plan(1)
|
|
|
1,114,320
|
|
|
$
|
0.89
|
|
|
|
2,385,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,114,320
|
|
|
$
|
0.89
|
|
|
|
2,385,680
|
|
|
(1)
|
Our
board of directors adopted this plan in September 2008. The
plan will be submitted for approval by our stockholders at our 2009 Annual
Meeting of stockholders. In the meantime, we may make awards
under the plan, whose effectiveness is conditioned upon obtaining
stockholder approval.
|
|
ITEM
6.
|
SELECTED
FINANCIAL DATA.
|
Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation S-K.
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following information should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this Form
10-K.
Overview
This
company, formerly known as Reel Estate Services Inc. was incorporated in Nevada
as a development stage company on January 12, 2006 to create a web-based service
that lists properties across the globe that are available for rental and/or use
by film and television companies as filming locations. We never earned any
revenue from our former Reel Estate Services internet site, and in September
2007 prior management terminated those operations.
On
December 28, 2007 Reel Estate Services, Inc. acquired BoomJ.com, Inc. through a
triangular merger (the “Merger”) in which it issued 34,458,067 shares of common
stock to the former shareholders of BoomJ.com, Inc.
The goal
of this company is to generate revenues primarily from website advertising and
E-commerce transactions. Although we did not generate significant
revenues and had a substantial loss in 2008, that year established the three
platforms from which we expect to generate significant revenues in
2009. Throughout 2008, we operated
BOOMj
,
www.BOOMj.com
, the leading
niche portal and social networking site for Baby Boomers and Generation
Jones. Revenues from this website were derived from advertising sales
and E-commerce transactions effected through the on-line store on that
website. Our
LocalAdLink
subsidiary
operates a website,
www.LocalAdLink.com
, and
a local search directory and advertising network that brings local advertising
to geo-targeted consumers. We started to generate revenues from sales
of local advertising through LocalAdLink after that product was released in
October 2008. Our third revenues source,
i-SUPPLY
,
www.i-SUPPLY.com
, a retail
storefront for any third party Websites was not commercially released in 2008
and did not generate any revenues (i-SUPPLY was released in March
2009). A major component of our business strategy in 2008 was to
maximize revenues from E-commerce sales made through our BOOMj
Store. In order to be able to offer and sell products through that
website, we needed to obtain credit from the vendors of the products offered on
the website. Because of our weak financial condition in 2008,
we did not receive the amount of credit from vendors that we needed and, as a
result, we were not able to effectively operate the BOOMj Store (in fact, the
BOOMj Store had limited operations during the later part of
2008). LocalAdLink contributed to our 2008 revenues, but since it was
not available until the last two months of the year, the amount of LocalAdLink
revenues was limited. Based on our recent results and the release of
i-SUPPLY, we currently anticipate that (i) we will generate more sales from our
BOOMj Store in 2009 if our financial condition improves and our vendor
relationships improve, (ii) we will generate significantly more revenues in 2009
from LocalAdLink, and (iii) i-SUPPLY will also contribute during
2009.
For
financial statement purposes, our acquisition of Boomj.com, Inc. was treated as
a reverse acquisition as though BoomJ.com, Inc. had acquired us since the prior
shareholders’ of BoomJ.com, Inc. ended up with a majority ownership in our
stock.
Subsequent
to December 28, 2007 the consolidated operations of both entities are included
in our financial statements. BoomJ.com, Inc. itself was created November 14,
2006. Our financial statements for the year ended December 31, 2007 are
therefore not comparable to the previous period from November 14, 2006 through
December 31, 2006 since this was a start-up period and our operations had not
fully commence.
During
the fourth quarter of 2008, we started a new company, LocalAdLink and now
consolidate the operations of this entity as well. In November of
2008 we changed our name from Boomj, Inc. to Beyond Commerce, Inc.
We
reported a consolidated net loss of $12,857,990 for the twelve months ended
December 31, 2008, a consolidated net loss of $4,973,477 for the twelve months
ended December 31, 2007 and a net loss of $54,914, reflecting our operations
from inception for the period November 14, 2006 through December 31, 2006
. The loss in 2008 was principally attributable to increase in
operating costs, as more fully explained in “Operating Expenses”
below.
Results
of Operations — Revenues
Our goal
is to generate revenues from the sale of various products to our website users
and from advertising fees. We operated our Boomj.com website throughout 2008 and
commenced our LocalAdLink.com site in October 2008. Through the end of 2008, we
had $1,843,230 in revenues, of which just over half was derived from
LocalAdLink revenues, with the remainder generated from the Boomj.com
web site from product sales and national advertising. Our revenues from the
Boomj.com website for 2007 were $94,485, consisting mostly of product sales
revenues.
Operating
Expenses
Selling,
general and administrative expenses (SG&A), including related party
expenditures, for the twelve month period ended December 31, 2008 (“fiscal 2008)
were $6,920,360. This reflects an increase of $3,736,900 in SG&A expenses
from the $3,183,460 reported for the twelve month period ended December 31, 2007
(“fiscal 2007). The change in SG&A expenses is attributable to
increased advertising, marketing and promotional costs, which were $2,236,170 in
fiscal 2008 as compared to $517,424 in fiscal 2007. These costs
in 2008 were largely incurred launching our LocalAdLink website and promoting
LocalAdLink. There were also increases in administrative, technical
and marketing personnel, related payroll costs, and an increase in travel
related costs. The increase is also attributable to the granting of
options to our employees and independent sales representatives valued at
approximately $630,000. Our SG&A expenses are expected to
continue to increase during the current fiscal year ending December 31, 2009 as
we increase our operations, increase advertising, and hire more
employees.
Professional
fees for the twelve month period ended December 31, 2008 were $1,345,091. The
largest component of professional fees consists of services rendered in
connection with the design and establishment of our websites and Internet
related activities, as well as legal and accounting fees. This reflects an
increase of $180,821 in professional fees from the $1,164,270 reported for the
period ended December 31, 2007.
Included
in the professional fees and SG&A are non-cash items of $1,703,459 for
fiscal 2008 and $817,417 for fiscal 2007 in stock issued in exchange for a
variety of consulting services and employee options.
Depreciation
and amortization expense for the twelve month period ended December 31, 2008 was
$182,802. This reflects an increase of $45,547 in depreciation and amortization
expense from the $137,255 reported for the period ended December 31,
2007. The increase in expense is attributable to the amortization of
the asset additions during the period ended December 31, 2008.
Interest
expense, of $3,325,662 for the twelve month period ended December 31, 2008
reflects an increase of $3,027,378 from the interest expense of $298,284 of
which $125,413 was to a related party in fiscal 2007. The loan discount relates
to the sundry loans procured by us during fiscal 2007 and fiscal
2008. Interest expense also includes non-cash expenses related to the
value of warrants issued to investors who invested in our convertible notes and
the related debt discounts from beneficial conversion features
or
allocating the loan proceeds between the debt and equity issued.
Our
increase in interest expense is due to loan fees and loan discount amortization
expenses of $2,446,939. he loan discount relates to the sundry loans
procured by us during 2007 and 2008.
Liquidity
and Capital Resources
Cash and
cash equivalents at December 31, 2008 were $100,086, a decrease of $11,161 from
the balance of $111,247 at December 31, 2007. Much of our capital resources
during fiscal 2008 were derived through the sale of convertible debt and equity
securities. No assurance can be made that we will have access to the capital
markets in future, or that financing will be available on acceptable terms to
satisfy our future and on-going cash requirements that we need to implement its
business strategies. Our inability to access the capital markets or obtain
acceptable financing could have a material adverse affect on its results of
operations and financial condition, and could severely threaten our ability to
continue as a going concern.
As shown
in the accompanying consolidated financial statements, we incurred a loss of
$12,857,990 for the twelve month period ended December 31, 2008. Our current
liabilities less debt exceeded current assets by $3,212,306 at December 31, 2008
and negative cash flow from operating activities for the twelve months ended
December 31, 2008 was $5,740,549. These factors, and our ability to meet our
obligations from current operations, and the need to raise additional capital to
accomplish our objectives, create a substantial doubt about our ability to
continue as a going concern.
We
currently do not have sufficient funds on hand to fund our anticipated on-going
operating expenses. We do not have any bank credit lines. Accordingly, we will
have to obtain additional funding in the near future in order to continue our
operations. Although the amount of revenues that we are now generating from our
operations is increasing on a monthly basis, we do not anticipate that we will
generate sufficient cash from operations to fund our working capital needs until
the second half of 2009, at the earliest. Accordingly to fund operations for the
next twelve months, we intend to continue to seek additional financing from
various sources, including from the sale of convertible debt or equity
securities. We have not yet identified, and cannot be sure that we will be able
to obtain any additional funding from either of these sources, or that the terms
under which we may be able to obtain such funding will be beneficial to us. In
addition the C
ompany is
maximizing the margins in each product line and expanding the capabilities of
the widget technologies of its i-supply division along with identifying some
strategic partners to assist in the distribution channels through product and
operating lines of credit.
If we do not obtain sufficient additional
funds in the near future, we will have to suspend some of our operations, scale
down our current and proposed future operations or, if those actions are not
sufficient, terminate our operations.
All of
the convertible notes that we have issued during the past year in order to fund
our working capital needs mature during 2009 (most of which mature on July 31,
2009). Accordingly, in addition to having to raise funds to continue
to operate, we also will have to raise funds to repay these convertible notes
(to the extent that such notes are not converted by the holders). As
of December 31, 2008, the total amount of our short-term borrowings was
$4,928,500. Most of the convertible notes that we issued are secured by a lien
on certain of our assets and/or the assets of our
subsidiary. Therefore, in the event that we fail to repay these
secured promissory notes as they mature, we will be at risk of losing our assets
through foreclosure of our assets. Accordingly, a default under the
secured convertible notes could result in the loss of our assets and the
termination of our operations.
Operating
Activities
Net cash
used in operating activities for the twelve months period ended December 31,
2008 was $5,740,549. This was mainly attributable from the use of cash in
operations as we establish business and operations. Accounts Receivable
increased $199,696 to $226,091 on December 31, 2008 from $26,395 on December 31,
2007. Most of this increase is due to sales made generated through
LocalAdLink. The credit card payments for these sales were
subsequently captured during the first week of January 2009. Accounts
Payable on December 31, 2008 was $1,510,142, an increase of $784,415
from the balance on December 31, 2007 of $725,727. The increase is
attributed mainly to commissions due sales reps of LocalAdLink of $630,000 and
increases in advertising of Boomj.com, with an increase to Google of
approximately $300,000.
Investing
Activities
Net cash
used in investing activities for the twelve month period ended December 31, 2008
was $122,310. The company expended cash for purchase of computer and office
equipment and expenditures related to its Website development.
Financing
Activities
Net cash
provided by financing activities for the twelve month period ended December 31,
2008 was $5,851,698 due primarily to net cash received from the sale of debt
securities of $6,213,232. We also received $721,966 from the issuance of common
stock net of $102,357 in offering costs, and paid $25,000 to repay a short term
bridge loan in January 2008, a $500,000 Secured Note in July 2008 and a
promissory note of $110,000 in August 2008 for a total debt payment of $661,500
(including the fourth quarter repayment listed below). During August
2008, the company paid off a zero coupon note to one of its investors of
$110,000. In September 2008 the Company received a $50,000 short-term
loan from an accredited investor, of which $26,500 was repaid in the fourth
quarter of fiscal 2008. In October 2008, the Company received a
$25,000 loan from an accredited investor as a 90-day zero coupon-note with a $
30,000 repayment.
As a
result of the above activities, we experienced a net decrease in cash of $11,161
for the twelve month period ended December 31, 2008. Our ability to continue as
a going concern is dependent on our success in obtaining additional financing
from investors through the sale of its securities and through a continued
increase in revenues.
Other
We do not
believe that inflation has had a material impact on our business or
operations.
We are
not a party to any off-balance sheet arrangements, and we do not engage in
trading activities involving non-exchange traded contracts. In addition, we have
no financial guarantees, debt or lease agreements or other arrangements that
could trigger a requirement for an early payment or that could change the value
of our assets
Going
Concern
This
company’s financial statements are prepared using generally accepted accounting
principles, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. However, the company has an
accumulated deficit of $17,886,381 on December 31, 2008 and will need to raise
additional capital, or obtain financing to continue operations. The enclosed
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should this company be
unable to continue as a going concern.
Management
is taking steps to address its operating and financial cash requirements, which
it believes will be sufficient to provide the company with the ability to
continue operations in next twelve months. Management has devoted a significant
amount of time in the raising of capital and improving the operating
profitability of the Company through initially its LocalAdLink division.
However, the company’s ability to continue as a going concern is dependent upon
raising funds through debt and equity financing and generating revenue. There
are no assurances this company will receive the necessary funding or generate
revenue necessary to fund operations. This raises substantial doubt about this
Company’s ability to continue as a going concern.
Application
of Critical Accounting Policies
We
prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America. As such, we are required to
make certain estimates, judgments, and assumptions that we believe are
reasonable based upon the information available.
Consolidation
The
accompanying financial statements include the accounts of the Company and its
wholly-owned subsidiaries, LocalAdLink, Inc. and Boomj.com, Inc. All
inter-company accounts and transactions between the entities have been
eliminated in consolidation.
Cash
and Cash Equivalents
The
Company considers only its monetary liquid assets with original maturities of
three months or less as cash and cash equivalents in accordance with Statement
of Financial Accounting Standards No. 115,
Accounting for Certain Investments
in Debt and Equity Securities
, (“SFAS 115”).
Revenue
Recognition
The
Company generates its revenue from products and advertising sold on its internet
websites. The BOOMj.com store’s database has available close to two million name
brand products. These items include books, digital cameras, kitchen and bath
items and office supplies. Revenue is also generated from content, advertising,
and discount travel.
Advertising
products consist of web-banner advertising, which are continuous or rotating.
Delivery of these profiles is based on the number of impressions
of an advertisement that
a customer purchases. An impression is a single instance of an Internet user
viewing the page that contains a customer's name and/or logo. Revenue is
recognized on such advertising programs based on the proportionate units of
advertising delivered over the period of a media campaign. The Company also
sells a marketing kit through their Local Ad Link division. The kit is
comprised of ten one month duration ads. The sales reps have the option to sell
the ten ads as a commissionable sale or to give them away as a free promotional
tool.
All
sources of revenue are recorded pursuant to Staff Accounting Bulletin (SAB) 104
“Revenue Recognition”, when persuasive evidence of arrangement exists, delivery
of services has occurred, the fee is fixed or determinable and collectability is
reasonably assured.
Stock-Based
Compensation
The
Company follows the guidance of Financial Accounting Standard No 123(R) “Share
Based Payment” for all share-based payments to employees, including grants of
employee stock options or warrants, are recognized in the financial statements
based on their fair values. This guidance requires the Company to measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. That cost will be
recognized over the period during which an employee is required to provide
service in exchange for the award—the requisite service period (usually the
vesting period).
The
Company follows the guidance of Emerging Issues Task Force No. 96-18:
“Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” for transactions
in which equity instruments are issued in exchange for the receipt of goods or
services to non employees.
Related
Party Transactions
We have
related party transaction with Linlithgow Holdings, LLC, an entity that owns 41%
of our outstanding common stock. Linlithgow Holdings is a family
trust of the McNulty family. Mr. McNulty, our Chief Executive Officer
has no voting control over the holdings of Linlithgow Holdings and disclaims
beneficial ownership of the shares owned by Linlithgow Holdings. We
paid $53,450 to Linlithgow Holdings in fiscal 2008 for various services provided
and commissions earned. We also have related party transactions with
FA Corp in which the principal shareholder is a member of our board of
directors, Murray Williams. We paid FA Corp in 2008 $102,673 for
services rendered. Another one of our directors Mr. Barry Falk is a partner in
the law firm Irvine Venture Law Firm. The Company paid $185 in 2007 and $336 in
2008 for legal services provided to the Company by Mr. Falk’s firm.
In 2009,
we started using the VISA debit card issued by TAC Financial, Inc., a private
debit card company, to pay commissions to this company’s LocalAdLink
representatives. TAC Financial was, as of December 31, 2008, 85%
owned by Linlithgow Holdings, LLC, and two members of TAC Financial’s
Board of Directors are the sons of Robert McNulty (our Chief Executive
Officer). This company does not pay TAC Financial for the use of the
debit cards, but TAC Financial does receive fees from the users of those
cards.
Issuance
of Shares for Service
The
Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable
.
Recent
Accounting Pronouncements
On
January 1, 2008, the Company adopted SFAS No. 157,
Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. SFAS 157 defines
fair value, establishes a framework for measuring fair value under GAAP, and
expands disclosures about fair value measurements. The Company does not believe
that the partial adoption of SFAS 157 has had or will have a material impact on
the Company’s financial statements. In February 2008, the FASB issued a FASB
Staff Position (“FSP”), FSP SFAS 157-2,
Effective Date of FASB
Statement No. 157
, to defer the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. The FSP defers the effective date of SFAS 157 to fiscal years beginning
after November 15, 2008. The Company does not expect the adoption of FSP SFAS
157-2 to have a significant impact on the financial statements
On
January 1, 2008, the Company adopted SFAS No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115
(“SFAS 159”). This Statement provides
companies with an option to measure, at specified election dates, many financial
instruments and certain other items at fair value that are not currently
measured at fair value. A company that adopts SFAS 159 will report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. This Statement also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. The adoption of SFAS 159 has not had a material
impact on the Company’s financial statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160,
Interests in Consolidated
Financial Statements — an amendment of ARB No.
51
(“SFAS 160”), which impacts the accounting for minority
interest in the consolidated financial statements of filers. The statement
requires the reclassification of minority interest to the equity section of the
balance sheet and the results from operations attributed to minority interest to
be included in net income. The related minority interest impact on earnings
would then be disclosed in the summary of other comprehensive income. The
statement is applicable for all fiscal years beginning on or after December 15,
2008 and earlier adoption is prohibited. The adoption of this standard will
require prospective treatment. The Company is currently evaluating the effect
that the adoption of SFAS 160 will have on its results of operations and
financial position. However, the adoption of SFAS 160 is not expected to have a
material impact on the Company’s financial statements.
In
December 2007, FASB issued SFAS No. 141R,
Business Combinations
(“SFAS
141R”), which impacts the accounting for business combinations. The statement
requires changes in the measurement of assets and liabilities required in favor
of a fair value method consistent with the guidance provided in SFAS 157 (see
above). Additionally, the statement requires a change in accounting for certain
acquisition related expenses and business adjustments which no longer are
considered part of the purchase price. Adoption of this standard is required for
fiscal years beginning after December 15, 2008. Early adoption of this standard
is not permitted. The statement requires prospective application for all
acquisitions after the date of adoption. The Company is currently evaluating the
effect that the adoption of SFAS 141R will have on its results of operations and
financial position. However, the adoption of SFAS 141R is not expected to have a
material impact on the Company’s financial statements.
In March
2008, FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities an amendment to FASB Statement No.
133
(“SFAS 161”). SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The Company does not expect
the adoption of this statement to have a material effect on its financial
statements.
In April
2008, the FASB issued Staff Position No. FAS 142-3,
Determination of the Useful Life of
Intangible Assets
, or FSP FAS 142-3. FSP FAS 142-3 amends
the factors that should
be considered in developing renewal
or extension assumptions used to determine the useful life
of a recognized intangible asset under Statement 142. We
are required to adopt FSP FAS 142-3 prospectively for intangible assets acquired
on or after January 1, 2009. Intangible assets acquired prior to
January 1, 2009 are not affected by the adoption of FSP FAS 142-3. We
are currently evaluating the impact of adopting FSP APB 14-1 on our results of
operations and financial condition.
In May
2008, the FASB issued Staff Position No. APB 14-1,
Accounting for
Convertible Debt Instruments That May
Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
, or
FSP APB 14-1. FSP APB 14-1 specifies that issuers of convertible debt
instruments that may be settled in cash upon conversion should separately
account for the liability and equity components in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. We are required to adopt FSP APB 14-1 at the beginning of
2009 and apply FSP APB 14-1 retrospectively to all periods
presented. We are currently evaluating the impact of adopting FSP APB
14-1 on our results of operations and financial condition.
Off
Balance Sheet Arrangements
The
Company has no Off Balance Sheet arrangements at December 31, 2008.
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation S-K.
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Financial
Statements are referred to in Item 15(a), listed in the Index to Financial
Statements and filed and included elsewhere herein as a part of this Annual
Report on Form 10-K.
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None
|
ITEM
9A(T).
|
CONTROLS
AND PROCEDURES
|
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer (“Certifying Officers”), has evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the fiscal period covered by
this Annual Report on Form 10-K. Based upon such evaluation, the Certifying
Officers have concluded that, as of the end of such period, December 31, 2008,
the Company’s disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and is accumulated and
communicated to management, including our Certifying Officers, to allow timely
decisions regarding such disclosure.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) for the Company. The Company maintains processes designed by,
or under the supervision of the Company’s management, including but not limited
to the Company’s Chief Executive Officer and its Chief Accounting Officer, or
persons performing similar functions, and effected by the Company’s board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles including policies and procedures that: (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and disposition of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the issuer are
being made only in accordance with authorization of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The
Company has an Audit Committee that meets periodically with management to review
the manner in which they are performing their responsibilities and to discuss
auditing, internal accounting controls and financial reporting
matters.
Management
has conducted an evaluation of the Company’s internal control over financial
reporting using the Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission as a basis to
evaluate effectiveness and determined that internal control over financial
reporting was effective as of the end of the fiscal year ended December 31,
2008. Based upon that evaluation, the Company’s Chief Executive and Financial
Officer concluded that the Company’s internal control over financial reporting
is effective.
This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting. Our
internal control over financial reporting was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this annual report.
CHANGES
IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
For the
quarter ended December 31, 2008, there were no significant changes in our
internal controls over financial reporting that 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
|
Information
concerning our officers and directors follows.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
Robert
McNulty
|
|
62
|
|
Chief
Executive Officer and a Director
|
|
Wendy
Borow-Johnson
|
|
56
|
|
President
– Brand Management
|
|
Mark
V. Noffke
|
|
53
|
|
Executive
V.P., Finance and Chief Financial Officer
|
|
Murray
Williams
|
|
38
|
|
Director
|
|
Michael
Warsinske
|
|
46
|
|
Director
|
|
Barry
Falk
|
|
46
|
|
Director
|
The
following describes the backgrounds of current directors and the key members of
the management team. The persons who acted as officers and directors of
Boomj.com, Inc. prior to the Merger resigned effective upon the Merger. All of
our officers and directors also currently hold the same offices with Boomj.com,
Inc. and LocalAdLink, Inc., our two wholly-owned subsidiaries. With
the exception of Mr. Warsinke and Mr. Falk, all of our officers and directors
assumed their current offices with Beyond Commerce, Inc. upon the closing of the
Merger on December 27, 2007.
Robert J. McNulty
has been the
Chief Executive Officer since the formation of Boomj.com, Inc. in January 2007.
Mr. McNulty is an accomplished entrepreneur with over twenty-five years of
significant experience in Specialty Retail, Branded Consumer Products,
Transactional Media TV, Retail and Internet Start-Ups and developing new
concepts and technology platforms in the Retail Industry. Since February
1999, Mr. McNulty served as an independent consultant for various companies in
those industries. In March 1996, Mr. McNulty founded Shopping.com, an online
retailer, selling a broad range of consumer brand name products on the Internet.
He served as its President and Chief Executive Officer and was a member of its
Board of Directors from its inception. Compaq Computers purchased Shopping.com
in February 1999 in all cash transaction for $220 million. Mr. McNulty has been
involved with several other retail companies, both public and private, in a
broad range of merchandise categories.
Wendy Borow-Johnson
joined
BoomJ.com, Inc. in August 2007 as President of Media and became the
President of Brand Management in January 2009. She previously was the President
of the Healthy Living Channel and the Senior Vice President of The Networks
Group of Turner Media Group, Inc from November 2002 thru July 2007. The Networks
Group includes Healthy Living Channel, iShop, Beauty and Fashion, Men’s Channel,
Mall TV, Resorts and Residence TV, iDrive and America’s Preview Network. She was
responsible for overseeing programming, network development, and distribution
and cross media marketing of these lifestyle transactional networks. Ms Johnson
currently is a member of the Financial Media Group, Inc. Board of Directors and
serves on its Audit committee. Prior to joining Turner Media Group, Inc., Ms.
Borow-Johnson served on the Board of Directors of Brands Shopping Network, Inc.
and was President of Television from March 2002 thru September 2002. She was the
President and CEO of RnetHealth Inc., a publicly traded company from October
1999 thru March 2000 and was the President and CEO of Recovery Television
Network October 2001 thru December 2001. Ms. Borow-Johnson is a Phi Beta Kappa
Magna Cum Laude graduate of Goucher College. She has a Masters Degree in
Counseling from Goddard College and a certificate in Psychotherapy from
Harvard’s Judge Baker Guidance Center.
Mark V. Noffke
has been the
Chief Financial Officer of Boomj.com, Inc. since January 2007. From August 2006
to December 2006, Mr. Noffke was the Chief Financial Officer of Financial Media
Group Inc. From May 2004 to August 2006, Mr. Noffke was Chief Financial Officer
of National Storm Management, Inc. where he was responsible for taking the
company public. From August 2003 to May 2004, Mr. Noffke was a managing director
of Striker Pacific Corporation, an investment bank, where he conducted due
diligence, and acquisition analysis in various industries, including waste
recycling, forest products and automotive. From September 1996 to August 2003,
Noffke served as the Chief Financial Officer and a Director of U.S. Forest
Industries, Inc, a timber manufacturing company, where he was responsible for
developing the company’s accounting infrastructure. From January 2002 to May
2004, Mr. Noffke served as Chief Financial Officer of Brands Shopping Networks,
a publicly traded company currently known as United Fuel and Energy Corporation.
In this position, Mr. Noffke was responsible for raising capital and developing
the accounting infrastructure. Mr. Noffke is a Certified Public Accountant and
has a B.S. in Accounting from Valparaiso University in Northwestern
Indiana.
Murray Williams
has been a
Director of Boomj.com, Inc. since June 1, 2007. Since March 14,
2008, Mr. Williams has been the Chief Financial Officer, Treasurer and Secretary
of GTX Corp., a public company engaged in the commercialization of miniaturized
assisted GPS tracking and cellular location-transmitting
technologies. From June 2005 to February 2007, Mr. Williams was Chief
Financial Officer at Interactive Television Networks, Inc., a public company and
a leading provider of Internet Protocol Television hardware, programming
software and interactive networks. From March 2003 to June 2005 Mr.
Williams served as an independent consultant for various companies in the
technology industry. From June 2002 to September 2003 Mr. Williams was Vice
President - Finance for Brands Shopping Network. He was one of the
founding members of Buy.Com, Inc., became an employee in February 1998, and
worked with the company until August 2001. During his three and a half
year tenure, Mr. Williams created and developed the finance, legal, business
development and H/R departments. Mr. Williams managed Buy.Com’s expansion
into Europe, Canada and Australia. From January 1993 through January 1998,
Mr. Williams was employed with KPMG Peat Marwick, LLP, and last served as a
Manager in their assurance practice. Mr. Williams managed a team of over
20 professionals specializing in financial services. Mr. Williams is a CPA
and received his license in 1995. Mr. Williams received degrees in both
Accounting and Real Estate from the University of Wisconsin-Madison in
1992. Mr. Williams has also been appointed to serve on the Company’s Audit
Committee.
Michael Warsinske
was
appointed to the Board of Directors on June 9, 2008. Mr. Warsinke is
the CEO and Founder, Warsinske Ventures, an Internet Asset Holding Company. Mr.
Warsinske also currently serves as the CEO of local Getaways.com a private
travel online publishing company. He has over 25 years of experience in Media
Sales. He was the Founder and CEO of Cybereps an online advertising sales
organization that he sold to radio rep firm Interep. (NASDAQ IREP).
Additionally, he was the Founder/CEO Warsinske Communications, a West Coast
magazine and broadcast rep firm. Mr. Warsinske was a member of USA Today’s
advertising sales launch team. Michael started his career on an account
management team at Saatchi and Saatchi working on Tylenol. Mr. Warsinske is a
Graduate of the University of Oregon, School of Journalism. Mr.
Warsinske has also been appointed to serve on the Company’s Compensation
Committee.
Barry Falk
was appointed to
the Board of Directors on December 11, 2008. Mr. Falk is a partner in
the corporate finance law firm of Irvine Venture Law Firm, LLP. Mr. Falk has
also been appointed to serve on the Company’s Audit Committee. Mr. Falk has
broad experience in structuring complex financing transactions in diversified
industries, including the telecommunications, specialty finance, software and
hardware technologies, distribution and retail sectors. Mr. Falk
specializes in corporate and securities law, with an emphasis on business
planning, venture capital and mergers and acquisitions. Prior to joining the
firm, Mr. Falk worked for the U.S. Securities and Exchange Commission’s Division
of Corporation Finance from 1990 through 1993 where he was the senior disclosure
attorney for the SEC’s Pacific Region and in the SEC’s Division of Enforcement
from 1988 through1990. Prior to completing his law degree, Mr. Falk
worked as an accountant for a national public accounting firm. Mr.
Falk is an investor in several venture capital and angel funds and is active on
the board of directors of several private companies. Mr. Falk
received his J.D. degree from Loyola Law School, Los Angeles and his B.S. degree
in Accounting from Kean College of New Jersey. Mr. Falk has also been appointed
to serve on the Company’s Audit Committee.
There are
no family relationships between any of the officers and directors.
Audit
Committee
Our board
of directors has a standing Audit Committee currently composed of Messrs. Falk
and Williams. Our board of directors has determined that Mr.
Williams, one of the independent directors serving on our Audit Committee, also
is an “audit committee financial expert” as defined by the SEC’s
rules. Mr. Williams has provided consulting services to this company
and, accordingly, may not qualify as an “independent” member of the Audit
Committee. Our board of directors has determined that Mr. Falk is
“independent” under the current independence standards of both Nasdaq and the
SEC.
Code
of Ethics
Our Board
of Directors has adopted a code of ethics covering all of our executive officers
and key employees. A copy of our code of ethics will be furnished
without charge to any person upon written request. Requests should be
sent to: Secretary, Beyond Commerce, Inc., 9029 South Pecos, Suite
2800 Henderson, Nevada 89074.
Compensation
Committee
Our
Compensation Committee currently is comprised of Mr. McNulty and Mr.
Warsinske.
Directors
Compensation
The
directors of the Company do not receive any cash compensation. However, in
January 2009, two of our new Directors received options to purchase 100,000
shares of common stock for their services. These options will vest over the next
two years, with 50% vesting after one year from the grant date and the remaining
50% vesting on the second anniversary date. These options were issued
in January 2009. The Company does reimburse the Board of Directors
for their actual expenses incurred in attending Board meetings.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and
directors, and persons who own more than ten percent of its Common Stock, to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission (“SEC”) and each exchange on which our securities are
registered. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish us with copies of all ownership forms they
file.
Based
solely on its review of the copies of such forms received by us, or written
representations from the officers, directors, or persons holding greater than
10% of our common stock, all forms that were required to be filed were timely
submitted to the SEC.
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
The table
set forth below summarizes the annual and long-term compensation for services in
all capacities paid to our executive officers during the years ending December
31, 2008 and 2007. On December 27, 2007, Beyond Commerce, Inc.
acquired Boomj.com, Inc., our primary operating subsidiary during 2007 and
2008. Beyond Commerce did not pay any compensation to any of its
officers or directors during 2007. The table below sets forth all
compensation paid (i) by Boomj.com, Inc. in 2007 and (ii) by either Beyond
Commerce, Inc. or Boomj.com, Inc. in 2008, to Robert McNulty and Mark Noffke,
the only individuals who served as our principal executive and financial
officers during the year ended December 31, 2008, and to our three other most
highly compensated executive officers who were serving as executive officers as
of December 31, 2008.
|
Name and Principle Position
(in dollars)
|
|
Fiscal
Year
|
|
Salary
(1)
|
|
|
Bonus
(2)
|
|
|
Restricted
Stock
Awards (3)
|
|
|
All Other
Compensation
(4)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. McNulty-
|
|
2008
|
|
$
|
171,692
|
|
|
|
|
|
|
-
|
|
|
|
—
|
|
|
$
|
171,692
|
|
|
President
and CEO
|
|
2007
|
|
|
-
|
|
|
|
—
|
|
|
$
|
150,000
|
|
|
|
|
|
|
$
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wendy
Borow- Johnson
|
|
2008
|
|
$
|
185,538
|
|
|
|
|
|
|
$
|
118,125
|
|
|
|
—
|
|
|
$
|
303,663
|
|
|
President
- Media
|
|
2007
|
|
$
|
64,615
|
|
|
|
—
|
|
|
$
|
75,000
|
|
|
|
|
|
|
$
|
139,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
V. Noffke -
|
|
2008
|
|
$
|
164,927
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
164,927
|
|
|
Chief
Financial Officer
|
|
2007
|
|
$
|
162,502
|
|
|
|
—
|
|
|
$
|
1,000
|
|
|
|
—
|
|
|
$
|
163,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Doumani Sr. -
|
|
2008
|
|
$
|
164,927
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
$
|
164,927
|
|
|
VP
Business Development (5)
|
|
2007
|
|
$
|
118,540
|
|
|
|
—
|
|
|
$
|
90,000
|
|
|
|
|
|
|
$
|
208,540
|
|
|
(1)
|
The dollar value of base salary
(cash and non-cash) earned.
|
|
(2)
|
The dollar value of bonus (cash
and non-cash) earned.
|
|
(3)
|
During the periods covered by the
table, the value of the shares of restricted stock issued as compensation
for services to the persons listed in the
table.
|
|
(4)
|
All
other compensation received that we could not properly report in any other
column of the table.
|
|
(5)
|
Mr.
Doumani resigned as VP Business Development effective January 31,
2009.
|
Outstanding Equity Awards at Fiscal
Year-End
None of the executive officers
named in the above Summary Compensation Table (i) received any options during
fiscal 2008, (ii) owned any vested or unvested stock options on December 31,
2008, or (iii) received any stock awards or equity incentive plan awards during
fiscal 2008 that had not vested.
We have
established a stock option compensation incentive plan, and have as of
12/31/2008 issued to 21 employees 395,000 options under the 2008 Equity
Incentive Plan at a strike price of $0.70.
Director
Compensation
We
reimburse our directors for expenses incurred in connection with attending board
meetings. We did not pay director’s fees or other cash compensation
for services rendered to our directors in the year ended December 31,
2007.
We
currently have no other formal plan for compensating our directors for their
service in their capacity as directors, although our Board of
Directors has recently granted options to purchase common shares to new
directors upon joining the Board of Directors. Our Board of Directors
has, however, from time to time paid non-employee directors cash compensation
for serving on the Board. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our Board of Directors. Our Board of
Directors may award special remuneration to any director undertaking any special
services on behalf of our company other than services ordinarily required of a
director.
The
following table summarizes the compensation of each of our directors who is not
also a named executive officer for their service as a director for the fiscal
year ended December 31, 2008.
DIRECTOR
COMPENSATION
|
Name
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All Other
Compensation
($)
|
|
|
|
|
|
Michael
Warsinske
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
56,000
|
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
56,000
|
|
|
Barry
Falk
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
56,000
|
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
56,000
|
|
|
Murray
Williams
|
|
$
|
102,673
|
(3)
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
102,673
|
|
|
(1)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2008 fiscal year for the fair value
of stock options granted to the named director in fiscal year 2008, in
accordance with SFAS 123R. Pursuant to SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. For additional information on the valuation
assumptions with respect to the 2007 grants, refer to Note 8 of our
financial statements in this Annual Report. These amounts
reflect our accounting expense for these awards, and do not correspond to
the actual value that will be recognized from these awards by the named
director.
|
|
(2)
|
We
agreed to grant each of Mr. Warsinke and Mr. Falk a five-year
non-qualified option to purchase 100,000 shares of the Company’s common
stock at an exercise price of $0.70 per share at the time that they joined
our Board of Directors in 2008. The Board did not formally
grant those options until January 2009. One half of the
foregoing options will vest upon the first anniversary of the
appointment of each of Mr. Warsinke and Mr. Falk to the Board, and the
second half of the options will vest upon the second anniversary of the
appointments.
|
|
(3)
|
At
the request of the Board, during 2008 Mr. Williams provided additional
services to the Company by monitoring and supervising certain of the
Company’s activities. These fees were paid to Mr. William’s
company, FA Corp.
|
Employment
Contracts
None.
Equity
Incentive Plan
On
September 11, 2008, our board of directors adopted the 2008 Equity Incentive
Plan, which will be submitted for approval by our stockholders at the 2009
Annual Meeting of stockholders. In the meantime, we may make awards
under the 2008 Equity Incentive Plan, the effectiveness of which are conditioned
upon obtaining such stockholder approval. Under the 2008 Equity
Incentive Plan, we are authorized to grant options, restricted stock and stock
appreciation rights to purchase up to 3,500,000 shares of common stock to our
employees, officers, directors, consultants and advisors. Awards
under the plan may consist of stock options (both non- qualified options and
options intended to qualify as “Incentive Stock Options” under Section 422 of
the Internal Revenue Code of 1986, as amended), restricted stock awards and
stock appreciation rights.
The 2008
Equity Incentive Plan is administered by our Board of Directors or a committee
appointed by the Board, which determines the persons to whom awards will be
granted, the type of award to be granted, the number of awards to be granted and
the specific terms of each grant, including the vesting thereof, subject to the
provisions of the plan.
The 2008
Equity Incentive Plan provides that the exercise price of each incentive stock
option may not be less than the fair market value of our common stock on the
date of grant (or 110% of the fair market value in the case of a grantee holding
more than 10% of our outstanding common stock). The exercise price of
a non-qualified stock option shall be no less than the fair market value of the
common stock on the date of grant. The maximum number of options that
may be granted in any fiscal year to any participant is 300,000.
The plan
also permits the grant of freestanding stock appreciation rights or in tandem
with option awards. The grant price of a stock appreciation right shall be no
less than the fair market value of a share on the date of grant of the stock
appreciation right. No stock appreciation right shall be exercisable later than
the tenth anniversary of its grant. Upon the exercise of a stock appreciation
right, a participant shall be entitled to receive common stock at a fair market
value equal to the benefit to be received by the exercise.
The plan
also provides us with the ability to grant or sell shares of common stock that
are subject to certain transferability, forfeiture, repurchase or other
restrictions. The type of restriction, the number of shares of
restricted stock granted and other such provisions shall be determined by our
Board of Directors or its committee.
Unless
otherwise determined by our Board of Directors or its committee, awards granted
under the 2008 Equity Incentive Plan are not transferable other than by will or
by the laws of descent and distribution.
The 2008
Equity Incentive Plan provides that, except as set forth in an individual award
agreement, upon the occurrence of a corporate transaction: (1) our Board of
Directors or its committee shall notify each participant at least thirty (30)
days prior to the consummation of the corporate transaction or as soon as may be
practicable and (2) all options and stock appreciation rights shall terminate
and all restricted stock shall be forfeited immediately prior to the
consummation of such corporate transaction unless the committee determines
otherwise in its sole discretion. A “corporate transaction” means (1)
a liquidation or dissolution of the company; (2) a merger or consolidation of
the company with or into another corporation or entity (other than a merger with
a wholly-owned subsidiary); or (3) a sale of all or substantially all of the
assets of the company.
Our Board
of Directors may alter, amend or terminate the plan in any respect at any time,
but no alteration, amendment or termination will adversely affect in any
material way any award previously granted under the plan, without the written
consent of the participant holding such award.
Long-Term
Incentive Plans - Awards in Last Fiscal Year
None.
Employee
Pension, Profit Sharing or Other Retirement Plans
None.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
Based
solely upon information made available to us, the following table sets forth
information with respect to the beneficial ownership of our common stock as of
March 30, 2009 by (1) each person who is known by us to beneficially own more
than five percent of our common stock; (2) each of our directors; (3) the named
executive officers listed in the Summary Compensation Table under Item 11; and
(4) all of our executive officers and directors as a group. Shares of
common stock subject to any warrants or options that are presently exercisable,
or exercisable within 60 days of March 30, 2009 (which are indicated by
footnote) are deemed outstanding for the purpose of computing the percentage
ownership of the person holding the warrants or options, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. The percentage ownership reflected in the table is based on 41,355,753
shares of our common stock outstanding as of March 30, 2009. Except as otherwise
indicated, the holders listed below have sole voting and investment power with
respect to all shares of common stock shown, subject to applicable community
property laws. An asterisk represents beneficial ownership of less than
1%.
|
Name and Address
|
|
Number of Shares
Beneficially
Owned
|
|
|
Percentage
of Class
|
|
|
|
|
|
|
|
|
|
|
Mark
V. Noffke
|
|
|
2,020,000
|
|
|
|
4.9
|
%
|
|
Mark
Doumani (1)
|
|
|
1,818,000
|
|
|
|
4.4
|
%
|
|
Murray
Williams
|
|
|
202,000
|
|
|
|
*
|
|
|
Michael
Warsinske(2)
|
|
|
|
|
|
|
|
|
|
Wendy
Borow-Johnson
|
|
|
606,000
|
|
|
|
1.5
|
%
|
|
Barry
Falk(2)
|
|
|
|
|
|
|
*
|
|
|
Robert
J. McNulty
|
|
|
505,000
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group (7 persons)
|
|
|
5,151,000
|
|
|
|
12.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Linlithgow
Holdings, LLC (3)
9029
S. Pecos Henderson, NV 89074
|
|
|
16,982,000
|
|
|
|
41.5
|
%
|
Unless
otherwise indicated, the address of each of the foregoing persons is 9029 South
Pecos, Suite 2800, and Henderson, Nevada 89074.
|
(1)
|
Includes
1,212,000 shares owned by MIK Irrevocable Trust, an irrevocable trust for
the benefit of Mr. Doumani. Mr. Doumani resigned as VP Business
Development effective January 31,
2009.
|
|
(2)
|
All
of the shares shown are subject to
options.
|
|
(3)
|
Represent
shares owned by Linlithgow Holdings, LLC, an entity owned and controlled
by immediate family members of Mr. Robert J. McNulty. Mr. McNulty is not a
member or manager of Linlithgow Holdings LLC and he disclaims any
beneficial interests in these shares. Mr. McNulty does not exercise any
voting rights in respect of these shares nor does he have any right to
dispose of these shares.
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
|
Our full
board of directors is responsible for reviewing and approving or ratifying all
related party transactions. Although there is no written policy in
this regard, it is the practice of our board to review all material facts of
interested transactions and take into account, among other factors it determines
appropriate, whether the interested transaction is on terms no less favorable
than terms generally available to any similarly situated, unrelated third
parties under the same or similar circumstances and the extent of the person’s
interest in the transaction. Additionally, board approval of any
interested party transaction must include the affirmative vote of at least a
majority of our non-employee directors. We have not engaged in any
transactions with any related persons that involved an amount over $120,000
since January 1, 2008. We have, however, since January 1, 2008 we
have been involved in the following smaller related party transactions, each of
which was reviewed and approved by our full board of directors:
|
|
·
|
The
Company permits TAC Financial, Inc. to use some of its facilities at its
Nevada headquarters. TAC Financial has not paid the Company for
the use of the facilities. In 2009, the Company commenced
paying the commissions it owed to its LocalAdLink independent consultants
through the use TAC Financial’s VISA debit card. The Company
does not pay TAC Financial for loading payments onto the debit cards,
although the card holders are charged fees for the use of the debit
cards. Linlithgow Holdings, LLC currently owns over 85% of the
issued and outstanding shares of TAC Financial. Linlithgow
Holdings, LLC is the largest shareholder of this Company and is a family
trust of the McNulty family. Mr. McNulty, our Chief Executive
Officer has no voting control over the holdings of Linlithgow Holdings and
disclaims beneficial ownership of the shares owned by Linlithgow
Holdings. Two members of TAC Financial’s Board of Directors are
the sons of Robert McNulty (our Chief Executive
Officer).
|
|
|
·
|
On
December 24, 2007 the Company borrowed $25,000 from Linlithgow Holdings,
LLC. The loan matured in 30 days and bore interest at a rate of
12% per annum. This loan was repaid in full (including $304 of
interest) in January 2008.
|
|
|
·
|
During
2007, BoomJ.com borrowed $218,000 from Linlithgow Holdings in a series of
transactions. All of the loans bore interest at 12% per
year. Most of the loan was repaid in 2007, although the final
$25,000 balance was not repaid until 2008. In connection with
these loans BoomJ.com issued Linlithgow Holdings warrants to purchase
34,835 shares of its common stock. The warrants are exercisable at a price
ranges from $0.01 to $1.00 per share and expire on December 31,
2011.
|
|
|
·
|
During
2008, we paid Linlithgow Holdings a total of $53,450 for consulting
services rendered to us.
|
|
|
·
|
In
2008, we paid FA Corp. a total of $102,673 for various services provided
to us by Mr. Murray Williams. Mr. Williams is a member of our
Board of Directors and the principal stockholder of FA
Corp.
|
Director
Independence
Although
a majority of our Board of Directors is comprised of non-employee directors,
only one half of our board is comprised of “independent” directors as defined in
Rule 4200(a)(15) of the Market place Rules of the NASDAQ Stock
Market. Our independent directors are Barry Falk and Michael
Warsinske. Through FA Corp., a consulting company affiliated with
Murray Williams, we paid Mr. Williams a total of $102,673 in 2008. We
also paid $336 in 2008 for legal services provided to the Company by Mr. Falk’s
firm. However, our board determined that the small amount of fees we
paid to Mr. Falk’s law firm during 2008 did not prevent it from reaching a
determination that Mr. Falk is independent. Robert McNulty, our chief
executive officer, is not an independent director.
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Aggregate
fees billed to us by L J Soldinger Associates, LLC, our principal accountants,
for professional services rendered with respect to our 2008 and 2007 fiscal
years were as follows:
|
|
|
Year
ended
December
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
209,000
|
|
|
$
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees
|
|
|
—
|
|
|
$
|
67,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
|
20,000
|
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
$
|
—
|
|
|
|
—
|
|
Audit
fees represent fees billed for professional services provided in connection with
the audit of the Company’s annual financial statements, reviews of its quarterly
financial statements, audit services provided in connection with statutory and
regulatory filings for those years and audit services provided in connection
with securities registration and/or other issues resulting from that
process.
The Audit
Committee requires that prior to the engagement of the Company’s principal
accountant to audit the financial statements of the Company or to perform other
Audit Related or Non-Audit Related services, the engagement be reviewed to
consider the scope of services to be rendered and the expected fees to be
charged by the principal accountant in connection with rendering such
services.
PART
IV
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
THE
FINANCIAL STATEMENTS OF BEYOND COMMERCE, INC. ARE LISTED ON THE INDEX TO
FINANCIAL STATEMENTS AS SET FORTH ON PAGE F-2.
The
following list describes the exhibits filed as part of this Annual Report Form
10-KSB.
|
Exhibit No.
|
|
Description of Document
|
|
3.1
|
|
Articles
of Incorporation (1)
|
|
3.2
|
|
Amendment
to Articles of Incorporation (name
change)(2)
|
|
3.3
|
|
Bylaws
(1)
|
|
4.1
|
|
Form
of Series A Common Stock Purchase Warrant(4)
|
|
10.1
|
|
Agreement
and Plan of Reorganization (3)
|
|
10.2
|
|
Employment
Agreement Wendy Borow-Johnson (3)
|
|
10.3
|
|
Property
Lease - Santa Ana, California (3)
|
|
10.4
|
|
Property
Lease - Henderson, Nevada (3)
|
|
10.5
|
|
2008
Equity Incentive Plan
|
|
10.6
|
|
Form
of Incentive Stock Option Agreement
|
|
10.7
|
|
Form
of Non-Qualified Stock Option Agreement
|
|
10.8
|
|
Form
of Subscription Agreement by and among the Company and the Subscribers
named therein. (4)
|
|
|
|
|
|
10.9
|
|
Form
of Secured Convertible Note. (4)
|
|
|
|
|
|
10.10
|
|
Form
of Guaranty, dated July 7, 2008, by BoomJ.com, Inc. (4)
|
|
|
|
|
|
10.11
|
|
Collateral
Agent Agreement, dated as of July 7, 2008, by and among BoomJ.com, Inc.,
the Subscribers and the Company. (4)
|
|
|
|
|
|
10,12
|
|
Form
of Security Agreement, dated July 7, 2008, between the Company and the
Subscribers(4)
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer
|
|
31.2
|
|
Certification
of Chief Financial Officer (Principal Accounting
Officer)
|
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer (Principal
Accounting Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section
1350
|
(1)
Previously
filed as an exhibit to the Company’s Registration Statement filed on January 22,
2007, which exhibit is hereby incorporated herein by
reference.
(2)
Previously
filed as an exhibit to the Company’s Annual Report Form 10-KSB filed , February
7, 2008), which exhibit is hereby incorporated herein by
reference.
(3)
Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on January 4,
2008, which exhibit is hereby incorporated herein by
reference.
(4)
Previously
filed as an exhibit to the Company’s Current Report on Form 8-K on July 11,
2009, which exhibit is hereby incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
|
BEYOND
COMMERCE, INC.
|
|
|
|
|
|
Date: March
31, 2009
|
By:
|
/s/ ROBERT
MCNULTY
|
|
|
|
Robert
McNulty
|
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ ROBERT MCNULTY
|
|
President,
Chief Executive Officer and
|
|
March
31, 2009
|
|
Robert
McNulty
|
|
Director
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ MARK NOFFKE
|
|
Chief
Financial Officer
|
|
March
31, 2009
|
|
Mark
V. Noffke
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/ MICHAEL WARSINKE
|
|
Director
|
|
March
31, 2009
|
|
Michael
Warsinske
|
|
|
|
|
|
|
|
|
|
|
|
/s/ BARRY FALK
|
|
Director
|
|
March
31, 2009
|
|
Barry
Falk
|
|
|
|
|
|
|
|
|
|
|
|
/s/ MURRAY WILLIAMS
|
|
Director
|
|
March
31, 2009
|
|
Murray
Williams
|
|
|
|
|
BEYOND
COMMERCE, INC.
TABLE OF
CONTENTS
|
|
Page
|
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2008 & 2007
|
F-2
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 &
2007
|
F-3
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 &
2007
|
F-4
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED
DECEMBER 31,2008, 2007 &2006
|
F-5
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-8
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Beyond Commerce, Inc.
We have
audited the accompanying consolidated balance sheets of Beyond Commerce, Inc. as
of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ deficit, 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 audit 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 control 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Beyond Commerce, Inc. as of
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.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company reflected a loss of approximately $12,857,990 and
$4,973,000 in 2008 and 2007, respectively and will need to raise additional
capital to fund operations in 2009. These conditions raise substantial doubt
about its ability to continue as a going concern. Management’s plans regarding
those matters also are described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ L J
Soldinger Associates, LLC
Deer
Park, Illinois
April 2,
2009
CONSOLIDATED
BALANCE SHEETS
As
of December 31,
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets :
|
|
|
|
|
|
|
|
Cash
|
|
$
|
100,086
|
|
|
$
|
111,247
|
|
|
Accounts
receivable
|
|
|
226,091
|
|
|
|
26,395
|
|
|
Prepaid
loan cost
|
|
|
562,665
|
|
|
|
116,854
|
|
|
Other
current assets
|
|
|
306,285
|
|
|
|
35,896
|
|
|
Total
current assets
|
|
$
|
1,195,127
|
|
|
$
|
290,392
|
|
|
Property,
website and computer equipment
|
|
|
871,180
|
|
|
|
749,298
|
|
|
Less:
Accumulated depreciation and amortization
|
|
|
(320,366
|
)
|
|
|
(137,564
|
)
|
|
Property,
website and computer equipment – net
|
|
$
|
550,814
|
|
|
$
|
611,734
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
60,067
|
|
|
|
22,930
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,806,008
|
|
|
$
|
925, 056
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Short
term borrowings
|
|
$
|
2,400,555
|
|
|
$
|
979,220
|
|
|
Short
term borrowings - related party
|
|
|
-
|
|
|
|
25,000
|
|
|
Accounts
payable
|
|
|
1,490,590
|
|
|
|
680,727
|
|
|
Accounts
payable - related party
|
|
|
19,552
|
|
|
|
45,000
|
|
|
Note
derivative liability
|
|
|
1,523,651
|
|
|
|
-
|
|
|
Other
current liabilities
|
|
|
1,374,534
|
|
|
|
273,237
|
|
|
Deferred
Revenue
|
|
|
609,987
|
|
|
|
-
|
|
|
Total
current liabilities
|
|
$
|
7,418,869
|
|
|
$
|
2,003,184
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary
Equity
|
|
$
|
1,135,980
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit :
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 200,000,000 and 75,000,000 shares authorized as
of December 31, 2008 and 2007,
respectively,
and 40,936,143
and 36,108,067
issued and
outstanding
at December 31, 2008 and 2007, respectively
|
|
$
|
40,936
|
|
|
$
|
36,108
|
|
|
Preferred
stock,$.001 par value of 50,000,000 shares
authorized
and no shares issued
|
|
|
-
|
|
|
|
-
|
|
|
Additional
paid in capital
|
|
|
11,096,604
|
|
|
|
3,914,155
|
|
|
Accumulated
deficit
|
|
|
(17,886,381
|
)
|
|
|
(5,028,391
|
)
|
|
Total
stockholders' deficit
|
|
$
|
(6,748,841
|
)
|
|
$
|
(1,078,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Deficit
|
|
$
|
1,806,008
|
|
|
$
|
925,056
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEYOND COMMERCE,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For the Year
ended
December 31,
|
|
|
For the Year
ended
December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Advertising,
net
|
|
$
|
782,959
|
|
|
$
|
-
|
|
|
Merchandise
sales, net
|
|
|
1,060,272
|
|
|
|
94,485
|
|
|
Total
Revenue
|
|
$
|
1,843,231
|
|
|
$
|
94,485
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Cost
of products sold, net
|
|
|
2,175,099
|
|
|
|
97,879
|
|
|
Selling
general & administrative
|
|
|
6,764,238
|
|
|
|
2,892,141
|
|
|
Selling
general & administrative – related party
|
|
|
156,123
|
|
|
|
291,319
|
|
|
Professional
fees
|
|
|
1,345,091
|
|
|
|
1,164,270
|
|
|
Depreciation
and amortization
|
|
|
182,802
|
|
|
|
137,255
|
|
|
Total
costs and operating expenses
|
|
|
10,623,353
|
|
|
|
4,582,864
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(8,780,122
|
)
|
|
|
(4,488,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating
income (expense)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(3,325,662
|
)
|
|
|
(172,871
|
)
|
|
Interest
expense –
Related
Party
|
|
|
-
|
|
|
|
(125,413
|
)
|
|
Expense
related to derivative
|
|
|
(752,748
|
)
|
|
|
-
|
|
|
Interest
income
|
|
|
542
|
|
|
|
2,150
|
|
|
Total
non-operating expense
|
|
|
(4,077,868
|
)
|
|
|
(296,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations before income taxes
|
|
|
(12,857,990
|
)
|
|
|
(4,784,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(12,857,990
|
)
|
|
|
(4,784,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Preferred Dividends
|
|
|
-
|
|
|
|
188,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss available to common stockholders
|
|
$
|
(12,857,990
|
)
|
|
|
(4,973,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per common share
|
|
$
|
(0.33
|
)
|
|
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
38,580,296
|
|
|
|
24,533,552
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Audited
|
|
|
For
the Years ended
December
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(12,857,990
|
)
|
|
$
|
(4,784,513
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Interest
expense from conversion of note
|
|
|
39,018
|
|
|
|
3,715
|
|
|
Amortization
of debt fees
|
|
|
2,446,939
|
|
|
|
279,903
|
|
|
Depreciation
and amortization
|
|
|
182,802
|
|
|
|
137,255
|
|
|
Stock
issued for professional services
|
|
|
1,703,459
|
|
|
|
817,417
|
|
|
Change
in derivative liability
|
|
|
752,748
|
|
|
|
-
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(199,697
|
)
|
|
|
(26,395
|
)
|
|
(Increase)
decrease in prepaid loan cost and other assets
|
|
|
(303,527
|
)
|
|
|
(107,942
|
)
|
|
Increase
(decrease) in accounts payable
|
|
|
809,863
|
|
|
|
663,198
|
|
|
Increase
(decrease) in accounts payable - related party
|
|
|
(25,448
|
)
|
|
|
(5,000
|
)
|
|
Increase
(decrease) in other current liabilities
|
|
|
1,101,297
|
|
|
|
114,528
|
|
|
Deferred
Revenue
|
|
|
609,987
|
|
|
|
-
|
|
|
Net
cash used in operating activities
|
|
$
|
(5,133,495
|
)
|
|
$
|
(2,907,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Cash
paid to purchase property, website and computer
equipment
|
|
$
|
(122,310
|
)
|
|
$
|
(149,698
|
)
|
|
Net
cash used in investing activities
|
|
$
|
(122,310
|
)
|
|
$
|
(149,698
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from common stock issuance – net of offering costs of
$102,357
|
|
$
|
721,966
|
|
|
$
|
-
|
|
|
Issuance
of preferred stock - net of offering costs
|
|
|
-
|
|
|
|
2,014,470
|
|
|
Cash
received from short term borrowings
|
|
|
6,213,232
|
|
|
|
1,200,000
|
|
|
Cash
received from short term borrowings - related party
|
|
|
-
|
|
|
|
218,000
|
|
|
Cash
paid on short term borrowings - related party
|
|
|
(25,000
|
)
|
|
|
(193,000
|
)
|
|
Cash
paid on short term borrowings
|
|
|
(636,500
|
)
|
|
|
-
|
|
|
Cash
paid for cancellation of stock at merger
|
|
|
-
|
|
|
|
(125,000
|
)
|
|
Cash
paid for debt placement fees
|
|
|
(422,000
|
)
|
|
|
-
|
|
|
Net
cash provided by financing activities
|
|
$
|
5,851,698
|
|
|
$
|
3,114,470
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase(decrease) in cash & cash equivalents
|
|
|
(11,161
|
)
|
|
|
56,938
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& cash equivalents, beginning balance
|
|
|
111,247
|
|
|
|
54,309
|
|
|
Cash
& cash equivalents, ending balance
|
|
$
|
100,086
|
|
|
$
|
111,247
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Page
1 of 3
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A Convertible 10%
Cumulative
Preferred Stock
issued
private offering at $0.248
per
share
|
|
|
—
|
|
|
$
|
—
|
|
|
|
383,800
|
|
|
$
|
384
|
|
|
$
|
94,616
|
|
|
|
—
|
|
|
$
|
95,000
|
|
|
Series
A Convertible 10% Cumulative Preferred Stock issued in exchange for
website technology
valued
at $0.248 per share
|
|
|
—
|
|
|
|
—
|
|
|
|
1,616,000
|
|
|
|
1,616
|
|
|
|
398,384
|
|
|
|
—
|
|
|
|
400,000
|
|
|
Common
stock issued to
founders
at
$.0005
|
|
|
20,604,000
|
|
|
|
20,604
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,404
|
)
|
|
|
—
|
|
|
|
10,200
|
|
|
Offering
costs on private offering for issuance of preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,685
|
)
|
|
|
—
|
|
|
|
(17,685
|
)
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(54,914
|
)
|
|
|
(54,914
|
)
|
|
Balance,
December 31,
2006
|
|
|
20,604,000
|
|
|
|
20,604
|
|
|
|
1,999,800
|
|
|
|
2,000
|
|
|
|
464,911
|
|
|
$
|
(54,914
|
)
|
|
|
432,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A
Convertible
10% Cumulative Preferred Stock for cash at $0.248 per share in
January 2007 in continuance of the 2006 private offering
|
|
|
—
|
|
|
|
—
|
|
|
|
1,838,200
|
|
|
|
1,838
|
|
|
|
453,162
|
|
|
|
—
|
|
|
|
455,000
|
|
|
Offering
costs on the January 2007
issuance
of Series A Convertible 10% Cumulative Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(45,000
|
)
|
|
|
—
|
|
|
|
(45,000
|
)
|
|
Issuance
of common stock in January and February 2007 in compensation for services
provided valued at $0.149 per share
|
|
|
1,979,600
|
|
|
|
1,980
|
|
|
|
—
|
|
|
|
—
|
|
|
|
292,020
|
|
|
|
—
|
|
|
|
294,000
|
|
|
Issuance
of Series B 10% Cumulative
Preferred
Stock for cash at $0.99 per
share
in private offering commencing
February
2007 through November 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
1,849,310
|
|
|
|
1,849
|
|
|
|
1,829,151
|
|
|
|
—
|
|
|
|
1,831,000
|
|
|
Offering
costs on the issuance of Series B 10% Cumulative Preferred
Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(226,530
|
)
|
|
|
—
|
|
|
|
(226,530
|
)
|
|
Issuance
of common stock in March
2007
upon conversion of a note
|
|
|
205,656
|
|
|
|
206
|
|
|
|
—
|
|
|
|
—
|
|
|
|
101,602
|
|
|
|
—
|
|
|
|
101,808
|
|
|
Issuance
of Series A Convertible 10% Cumulative Preferred Stock in exchange for
website technology valued at $0.248 per share
|
|
|
—
|
|
|
|
—
|
|
|
|
202,000
|
|
|
|
202
|
|
|
|
49,798
|
|
|
|
—
|
|
|
|
50,000
|
|
|
Issuance
of common stock in April 2007 in compensation for services provided valued
at $0.149 per share
|
|
|
808,000
|
|
|
|
808
|
|
|
|
—
|
|
|
|
—
|
|
|
|
119,192
|
|
|
|
—
|
|
|
|
120,000
|
|
Page
2 of 3
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants to Linlithgow Holdings, LLC (“Linlithgow”) to purchase 34,835
shares of common stock in 2007 in connection with various promissory notes
issued to Linlithgow in the total amount of $193,000
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
13,414
|
|
|
$
|
—
|
|
|
$
|
13,414
|
|
|
Issuance
of common stock in August 2007 in compensation for consulting services
provided valued at $0.149 per share
|
|
|
2,424,000
|
|
|
|
2,424
|
|
|
|
—
|
|
|
|
—
|
|
|
|
357,576
|
|
|
|
—
|
|
|
|
360,000
|
|
|
Issuance
of common stock in September 2007 in compensation for consulting services
provided valued at $0.297 per share
|
|
|
80,800
|
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,919
|
|
|
|
—
|
|
|
|
24,000
|
|
|
Issuance
of warrant to a noteholder to
purchase
25,000 shares of common
stock
in October 2007 in connection
with
a $100,000 promissory note
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,494
|
|
|
|
—
|
|
|
|
9,494
|
|
|
Issuance
of Series B 10% Cumulative Preferred Stock in December 2007 upon
conversion of the $100,000 promissory note
|
|
|
—
|
|
|
|
—
|
|
|
|
102,925
|
|
|
|
103
|
|
|
|
101,804
|
|
|
|
—
|
|
|
|
101,907
|
|
|
Cancellation
of shares of common stock upon termination of employment in October
2007
|
|
|
(174,645
|
)
|
|
|
(175
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,762
|
)
|
|
|
—
|
|
|
|
(25,937
|
)
|
|
Issuance
of common stock in October 2007 to Centurion Credit Resources, LLC
(“Centurion”) in connection with a $500,000 promissory note issued to
Centurion valued at $0.24 per share
|
|
|
404,000
|
|
|
|
404
|
|
|
|
—
|
|
|
|
—
|
|
|
|
96,371
|
|
|
|
—
|
|
|
|
96,775
|
|
|
Issuance
of common stock to Robert McNulty in October 2007 in compensation for
guarantee services provided on the $500,000 Centurion
loan
valued at $0.297 per share
|
|
|
505,000
|
|
|
|
505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
149,495
|
|
|
|
—
|
|
|
|
150,000
|
|
Page
3 of 3
BEYOND
COMMERCE, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in November 2007 in compensation for employment services
vesting over a one year period valued at $0.297 per share
|
|
|
606,000
|
|
|
$
|
606
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
74,394
|
|
|
$
|
—
|
|
|
$
|
75,000
|
|
|
Issuance
of common stock in October and November 2007 to various parties in
compensation for consulting and legal services provided valued at $0.297
per share
|
|
|
424,200
|
|
|
|
424
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,576
|
|
|
|
—
|
|
|
|
126,000
|
|
|
Issuance
of common stock upon conversion of all Series A and B 10% Cumulative
Preferred Stock in December 2007
|
|
|
5,992,235
|
|
|
|
5,992
|
|
|
|
(5,992,235
|
)
|
|
|
(5,992
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Dividends
issued on conversion of Preferred Stock
|
|
|
599,221
|
|
|
|
599
|
|
|
|
—
|
|
|
|
—
|
|
|
|
188,365
|
|
|
|
—
|
|
|
|
188,964
|
|
|
Recapitalization
of Reel Estate Services, Inc. (“RES”) on December 28, 2007 and
cancellation of 1,500,000 shares of common stock
|
|
|
1,650,000
|
|
|
|
1,650
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(251,650
|
)
|
|
|
—
|
|
|
|
(250,000
|
)
|
|
Warrants
issued for financing fees in December 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,853
|
|
|
|
—
|
|
|
|
12,853
|
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,973,477
|
)
|
|
|
(4,973,477
|
)
|
|
Balance,
December 31, 2007
|
|
|
36,108,067
|
|
|
|
36,108
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,914,155
|
|
|
|
(5,028,391
|
)
|
|
$
|
(1,078,128
|
)
|
|
Common
stock sold - net of costs
|
|
|
793,986
|
|
|
|
794
|
|
|
|
—
|
|
|
|
—
|
|
|
|
719,245
|
|
|
|
—
|
|
|
|
720,039
|
|
|
Common
stock issued in relation to debt
|
|
|
855,000
|
|
|
|
855
|
|
|
|
—
|
|
|
|
—
|
|
|
|
255,645
|
|
|
|
—
|
|
|
|
256,500
|
|
|
Common
stock issued in relation to
debt
conversion
|
|
|
1,686,530
|
|
|
|
1,687
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,659,842
|
|
|
|
—
|
|
|
|
1,661,529
|
|
|
Common
stock issued for services
|
|
|
918,240
|
|
|
|
918
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,686,872
|
|
|
|
—
|
|
|
|
1,687,790
|
|
|
Cashless
stock warrant exercises
|
|
|
574,320
|
|
|
|
574
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(574
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Stock
and options issued for compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
748,956
|
|
|
|
—
|
|
|
|
748,956
|
|
|
Warrants
issued in connection with debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,883,366
|
|
|
|
—
|
|
|
|
2,883,366
|
|
|
Derivative
on note discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(770,903
|
)
|
|
|
|
|
|
|
(770,903
|
)
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,857,990
|
)
|
|
|
(12,857,990
|
)
|
|
Balance,
December 31,
2008
|
|
|
40,936,143
|
|
|
$
|
40,936
|
|
|
|
0
|
|
|
$
|
-
|
|
|
$
|
11,096,604
|
|
|
$
|
(17,886,381
|
)
|
|
$
|
(6,748,841
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEYOND
COMMERCE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
|
NOTE
1
|
DESCRIPTION OF BUSINESS AND
BASIS OF PRESENTATION
|
Beyond
Commerce, Inc., formerly known as BoomJ, Inc. (the “Company”), is an Internet
company that has three interrelated business models aimed at generating revenues
primarily from website advertising and E-commerce transactions. Our
initial business was
BOOMj
,
www.BOOMj.com
,
the leading niche portal and social networking site for Baby Boomers and
Generation Jones. Our Boomj.com website provides social, political,
financial, and lifestyle content to the Baby Boomer/Generation Jones target
audience as a platform for our advertising and E-commerce businesses. Our
LocalAdLink
subsidiary
operates a website,
www.LocalAdLink.com
,
and a local search directory and advertising network that brings local
advertising to geo-targeted consumers. We are currently releasing
i-SUPPLY
,
www.i-SUPPLY.com
,
a retail storefront that offers easy to use, fully customizable E-commerce
services, and revenue solutions for any third party website large or small, and
hosts local ads, providing extensive reach for our proprietary advertising
partner network platform.
History
of the Company
The
Company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated
in Nevada on January 12, 2006. As of December 28, 2007, RES was a
public shell company, defined by the Securities and Exchange Commission as an
inactive, publicly quoted company with nominal assets and
liabilities.
On
December 28, 2007, RES entered into an Agreement and Plan of Reorganization (the
“Reorganization Agreement”), with Time Lending Sub, Inc., a newly-formed Nevada
corporation (hereinafter “RES Sub”), and Linda Rutter, the owner of 1,500,000
shares of RES Common Stock and the sole Director and officer of RES, and
BOOMj.com, Inc., a Nevada corporation (“BOOMj.com”), pursuant to which RES Sub
agreed to merge with and into BOOMj.com (the “Merger”). In connection
with the Merger, RES agreed to issue its shares of common stock, at a rate of
2.02 shares of RES common stock for each share of BOOMj.com common stock, in
exchange for all of the issued and outstanding stock of BOOMj.com.
In
addition, prior to the Merger, RES agreed to cancel 1,500,000 shares (which were
held by Linda Rutter) of the 3,150,000 issued and outstanding shares of RES. The
cancellation was performed in two tranches: In exchange for $125,000 paid at the
closing of the Merger, 750,000 shares of RES Common Stock were cancelled; the
remaining 750,000 shares were cancelled upon payment to Ms. Rutter of $125,000
on January 31, 2008. All share amounts presented in these financial statements,
unless otherwise noted, reflect the foregoing recapitalization.
Upon the
closing of the Merger, Linda Rutter received a five-year warrant to purchase
825,000 shares of the Company’s common stock at an exercise price of $0.93 per
share.
Prior to
the Merger, BOOMj.com had 17,058,448 shares of common stock (“BOOM Common
Stock”) outstanding, which were exchanged for 34,458,067 shares of RES Common
Stock through RES Sub. All warrants that were issued by BOOMj.com
prior to the Merger remained outstanding as of December 31, 2007. However,
pursuant to the terms of those warrants, the warrants were subsequently
exchanged for warrants to purchase the Company’s common stock. The
exchange of the warrants was completed during 2008.
In the
Reorganization Agreement, concurrent with the closing of the Merger, (a) all
current officers of RES resigned from their positions with RES and (b)
BOOMj.com’s officers were appointed by the then existing members of the Board of
Directors of RES to replace the former RES officers, and (c) the members of the
RES board of directors appointed the members of BOOMj.com’s current board of
directors of the Company and thereafter resigned.
Subsequent
to the Merger, RES changed its name to BoomJ, Inc.
RES is
the legal acquirer of BOOMj.com. However, since RES was a public
shell company with a nominal amount of net assets, the Merger has been treated
as a recapitalization of BOOMj.com and an acquisition of the assets and
liabilities of RES by BOOMj.com. Although RES was the legal acquirer
in the Merger, BOOMj.com was the accounting acquirer since its shareholders
ended up owning a majority of the outstanding common shares of RES. Therefore,
at the date of the Merger the historical financial statements of BOOMj.com
became those of RES for the period prior to the Merger. Subsequent to the
Merger, the consolidated financial statements include both entities. Unless
otherwise specified, all references to the Company prior to the Merger refer to
BOOMj.com, and all references to the Company after the Merger refer to Beyond
Commerce, Inc. (formerly BOOMj, Inc.) and its subsidiaries on a consolidated
basis.
In
December 2008, the Company changed its name from Boomj, Inc. to Beyond Commerce,
Inc. to more accurately reflect the new structure of the Company consisting of
two operating divisions: BOOMj.com dba i-SUPPLY and
LocalAdLink, .
The
Company currently maintains its corporate office in Henderson, Nevada, and has
its LocalAdLink customer service department located in Irvine,
California.
NOTE 2
-
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of Presentation
Management
is responsible for the fair presentation of the Company’s financial statements,
prepared in accordance with U.S. generally accepted accounting principles (GAAP)
and principles of consolidations.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary: Local Ad Link, Inc. All significant intercompany
transactions and accounts have been eliminated upon
consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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. Estimates are used in the
determination of depreciation and amortization and the valuation for non-cash
issuances of equity instruments, and the website, income taxes and
contingencies, among others.
Cash
and Cash Equivalents
The
Company classifies as cash and cash equivalents amounts on deposit in banks and
cash temporarily in various instruments with original maturities of three months
or less at the time of purchase. The Company’s cash management system is
integrated within three separate banking institutions.
Accounts
Receivable
Accounts
receivable consists primarily of credit card charges which are collected within
one to five days.
Fair
Value of Financial Instruments
The
carrying value of the current assets and liabilities approximate fair value due
to their relatively short maturities except for certain of the short-term
borrowings which are net of a $2,527,945 debt discount in 2008 and $20,780 in
2007.
Reclassifications
Certain
comparative amounts from prior periods have been reclassified to conform to the
current year's presentation. These changes did not affect previously reported
net loss.
Segment
Information
The
Company’s Operations Are Classified Into two Principal Reportable Segments:
Internet retail store, its e-commerce operations (BOOMj.com
dba i-SUPPLY) and internet advertising (Local Ad Link) and as defined
by SFA No. 131, “Disclosures about Segments of an Enterprise and Related
Information”.
Property,
Website and Computer Equipment
Property,
website and computer equipment are stated at cost less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
income as incurred. Additions, improvements and major replacements
that extend the life of the asset are capitalized. The initial cost of the
Boomj.com website has been capitalized. Once the site began operating, costs to
maintain the site are expensed as incurred. The cost and accumulated
depreciation and amortization related to assets sold or retired are removed from
the accounts and any gain or loss is credited or charged to income in the period
of disposal.
The
Company accounts for web site costs in accordance with SOP 98-1 “Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use” and EITF
00-2 “Accounting for Web Site Development Costs”. Costs associated
with the web site application and infrastructure development stage are
capitalized. Amortization of costs commences once the web site is
ready for its intended use which occurred when the website was launched in
2007.
For
financial reporting purposes, depreciation and amortization is provided on the
straight-line method over the estimated useful lives of depreciable
assets. Financial reporting provisions for depreciation and
amortization are generally based on the following annual rates and estimated
useful lives:
|
Type
of Asset
|
|
Rates
|
|
Years
|
|
|
|
|
|
|
|
Computer
equipment and property
|
|
|
20%
- 50%
|
|
2 -
5 years
|
|
Website
Development Costs
|
|
|
20%
|
|
5
years
|
|
Leasehold
improvements
(or
life of lease where shorter)
|
|
|
20%
- 50%
|
|
2 -
5 years
|
Income
Taxes
The
Company has not generated any taxable income, and, therefore, no provision for
income taxes has been made other than for State franchise taxes.
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with SFAS Number 109, "Accounting for Income Taxes",
which requires the use of the asset/liability method of accounting for income
taxes. Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and for tax loss and credit carry-forwards. Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated future tax
effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
A
valuation allowance is recorded to fully offset the deferred tax asset if it is
more likely than not that the assets will be utilized.
The
Company’s effective tax rate differs from the statutory rates associated with
taxing jurisdictions because of permanent timing differences as well as a
valuation allowance.
On
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”,
which seeks to reduce the diversity in practice associated with the accounting
and reporting for uncertainty in income tax positions. This
Interpretation prescribes comprehensive model for financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns.
Revenue
Recognition
The
Company generates its revenue from products and advertising sold on its internet
websites. The BOOMj.com store’s database has available close to two million name
brand products. These items include books, digital cameras, kitchen and bath
items and office supplies. Revenue is also generated from content, advertising,
and discount travel.
Advertising
products consist of web-banner advertising, which are continuous or rotating.
Delivery of these profiles is based on the number of impressions
of an advertisement that
a customer purchases. An impression is a single instance of an Internet user
viewing the page that contains a customer's name and/or logo. Revenue is
recognized on such advertising programs based on the proportionate units of
advertising delivered over the period of a media campaign. The Company also
sells a marketing kit through their Local Ad Link division. The kit is
comprised of ten one month duration ads. The sales reps have the option to sell
the ten ads as a commissionable sale or to give them away as a free promotional
tool.
All
sources of revenue are recorded pursuant to Staff Accounting Bulletin (SAB) 104
“Revenue Recognition” and EITF 00-21 “Revenue Arrangements with Multiple
Deliverables”, when persuasive evidence of an arrangement exists, delivery of
services has occurred, the fee is fixed or determinable and collectability is
reasonably assured.
Revenue
is presented in the statement of operations in accordance with EITF 99-19
“Reporting Revenue Gross as a Principal versus Net as an Agent” and EITF 00-10
“Accounting for Shipping and Handling Fees and Cost.”
In
connection with advertising revenue, the Company receives certain up front fees
a portion of which they defer recognition in accordance with EITF 00-21 and SEC
Staff Accounting Bulletin 104.
Corresponding
revenue origination costs are accounted for under the guidance provided in SAB
104.
Revenue
is recorded net of discounts, allowances, and estimated
returns.
Stock
Based Compensation
The
Company accounts for stock based compensation in accordance with Statement of
Financial Accounting Standard (“SFAS”) 123 (revised 2004), “Share Based Payment”
(“SFAS 123(R)”). Share-based payments are required to be reflected as
an expense based on the grant-date fair value of those awards. The Company
follows the guidance of Emerging Issues Task Force No. 96-18: “Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” for transactions in which equity
instruments are issued in exchange for the receipt of goods or services to non
employees.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consists principally of cash deposits at financial
institutions. At various times during the year, the Company may
exceed the federally insured limits. To mitigate this risk, the Company places
its cash deposits only with high credit quality
institutions. Management believes the risk of loss is
minimal. At December 31, 2008, the Company had $40,729 in uninsured
cash deposits.
Impairment
of Long-lived Assets
The
Company accounts for long-lived assets in accordance with the provisions of
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment of Long-Lived Assets. 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 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. Fair values are determined based on quoted market value,
discounted cash flows or internal and external appraisals, as applicable. During
2008 and 2007, the Company did not recognize any impairment
charges.
Employee
Benefits
The
Company currently offers employees vacation benefits and recently began offering
a healthcare plan. During 2008, the Company implemented the 2008 Equity
Incentive Plan.
Inventories
The
Company does not carry any inventory and has its vendors or distributors ship
directly to the consumer based on confirmed orders provided electronically by
the Company.
Recent
Accounting Pronouncements
On
January 1, 2008, the Company adopted SFAS No. 157,
Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. SFAS 157 defines
fair value, establishes a framework for measuring fair value under GAAP, and
expands disclosures about fair value measurements. The Company does not believe
that the partial adoption of SFAS 157 has had or will have a material impact on
the Company’s financial statements. In February 2008, the FASB issued a FASB
Staff Position (“FSP”), FSP SFAS 157-2,
Effective Date of FASB
Statement No. 157
, to defer the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. The FSP defers the effective date of SFAS 157 to fiscal years beginning
after November 15, 2008. The Company does not expect the adoption of FSP SFAS
157-2 to have a significant impact on the financial statements
On
January 1, 2008, the Company adopted SFAS No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115
(“SFAS 159”). This Statement provides
companies with an option to measure, at specified election dates, many financial
instruments and certain other items at fair value that are not currently
measured at fair value. A company that adopts SFAS 159 will report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. This Statement also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. The adoption of SFAS 159 has not had a material
impact on the Company’s financial statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160,
Interests in Consolidated
Financial Statements — an amendment of ARB No.
51
(“SFAS 160”), which impacts the accounting for minority
interest in the consolidated financial statements of filers. The statement
requires the reclassification of minority interest to the equity section of the
balance sheet and the results from operations attributed to minority interest to
be included in net income. The related minority interest impact on earnings
would then be disclosed in the summary of other comprehensive income. The
statement is applicable for all fiscal years beginning on or after December 15,
2008 and earlier adoption is prohibited. The adoption of this standard will
require prospective treatment. The Company is currently evaluating the effect
that the adoption of SFAS 160 will have on its results of operations and
financial position. However, the adoption of SFAS 160 is not expected to have a
material impact on the Company’s financial statements.
In
December 2007, FASB issued SFAS No. 141R,
Business Combinations
(“SFAS
141R”), which impacts the accounting for business combinations. The statement
requires changes in the measurement of assets and liabilities required in favor
of a fair value method consistent with the guidance provided in SFAS 157 (see
above). Additionally, the statement requires a change in accounting for certain
acquisition related expenses and business adjustments which no longer are
considered part of the purchase price. Adoption of this standard is required for
fiscal years beginning after December 15, 2008. Early adoption of this standard
is not permitted. The statement requires prospective application for all
acquisitions after the date of adoption. The Company is currently evaluating the
effect that the adoption of SFAS 141R will have on its results of operations and
financial position. However, the adoption of SFAS 141R is not expected to have a
material impact on the Company’s financial statements.
In March
2008, FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities an amendment to FASB Statement No.
133
(“SFAS 161”). SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The Company does not expect
the adoption of this statement to have a material effect on its financial
statements.
In April
2008, the FASB issued Staff Position No. FAS 142-3,
Determination of the Useful Life of
Intangible Assets
, or FSP FAS 142-3. FSP FAS 142-3 amends
the factors that should
be considered in developing renewal
or extension assumptions used to determine the useful life
of a recognized intangible asset under Statement 142. We
are required to adopt FSP FAS 142-3 prospectively for intangible assets acquired
on or after January 1, 2009. Intangible assets acquired prior to
January 1, 2009 are not affected by the adoption of FSP FAS 142-3. We
are currently evaluating the impact of adopting FSP FASB 142-3 on our results of
operations and financial condition.
In May
2008, the FASB issued Staff Position No. APB 14-1,
Accounting for
Convertible Debt Instruments That May
Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
, or
FSP APB 14-1. FSP APB 14-1 specifies that issuers of convertible debt
instruments that may be settled in cash upon conversion should separately
account for the liability and equity components in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. We are required to adopt FSP APB 14-1 at the beginning of
2009 and apply FSP APB 14-1 retrospectively to all periods
presented. We are currently evaluating the impact of adopting FSP APB
14-1 on our results of operations and financial condition.
The
Company's financial statements are prepared using generally accepted accounting
principles, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company has limited
sales, reflected a loss of approximately $12,857,990 for the year ended December
31, 2008 and will need to raise additional capital and/or obtain financing to
continue operations in 2009. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going
concern.
Management
is taking steps to raise additional funds to address its operating and financial
cash requirements to continue operations in the next twelve months. Management
has devoted a significant amount of time in the raising of capital from
additional debt and equity financing. However, the Company’s ability to continue
as a going concern is dependent upon raising additional funds through debt and
equity financing and generating revenue. There are no assurances the Company
will receive the necessary funding or generate revenue necessary to fund
operations.
|
NOTE
4
|
PROPERTY,
WEBSITE AND COMPUTER
EQUIPMENT
|
Property
and equipment at December 31, 2008 and 2007 consisted of the
following:
|
|
|
2008
|
|
|
2007
|
|
|
Office
and computer equipment
|
|
$
|
186,614
|
|
|
$
|
64,732
|
|
|
Website
|
|
|
684,566
|
|
|
|
684,566
|
|
|
Total
property, website and computer equipment
|
|
|
871,180
|
|
|
|
749,298
|
|
|
Less:
accumulated depreciation
|
|
|
(320,366
|
)
|
|
|
(137,564
|
)
|
|
|
|
$
|
550,814
|
|
|
$
|
611,734
|
|
Depreciation
and amortization expense for the year ended December 31, 2008 was $182,802,
compared to $137,255 for the same period in 2007.
|
|
|
2008
|
|
|
2007
|
|
|
Rent
Deposits
|
|
$
|
20,828
|
|
|
$
|
22,930
|
|
|
Credit
Card Reserve
|
|
|
33,387
|
|
|
|
-
|
|
|
Vendor
Deposit
|
|
|
5,852
|
|
|
|
-
|
|
|
TOTAL
|
|
$
|
$60,067
|
|
|
$
|
22,930
|
|
Other
assets primarily consisted of rent and utility deposits of $17,753 and $3,075
for the Company's Nevada and Irvine offices respectively, at December 31, 2008
and $18,659 and $4,271 at December 31, 2007. Also included in this line item for
December 31, 2008 is $33,387 for credit card reserves and $5,852 in vendor
deposits.
Accrued
expenses consist of the following at December 31, 2008:
|
|
|
2008
|
|
|
2007
|
|
|
Accrued
website costs
|
|
$
|
-
|
|
|
$
|
50,000
|
|
|
Accrued
interest
|
|
|
388,783
|
|
|
|
-
|
|
|
Accrued
commission
|
|
|
220,869
|
|
|
|
-
|
|
|
Accrued
payroll and related expenses
|
|
|
625,997
|
|
|
|
180,544
|
|
|
Other
|
|
|
138,885
|
|
|
|
42,693
|
|
|
|
|
$
|
1,374,534
|
|
|
$
|
273,237
|
|
|
NOTE
7
|
SHORT
TERM BORROWINGS
|
|
|
|
2008
|
|
|
2007
|
|
|
Note
payable ($190,000 face amount) to Carole Harder bearing an annual interest
rate of 12%, unsecured, due 6/20/09
|
|
$
|
190,000
|
|
|
$
|
-
|
|
|
Convertible
Promissory Notes ($4,280,000 face amount), bearing an annual interest rate
of 12%, secured, due 7/31/09
|
|
|
4,280,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge
Notes ($458,500 face amount), bearing an annual interest rate 12%,
unsecured, due 6/30/09
|
|
|
458,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to Linlithgow Holdings, LLC (related Party) 12% per
annum, Unsecured
|
|
|
-
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to Centurion Credit, LLC 12% per annum
|
|
|
-
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
principal
|
|
$
|
4,928,500
|
|
|
$
|
1,025,000
|
|
|
Less
debt discount
|
|
|
2,527,945
|
|
|
|
20,780
|
|
|
Net
balance
|
|
$
|
2,400,555
|
|
|
$
|
1,004,220
|
|
On March
16, 2007 the Company issued a 12% Convertible Note to Mountain Capital Natural
Resource Fund, L.P. in exchange for $100,000. The term of this Note is one year
from the issuances with provisions to pay interest at 12%, in cash, on a
quarterly basis. The principal and accrued interest on this Note may be
converted into shares of the Company’s common stock at the option of the holder
at any time, at a price of one dollar ($1.00) per share. On May 10, 2007,
Mountain Capital Natural Resource Fund, L.P. initiated the optional conversion
provision included in this Note, and the Company subsequently issued 205,656
shares of common stock for the cancellation of the 12% Convertible Note. This
included $1,808 of interest with the principal conversion of
$100,000.
On April
30, 2007 the Company issued a short term Promissory Note to Linlithgow Holdings,
LLC (a related party) in exchange for $50,000. The term of this Note was for
thirty (30) days from the issuance with provision to pay interest at 12%, in
cash from the date of issuance until the Note is paid. On May 9
th
this
Note was paid in full along with the respective interest earned of
$247. On May 14, 2007 the Company issued a short term Promissory Note
to Linlithgow Holdings, LLC (a related party) in exchange for $30,000. The term
of this Note was for thirty (30) days from the issuance with provisions to pay
interest at 12%, in cash from the date of issuance until the Note is paid. On
May 24
th
this
Note was paid in full along with the respective interest of $108. In
connection with the issuance of these two notes to Linlithgow Holdings, LLC (a
related party), the Company granted a warrant to Linlithgow Holdings, LLC (a
related party) in June 2007 to purchase 16,000 shares of its common
stock. The warrant has an exercise price of $0.01 per share, vested
immediately, and expires in four years. The warrant was valued by the
Company at $4,685 using the Black-Sholes model and recorded as expense on the
notes.
On
September 10, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $90,000. The term of
this Note is for thirty (30) days from the issuance with provisions to pay
interest at 12%, in cash from the date of issuance until the Note is paid. Also,
issued with this note were 15,000 warrants exercisable at $0.30 per share
expiring in 2011. These warrants were valued at $0.49 per share using the
Black-Scholes method. This resulted in a total value of $7,273 assuming a
risk-free interest rate of 5.25% and 100% volatility index. We allocated the
proceeds from the issuance of this note and the warrants based on the
proportional fair value for each item. Consequently we recorded a discount of
$7,273 on the note, which was amortized over the term of the note. For the
twelve months ended December 31, 2007, amortization of the discount amounted to
$7,273, which was recorded as interest expense. On October 10
th
this
Note was extended another thirty-two days with the same terms and conditions. On
October 22, 2007 this Note was paid in full along with the respective
interest of $1,243.
On
October 14, 2007 the Company issued a 12% Convertible Note to Carole Harder in
exchange for $100,000. The term of this Note was for thirty (30) days from the
issuance with provisions to pay interest at 12% per annum, in cash. Also,
included with this Note were the issuance of warrants to purchase 25,000 shares
of our common stock exercisable at $1.00 per share expiring in 2011, which was
valued using the Black-Scholes method at $0.59 per share. This resulted in a
total value of $9,494 assuming a risk-free interest rate of 5.25% and 100%
volatility index. We allocated the proceeds from the issuance of this note and
the warrants based on the proportional fair value for each item. Consequently we
recorded a discount of $9,494 on the note, which was being amortized over the
term of the note. For the twelve months ended December 31, 2007, amortization of
the discount amounted to $9,494, which was recorded as interest
expense. The principal and accrued interest on this Note was converted into
shares of the Company’s Preferred Stock Series “B” at the request of the holder
at a price of two dollar ($2.00) per share on December 12, 2007. The Company
subsequently issued 102,925 shares of its Preferred Stock Series “B” for the
cancellation of the 12% Note. This included $1,907 of interest with the
principal conversion of $100,000.
On
October 19, 2007 the Company issued a short term Promissory Note to Centurion
Credit Resources, LLC (the “Lender”) in exchange for $500,000. The Promissory
Note bore interest at 12% per annum payable in cash monthly from the date of
issuance until the note is paid. The loan was secured by a lien on all of the
assets of BOOMj.com. As consideration for making the loan, the
Company delivered to Lender (a) an origination fee and reimbursement of Lender’s
out of pocket costs and expenses in the amount of $19,600, and (b) 404,000
shares (as adjusted by the Merger) of the Company’s common stock. This Note was
guaranteed personally by Robert McNulty, Chairman of both the Company and
BOOMj.com. On January 18, 2008 this Promissory Note was modified to extend the
term of this Note to the earlier of three months from the modification date or
the receipt by the Company of the first $2,000,000 in connection with Company’s
anticipated private placement of its common stock. As a condition precedent to
modification, the Company delivered to Lender (a) an origination fee in the
amount of $20,000, and (b) 300,000 additional shares of the Company’s common
stock (see Note 8). On April 18, 2008 the Company entered into a Second
Modification Agreement and received an option to extend the term for $350,000 of
this Note to August 1, 2008 and $150,000 to April 30, 2008 for an additional fee
of $100,000. The Company did not exercise this option, thus did not
pay the $100,000 option fee. As a condition precedent to the April
18, 2008 modification the Company delivered to Lender (a) an origination fee in
the amount of $25,000, and (b) 100,000 additional shares of the Company’s common
stock. During May 2008, the Company asked the Lender for an additional extension
until May 16, 2008 through two modification agreements and the payment of two
$5,000 payments and prorated interest on the note. Centurion also has piggyback
registration rights associated with the common stock they received. On June 23,
2008 Centurion Credit Resources entered a judgment against the Company and Mr.
McNulty for the entire principal amount, plus interest. On July 9, 2008, the
Company satisfied the entire judgment by paying in full the $500,000 note
balance plus accrued interest of $7,553.
On
December 4, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $23,000. The term of this Note
is for thirty (30) days from the issuance with provisions to pay interest at
12%, in cash from the date of issuance until the Note is paid. Also, included in
this note were the issuance of 3,835 warrants exercisable at $1.00 per share
expiring in 2011, which were valued using the Black-Scholes method at $1,456
assuming a discount rate of 5.25% and 100% volatility index. The note was paid
in December 2007.
On
December 24, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party-see note 13) in exchange for $25,000. The term of
this Note was for thirty days from issuance with interest at 12%. This Note was
paid in full (including the $304 interest) in January 2008.
On March
21, 2008 the Company issued a 12% Convertible Note to Carole Harder, an
accredited investor in exchange for $140,000 originally due March 20, 2009. In
connection with the note, the Company issued to the investor a five-year warrant
to purchase 200,000 shares of our common stock exercisable at $0.93 per share.
This warrant was valued using the Black–Scholes method at $0.136 per share,
resulting in a total value of $27,288 assuming a fair value per share of $0.30,
risk-free interest rate of 2.50% and 83% volatility index. In addition there is
a conversion option to exchange the amount outstanding into the shares of the
Company’s common stock at a conversion price of $1.00 per share. We allocated
the proceeds from the issuance of this note and the warrants based on the
relative fair value for each item. Consequently, we recorded a discount of
$22,837 on the note, which is being amortized over the term of the note using
the effective interest method resulting in an effective interest rate of
approximately 25%. This note was extended on March 21 for another 90
days.
On
December 28, 2007, RES raised $500,000 in a private offering to accredited
investors of its 12% Secured Convertible one-year promissory notes. These notes
have a voluntary conversion feature to convert into a unit from a contemplated
offering, each unit comprised of (i) one share of stock at $0.70 per unit and
(ii) one warrant to purchase one share of common stock at an exercise price of
$0.93 per share. In addition, on December 28, 2007, the Company issued warrants
to the placement agent as financing fees to purchase 71,429 shares of its common
stock at an exercise price of $0.93 per share. The warrant vested
immediately and expires in five years. It was valued by the Company at $12,853.
Additional promissory notes in conjunction with this same offering were sold by
the Company on January 25, 2008 and February 8, 2008 for $1,230,000 and
$550,000, respectively. The promissory notes were scheduled to mature on March
31, 2009. However, the maturity date of the promissory notes has been
extended to July 31, 2009 (see Note 16, “Subsequent
Events”). The purchasers of the December 28, 2007, January and
February 2008 promissory notes also received warrants to purchase 3,257,143
shares of our common stock exercisable at $0.93 per share expiring in 2013,
which was valued using the Black–Scholes method at $0.177 per share. This
resulted in a total value of $577,769 assuming a fair value per share of $0.30,
risk-free interest rate range of 3.25% to 5.25% based on the note issuance and
100% volatility index. Consequently, we recorded a discount of $460,952 on the
notes, which is being amortized over the term of these notes using the
effective interest method with an effective interest rate between 26% and 27%.
In addition, on January 25, 2008 and February 8, 2008, the Company issued
warrants to the placement agent as financing fees to purchase 175,714 and 78,571
respectively, shares of its common stock at an exercise price of $0.93 per
share. The warrant vested immediately and expires in five years.
These warrants were valued by the Company at $44,882. The Company has also
granted, to these investors, a security interest in all its assets.
In
addition to the above terms of the 12% secured convertible promissory notes, the
Company granted to the January and February 2008 note-holders “piggyback”
registration rights with respect to the shares of Common Stock issued or
issuable under those notes and warrants. The Company also agreed with
the note-holders that in the event all of the shares underlying their warrants
have not otherwise been included in a registration statement filed by the
Company with the SEC on or prior to May 1, 2008, other than for certain
specified reasons, then, as partial relief for the damages to the investors, the
Company shall pay to the noteholders an amount in cash equal to one percent
(1.0%) of the original cash consideration invested by the noteholders for each
30 day period during which the registration statement is not effective. Since a
registration statement was not filed by June 30, 2008, the Company accrued
$45,000 as a penalty charge. During the fiscal quarter ended September 30, 2008,
this registration obligation and the requirement to pay penalties was waived by
the majority of noteholders and the accrual was reversed.
In
addition, during 2008, the Company raised $2,025,000, in a private offering from
accredited investors. The securities sold by the Company consisted of
its 12% secured convertible promissory notes and warrants to purchase 2,892,858
shares of the Company’s common stock at an exercise price of $0.93 per
share. The notes are convertible at a price of $0.70 per share, are
secured by a lien on the Company’s assets and on the assets of Boomj.com, Inc.,
and mature on July 31, 2009. The warrants were valued using the
Black–Scholes method at $0.767per share. This resulted in a total value of
$2,218,822 assuming a fair value per share of $1.00, risk-free interest rate of
3.32% and 100% volatility index. Under EITF 00-27 and APB No. 14, we
allocated the proceeds from issuance of these notes and warrants based on the
relative fair value for each item. Consequently, we recorded a
discount of $1,135,980 on the notes, which is being amortized over the term of
these notes using the effective interest rate method. A discount was
also recorded on these convertible notes based on the requirement to bifurcate
the conversion feature as noted below. As a result, those convertible
notes were recorded with additional discounts in the total amount of $770,903.
The combined value of the note discount and discount related to the conversion
feature on the convertible notes is being amortized over the term of the
respective convertible note using the effective interest method. The
amortization of the discounts was recorded as interest expense. Since
the discounts represent near 100% of the loan proceeds from these notes, the
effective periodic interest rate for these notes ranges from between 77% and
86%. As a result, the majority of amortization expense will be
incurred at the end of the term of the note. See the table below for
the timing and approximate amounts of the amortization expense. For
the twelve months ended December 31, 2008, we recorded interest expense of
$316,127 related to amortization of the discounts. We also recorded an
additional interest expense of $108,208, which was for the stated interest rate
and accrued as of December 31, 2008.
|
Note Amounts
|
|
9/30/2008
|
|
|
12/31/2008
|
|
|
3/31/2009
|
|
|
6/30/2009
|
|
|
9/30/09
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$2,025,000
|
|
$
|
-
|
|
|
$
|
316,127
|
|
|
$
|
270,974
|
|
|
$
|
503,258
|
|
|
$
|
934,641
|
|
|
$
|
2,025,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
316,127
|
|
|
$
|
270,974
|
|
|
$
|
503,258
|
|
|
$
|
934,641
|
|
|
$
|
2,025,000
|
|
In
addition the Notes contained several provisions which if triggered would reset
the conversion price of the Notes including; (1) in the event the Company failed
to timely convert or deliver the conversion shares, the Notes went into default
as defined under the agreement or a change of control event, as defined in the
Note agreement, occurred, the holders of the Note could demand immediate cash
payment of the greater of 120% of the outstanding principal plus accrued
interest or the dollar amount equivalent of the number of shares convertible
into at the time of the triggering event multiplied by the closing stock price
of the Company’s common shares; (2) a reset provision such that should the
Company issue in the future any common stock or instruments convertible or
exchangeable into common stock of the Company at a per share price lower than
the then in effect conversion price, would automatically reset the conversion
price of the Notes to that lower price and (3) the Company agreed to reset the
conversion price of the notes based on a formula of meeting certain sales and
income targets in the twelve month period ending June 30, 2009, such that the
conversion price would reset lower by 1% for every 1% of either the revenue or
income targets missed by the Company, with a cap such that the reduction in
price per share could not exceed 50%.
Because
of these provisions, the Company determined that the conversion feature was not
clearly and closely related to the Note host contract and under the guidance of
Emerging Issues Task Force (“EITF”) 05-2 “The Meaning of Conventional
Convertible Debt Instrument Under EITF 00-19” and SFAS 133 “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”) it has bifurcated
the conversion feature. Because the conversion feature is not
considered to be conventional convertible and note holders have the ability to
demand cash settlement of the conversion feature, the amount recorded has been
shown as a liability at December 31, 2008 of $1,523,651. Under the
requirements of SFAS 133, the Company has remeasured the fair value of the
conversion feature at each reporting period after inception, with those changes
in fair value being recorded in the statement of operations.
The
warrants issued under this Note and Warrant Purchase Agreement also contained
several provisions which if triggered would reset the strike price of the
warrants and also possibly the number of warrant shares to be issued, including
(1) a reset provision such that should the Company issue in the future any
common stock or instruments convertible or exchangeable into common stock of the
Company at a per share price lower than the then in effect conversion price,
would automatically reset the conversion price of the Notes to that lower price
and would also increase the number of shares exercisable and (2) the Company
agreed to reset the conversion price of the notes based on a formula of meeting
certain sales and income targets in the twelve month period ending June 30,
2009, such that the conversion price would reset lower by 1% for every 1% of
either the revenue or income targets missed by the Company, with a cap such that
the reduction in price per share could not exceed 50%.
Because
of these provisions, the Company has determined that the provisions within the
warrants that could result in the issuance of a variable number of shares
preclude amounts ascribed to the warrants from being included in permanent
equity so long as those provisions are outstanding. Under the
guidance of Accounting Series Release (“ASR”) 268 and Topic D-98 the Company has
recorded the amounts for the warrants under Temporary Equity. The
Company believes as of the issuance date and the date of these financial
statements that the provisions which would trigger the reset to be remote and
thus has not remeasured the warrants after the date of
issuance. Should the trigger events become probable, the Company will
remeasure the warrants and any changes will be reported in expense at that time.
Both the Notes and Warrants also contained standard anti-dilution
provisions.
The
Company in August 2008 issued warrants to the placement agent to purchase
289,286 shares of its common stock at an exercise price of $0.93 per
share. The warrants vested immediately and expire in five years.
These warrants were valued by the Company using the Black-Scholes method at
$831,872 using a fair value per share of $1.00, risk-free interest rate of 3.32%
based on the note issuance and 100% volatility.
In
October 2008 the Company issued detachable warrants along with a note agreement
with an exercise price of $0.70 per share. This issuance triggered
the reset provision contained within the warrants above such that the warrant
exercise price reset to $0.70 from $0.93 and the number of shares exercisable
increased to 3,843,364 from 2,892,858. The Company recorded an
additional discount of $118,000 in 2008 which will be amortized.
On May
29, 2008, one of the note-holders from the January 2008 investment converted a
$25,000 note including accrued interest of $1,028 into 37,182 shares of the
Company’s common stock.
During
August 2008, the Company paid off a zero coupon note to one of its investors of
$110,000 which $95,000 represented cash received from the prior
quarter.
On
September 23, 2008 the Company received $50,000 from an accredited investor as a
90 day Zero Coupon note in which $55,000 was due in December 2008. The
Company made payments of $26,500 in December 2008, and paid the balance in
incremental payments during the first quarter of 2009.
During
2008, the Company entered into several short term (ninety-day) unsecured, 12%
promissory notes with certain accredited investors for a total of $1,508,232.
Along with these notes, the Company issued warrants to purchase 754,116 shares
of common stock at an exercise price of $0.70 expiring in 2013, which was valued
using the Black–Scholes method at $0.192 per share. This resulted in a value
of approximately $144,000 assuming a fair value per share of $0.30,
risk-free interest rate of 3.32% and a 100% volatility index. Consequently, the
Company recorded a discount of $131,865 on the notes, based on the relative fair
value of the warrants, which is being amortized over the term of these notes.
During 2008, all notes plus interest accrued of $36,598 were converted into
1,542,457 shares of common stock. On August 22, 2008 the Company
issued 327,126 shares of the Company’s common stock to another one of our
placement agents as part of their commission in connection with this convertible
note private placement. In accordance with an agreement with
the placement agent, the number of shares were determined by converting the cost
of services to common stock at $.70 per share. However, at the time
of settlement, in accordance with generally accepted accounting principles, the
company used the trading price of the stock, which ranged between $2.24 and
$3.27 per share, to convert the liability. Since the Company
initially recorded an expense of approximately $325,000 for these services, this
settlement resulted in additional expense
of $583,893.
During
the third quarter ended September 30, 2008, the Company issued short term
(ninety-day) unsecured, 12% promissory notes to four (4) accredited investors
for a total of $170,000. Along with these notes, the Company issued
warrants to note holders to purchase 57,500 shares of common stock exercisable
at $0.70 per share expiring in 2013, which was valued using the Black–Scholes
method at $0.39 per share. This resulted in a Black–Scholes value of $32,000
using a market price per share of $1.00, risk-free interest rate of 3.32% and a
100% volatility index. Consequently, the Company recorded a discount of $64,857
on the notes, based on the relative fair value of the warrants, which is being
amortized over the term of these notes. These notes also contain a conversion
feature in which the holder may convert their respective principal and accrued
interest into shares of the Company’s common stock at $1.00 per share. During
the fiscal quarter ended September 30, 2008; $90,000 of principal from the notes
were converted into 90,000 shares of common stock and accrued interest of $770
was converted into 770 shares of common stock.
On
October 30, 2008, November 17, 2008, December 4, 2008 and December 17, 2008, the
company raised $130,000, $100,000, $180,000 and $40,000 respectively in a
private offering from accredited investors. The securities sold by the Company
consisted of its 12% secured convertible promissory notes and warrants to
purchase 130,000, 100,000 180,000 and 40,000 shares of the Company’s common
stock , respectively at an exercise price of $0.70 and $1.00
respectively. The warrants were valued using the Black–Scholes
method. This resulted in a total value of $203,966 assuming a fair value per
share of $1.00, risk-free interest rates ranging from 2.06% to 2.75% based on
the note issuance and 100% volatility index. Under EITF 00-27 and APB
No. 14, we allocated the proceeds from issuance of these notes and warrants
based on the proportional fair value for each item. Consequently, we
recorded a discount of $209,966 which is being amortized over the term of these
notes using the effective interest rate ranging from 3.815% to
5.329%. A beneficial conversion discount was also recorded on these
convertible notes since these notes were convertible into shares of common stock
at an effective conversion price lower than the fair value of the common
stock. The beneficial conversion amount was limited to the portion of
the cash proceeds allocated to those convertible notes.
On
October 22, 2008 the company received $25,000 from an accredited investor as a
90 day zero coupon note in which $30,000 was due in January 2009. Payments
on the $30,000 note through March 31, 2009 were $16,500 and the
balance is scheduled to be paid in full during April
2009.
The
Company recorded $467,098 and $17,822 as interest expense on the above notes for
the twelve month period ended December 31, 2008 and 2007, respectively. Also,
included in interest expense is the amortization of $2,446,939 and $279,903 of
loan origination fees associated with these notes for the year ended 2008 and
2007 respectively.
|
NOTE
8
|
COMMON
STOCK, WARRANTS AND PAID IN CAPITAL
|
Common
Stock
As of
December 31, 2007 our authorized capital stock consisted of 75,000,000 shares of
common stock, par value $.001 per share. As of December 31, 2007, there were
3,150,000 issued and outstanding shares of common stock, 34,458,067 shares
issuable, and 1,500,000 shares to be cancelled. The Company issued 6,478,076
shares of common stock during the twelve month period ended December 31,
2008.
Holders
of common stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, including the election of directors. Except as
otherwise required by law, the holders of our common stock will possess all
voting power. Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors, by a
plurality) of the votes entitled to be cast by all shares of our common stock
that are present in person or represented by proxy. A vote by the
holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation. Our Articles of Incorporation do not
provide for cumulative voting in the election of directors.
Holders
of our common stock have no pre-emptive rights, no conversion rights and there
are no redemption provisions applicable to our common stock.
The
Company on December 1, 2006 commenced a private placement offering 1,000,000
shares of Convertible 10% Cumulative Preferred Stock Series A ($.001 par value)
at $0.248 per share. This offering included piggy-back registration rights. The
Series A Preferred Stock was convertible on a 1:1 basis, at the option of the
holder into shares of the Company’s common stock. In December 2006, the Company
issued 383,800 shares and collected $95,000. This offering was completed in
January 2007 issuing 1,838,200 shares of preferred stock and generating net
proceeds of an additional $410,000. Prior to the merger, the Company
had cumulative undeclared and unpaid dividends for Series A Preferred Stock of
$95,266. The cumulative undeclared dividends were paid via an
additional .1 share of stock for each preferred share of stock outstanding.
These preferred shares and dividends were exchanged for 2,022,020 shares of
common stock upon consummation of the merger.
In
connection with the Series A Preferred Stock Offering, the Company issued
warrants to various parties to purchase a total of 80,800 shares of its common
stock in January 2007. These warrants all have an exercise price of
$0.01 per share, vested immediately and expire in December
2011. These warrants were valued to be $24,000.
In
connection with the Series A Preferred Stock Offering, the Company issued
warrants to various parties to purchase a total of 80,800 shares of its common
stock in January 2007. These warrants all have an exercise price of
$0.01 per share, vested immediately and expire in December
2011. These warrants were valued to be $24,000.
The
Company in January and February 2007 issued an additional 1,979,600 shares of
its common stock to a series of fifteen individuals for the services they
provided to the Company in 2007. These shares were valued at $0.149 per
share for a total of $294,000. $208,500 of this cost was expensed during the
three month period ended March 31, 2007 in professional fees, with the balance
of $85,500 being capitalized under Website Development.
The
Company in April 2007 issued an additional 505,000 shares of its common stock to
its advisory board for the services they provide to the Company in 2007. These
shares were valued by the Company at $0.149 per share for a total of $75,000.
The cost of this issuance was expensed in professional fees during the three
month period ended June 30, 2007. Also in April the Company issued 303,000
shares to three key employees for services that these employees have provided
the Company. These shares were also valued by the Company at $0.149 per share
for a total of $45,000. This cost was reflected under administrative expense
during the three month period ended June 30
th
2007.
In October 2007, 174,645 shares were cancelled due to employee
termination.
On April
27, 2007, the Company fully accepted the Website software form Hype/Swapin
Networks (a related party; also see Note 13) for the development of the website
and delivered the final 202,000 shares of Series A Convertible 10% Cumulative
Preferred Stock ($0.001 par value) at $0.248 per share with piggy back
registration rights that were previously held back. On December 28, 2007, these
shares were exchanged for 222,200 shares of BOOMj.com common stock.
On May
10, 2007, Mountain Capital Natural Resource Fund, L.P. initiated the optional
conversion provision included in its note with the Company. The Company
subsequently issued 205,656 shares of common stock for the cancellation of the
12% Convertible Note. This included $1,808 of interest coupled with the
principal conversion of $100,000.
The
Company on February 1, 2007 commenced a private placement offering 5,050,000
shares of Convertible 10% Cumulative Preferred Stock Series B ($.001 par value)
at $0.99 per share. This offering included piggy-back registration rights. The
Preferred Stock Series B was convertible on a 1:1 basis, at the option of the
holder into shares of the Company’s common stock. The Company initially broke
escrow on May 24
th
2007
issuing 1,066,560 shares of Preferred Stock Series B, receiving $918,720 in net
proceeds. The Company issued an additional 282,800 of Preferred Stock Series B,
on June 27
th
after
receiving $243,600 in net proceeds. During the three months ended September 30,
2007 the Company issued an additional 449,450 shares of Preferred B, receiving
$392,150 in net proceeds during this time period. During the three month period
ended December 31, 2007 the Company issued an additional 50,500 shares of
Preferred Stock Series B receiving $50,000 in net proceeds. On December 12, 2007
the principal and accrued interest on the Carole Harder Note was converted into
shares of the Company’s Preferred Stock Series “B” at the request of the holder
at a price of $0.99 per share on December 12, 2007. The Company subsequently
issued 102,925 shares of its Preferred Stock Series “B” for the cancellation of
the 12% Convertible Note. This included $1,907 of interest coupled with the
principal conversion of $100,000. Prior to the Merger the Company had cumulative
undeclared and unpaid preferred dividends for series B Preferred Stock of
$93,698. These preferred shares and dividends were converted into 2,147,460
shares of BoomJ (fka Reel Estate Services) common stock.
In
connection with the Series B Preferred Stock Offering, on September 2007, the
Company issued two warrants to the placement agent to purchase a total of
115,500 shares of the Company’s common stock. The warrant to purchase
50,000 shares of common stock vested immediately, has an exercise price of $0.50
per share and expires in five years. The other warrant to purchase
65,500 shares of common stock also vested immediately, has an exercise price of
$2.40 per share and expires in five years. The Company valued these
two warrants by using the Black-Scholes model at a total of
$46,076.
On August
3, 2007 the Company issued 2,424,000 shares of the Company’s common stock to two
individuals for services rendered in connection with analyzing several potential
reverse merger candidates which would allow the Company to become a publicly
traded entity. These shares were valued by the Company at $0.149 per share for a
total of $360,000. The cost of this issuance was recorded as professional fees
on the Company’s statement of operations.
On
September 10, 2007 the Company issued a short term Promissory Note to Linlithgow
Holdings, LLC (a related party) in exchange for $90,000. The term of this Note
was for thirty (30) days from the issuance with provisions to pay interest at
12%, in cash from the date of issuance until the Note is paid. On October 10,
2007 this Note was extended another thirty-two days with the same terms and
conditions. Also, issued with this note was warrant to purchase 15,000 shares of
common stock exercisable at $0.30 per share expiring in 2011. These warrants
were valued at $0.49 per share using the Black-Scholes method. This resulted in
a total value of $7,273 using a risk-free interest rate of 5.25% and 100%
volatility index.
On
September 24, 2007, the Company entered into an agreement with a firm to provide
management and financial consulting services for publicly traded companies. The
Company in exchange for these services issued 80,800 shares of the Company’s
common stock. These shares were valued by the Company at $0.297 per share for a
total of $24,000. The Company has reported $12,000 in consulting fees in the
accompanying Statement of Operations and the remaining $12,000 is in Prepaid
Expense. This agreement was for a period of twelve months with piggy back stock
registration rights.
On
October 14, 2007 the Company issued a 12% Convertible Note to Carole Harder in
exchange for $100,000. The term of this Note was for thirty (30) days from the
issuance with provisions to pay interest at 12%, in cash. Also, included in this
note were the issuance of warrant to purchase 25,000 shares of our common stock
exercisable at $1.00 per share expiring in 2011, which was valued using the
Black-Scholes method at $0.59 per share. This resulted in a total value of
$9,494 assuming a risk-free interest rate of 5.25% and 100% volatility index. We
allocated the proceeds from the issuance of this note and the warrants based on
the proportional fair value for each item. Consequently we recorded a discount
of $9,494 on the note, which is being amortized over the term of the
note. On December 12, 2007, the principal and accrued interest on
this note was converted into 102,925 shares of our Series B Preferred
stock.
On
October 19, 2007 the Company issued a short term Promissory Note to Centurion
Credit Resources, LLC (“Centurion”) in exchange for $500,000 (“Centurion Loan”).
The term of this Note is for ninety (90) days from the issuance with provisions
to pay interest at 12% in cash monthly from the date of issuance until the note
is paid. As a condition precedent to the note holder’s obligations under this
Note, the Company delivered to Lender (a) an origination fee in the amount of
$15,000, and (b) 404,000 shares of the Company’s $.001 par value common stock.
These shares were valued by the Company at relative fair value of $96,775. The
cost of this issuance is being captured within the debt financing costs a
component of interest. This Note has been guaranteed personally by Robert
McNulty, Chairman of BoomJ. On October 24, 2007 the Company issued 505,000
shares of the Company’s common stock to Robert McNulty, Chairman of BOOMj.com as
consideration for his guarantee to Centurion for the financing to the Company.
The amount of remuneration was determined by the independent members of the
Executive Committee. These shares were valued by the Company at $0.297 per share
for a total of $150,000, which is being amortized over the term of the Centurion
Loan.
On
October 19, 2007 the Company issued 404,000 shares of the Company’s common stock
to two individuals for services rendered in connection with obtaining the
Centurion Loan for the Company. These shares were valued by the Company at
$0.297 per share for a total of $120,000. The cost of this issuance is recorded
as prepaid financing costs and amortized over the term of the Centurion Loan.
Accordingly, on December 28, 2007 these shares were exchanged for 404,000 shares
of BOOMj.com common stock.
On
November 6, 2007, the Company entered into an agreement with the firm Richardson
& Patel LLC to provide legal services for publicly traded companies. The
Company in exchange for these services issued 20,200 shares of the Company’s
common stock. These shares were valued utilizing information provided from
Financial Valuation Group at $0.297 per share for a total of $6,000. Accordingly
on December 28, 2007 these shares were exchanged for 20,200 shares of BOOMj.com
common stock.
On
November 15, 2007 the Company issued 606,000 shares of the Company’s common
stock to an employee of the Company for the services provided in
2007. These shares were valued by the Company at $0.297 per share for
a total of $180,000.
On
January 18, 2008, the promissory note with Centurion Credit Resources, LLC was
modified to extend the term for an additional ninety (90) days. As a condition
precedent to modification, the Company paid Centurion Credit Resources (a) an
origination fee of $20,000, and (b) 300,000 shares of the Company’s common
stock. These shares were valued at $0.30 per share for a total of $90,000.
$22,500 of this cost was amortized during the three month period ended March 31,
2008 as debt financing fees. On April 18, 2008 the Company entered into a Second
Modification Agreement with Centurion Credit Resources, LLC on its $500,000
note. As a condition precedent to modification, the Company paid to Centurion
Credit Resources’ (a) an origination fee in the amount of $25,000, and (b)
100,000 additional shares of the Company’s common stock valued at
$30,000.
On
January 19, 2008, the Company issued a four-year warrant to purchase up to
12,500 shares of common stock at an exercise price of $0.70 per share to an
accredited investor for services rendered in connection with obtaining short
term financing for the Company. The warrants were valued using the
Black–Scholes method at $0.001 per share. This resulted in a total value of $10
assuming a risk-free interest rate range of 4.00%, and 16% volatility
index.
On
January 25 and February 1, 2008, the Company issued an aggregate of 105,000
shares of the Company’s common stock to three entities for services rendered to
the Company. These shares were valued by the Company at $0.30 per share for a
total of $31,500. The total amount was amortized during 2008 as debt financing
fees.
On
February 7, 2008, the Company issued a warrant to a media entity for services
rendered to the Company. Included in this transaction were the issuances of
20,000 warrants exercisable at $0.93 per share, expiring in 2011. The warrants
were valued using the Black–Scholes method at $0.092 per share. This resulted in
a total value of $1,843 assuming a risk-free interest rate of 3.50% and 73%
volatility index. This amount was expensed in selling, administrative, and
general expense during the three month period ended March 31, 2008
On
February 13, 2008, the Company issued 350,000 shares of the Company’s common
stock to three entities for services rendered in connection with the private
placement offering of the Convertible 12% Secured Promissory Notes described
above for February 7, 2008. These shares were valued by the Company at $0.30 per
share for a total of $105,000.
On
February 20, 2008, Carole Harder, an accredited investor, acquired 71,429 shares
of the Company’s common stock at $0.70 per share for $50,000 in cash. Also,
included in this transaction was the issuance of a warrant to purchase 71,429
shares of our common stock at an exercise price of $0.93 per share expiring in
2011.
On
February 28, 2008, the Company issued 40,000 shares of its common stock upon the
exercise of warrants to purchase the Company’s stock at $0.01 per share by two
entities.
On March
12, 2008, an accredited investor acquired 40,000 shares of the Company’s common
stock at $0.70 per share or $28,000 in cash. Also, included in this transaction
was the issuance of a warrant to purchase 40,000 shares of our common stock at
an exercise price of $0.93 per share expiring in 2013.
On April
16, 2008, the Company and Coventry Windsor, Inc. entered into an agreement for
Coventry Windsor, Inc. to provide services related to finding contacts for
future funding and other services. The term of the agreement is for
one year and Coventry Windsor, Inc. will be compensated by a 4% commission on
all monies raised through their introductions.
In May
2008, the Company entered into an agreement with Wealth Wise LLC to provide
investor relation and other services to the Company on a month-to-month basis.
As compensation for these services, we agreed to pay Wealth Wise
LLC $25,000 in cash and 25,000 shares of our common stock each month. In
2008 we issued a total of 100,000 shares of our stock under this agreement and
recorded expense in the amount of $303,730.
On
May 29, 2008 one of the January 2008 note holders converted an amount of $26,027
being principal and interest of their note into 37,182 shares of the Company’s
common stock.
During
2008 the Company issued 535,715 shares of the Company’s common stock, to one of
its service providers of technical and administrative assistance for the
Company’s e-commerce platform, in settlement of a liability incurred during
2008. The Company has an agreement with this provider to settle the
liability at $.70 per share. However, in accordance with generally
accepted accounting principles, since the trading price of the common stock on
the date of settlement was $3.21 per share, the Company recorded an additional
expense of $268,929 in 2008.
During 2008
the Company issued 425,376 shares of its common stock for $428,635 to foreign
investors.
During
2008, one of our placement agents and three of our investors exercised their
warrants utilizing a cashless option in their agreement, converting 744,027
warrants into 574,326 shares of the Company’s common stock at an exercise price
of $0.93.
On August
22, 2008 the Company issued 224,646 shares of the Company’s common stock to
another one of our placement agents as part of their commission in connection
with the convertible note private placement. In accordance with
an agreement with the placement agent, the number of shares was determined by
converting the cost of services to common stock at $.70 per
share. However, at the time of settlement, in accordance with
generally accepted accounting principles, the Company used the trading price of
the stock, which ranged between $2.24 and $3.27 per share, to convert the
liability which resulted in us recording $607,289 of loan fees. In
addition this same placement agent was paid cash commission and fees of
$68,300.
On
September 26, 2008 the Company issued 50,400 shares of the Company’s common
stock to a placement agent for settlement of a liability incurred in a prior
period. In accordance with an agreement with this placement
agent the number of shares was determined by converting the cost of the services
to common stock at $.70 per share. However, in accordance with
generally accepted accounting principles, the Company used the trading price of
the stock on the settlement date, which was $2.50 per share, to record the
expense related to this liability. Since $15,000 was recorded as
expense in a previous period, this resulted in additional expense of $111,000 in
2008.
On
September 30, 2008 the Company sold 25,000 shares of its common stock for
$25,000. As part of this transaction, a warrant was issued to
purchase an additional 12,500 shares of common stock at $.70. This
warrant vested immediately and expires in 5 years.
During
2008, the holders of $1,598,232 of short term convertible notes along with the
accrued interest of $37,368 was converted into 1,635,600 shares of common stock
.
On
October 9, 2008 the Company issued 5,000 shares of common stock to a vendor for
computer software services valued at the trading price of the common stock on
the date of the transcations.
During
October 2008 the Company sold to five (5) different investors, an aggregate of
155,000 shares of its common stock for $155,000. As part of these transactions,
warrants were issued to the investors to purchase an additional 77,500 shares of
common stock at $0.70 per share.
On
October 22, 2008 $25,000 of principal from the short term convertible notes was
converted into 25,000 shares of common stock and the related accrued interest of
$904 was also converted into 904 shares of common stock.
In
December 2008 the Company sold to four (4) different investors, an aggregate of
25,000 shares of its common stock for $25,000. As part of these transactions,
warrants were issued to the investors to purchase an additional 25,000 shares of
common stock at $1.00 per share.
Warrants
The
following is a summary of the Company’s outstanding common stock purchase
warrants:
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercise Price
|
|
December 31, 2007
|
|
|
Issued in 2008
|
|
|
Exercised
|
|
|
December 31, 2008
|
|
|
$0.01
|
|
|
193,920
|
|
|
|
—
|
|
|
|
(40,000
|
)
|
|
|
153,920
|
|
|
$0.30
|
|
|
30,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,300
|
|
|
$0.50
|
|
|
101,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
101,000
|
(1
)
|
|
$0.70
|
|
|
0
|
|
|
|
5,087,480
|
|
|
|
—
|
|
|
|
5,087,480
|
|
|
$0.93
|
|
|
896,429
|
|
|
|
3,917,858
|
|
|
|
(787,644
|
)
|
|
|
4,026,643
|
|
|
$1.00
|
|
|
58,247
|
|
|
|
445,000
|
|
|
|
—
|
|
|
|
503,247
|
|
|
$2.40
|
|
|
132,310
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132,310
|
(1
)
|
|
|
|
|
1,412,206
|
|
|
|
9,450,338
|
|
|
|
(827,644
|
)
|
|
|
10,034,900
|
|
|
|
(1)
|
The
chart above includes in the outstanding December 31, 2007 balance warrants
to purchase BOOMj.com common stock. The BOOMj.com warrants to
purchase common stock should have been exchanged for warrants of the
Company. On June 28, 2008, the Company issued replacement
warrants for the BOOMj.com warrants. The outstanding
warrants as of December 31, 2008, therefore, include an additional
260,442 warrants issued to replace the warrants previously issued by
Boomj.com, Inc., which new warrants were issued at a rate of 2.02 shares
of the Company common stock for each warrant share of BOOMj.com. The
Company has reserved a sufficient number of shares of authorized common
stock for issuance upon exercise of the outstanding
warrants.
|
2008
Stock Option Plan
In
September 2008, the Company's Board of Directors approved the 2008 Equity
Incentive Plan of
Beyond
Commerce
(the "Plan"). The Plan reserves 3,500,000 shares of common stock
for issuance pursuant to stock options that are either “incentive stock options”
(“ISOs”) intended to satisfy the requirements under Section 422 of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder, or
“non-qualified stock options” (“NQSOs”), (collectively the “Options”). Employees
of the Company, or any of the Company’s subsidiaries, at the option grant date
are eligible to receive NQSOs or ISOs. Consultants, or non-employee directors of
the Company or any of the Company's subsidiaries, are eligible to receive NQSOs.
The Plan is administered by the Board of Directors of the Company (the "Board").
In order to comply with certain rules and regulations of the Securities and
Exchange Commission or the Internal Revenue Code, the Board can delegate
authority to appropriate committees of the Board made up of “non-employee
directors”, as defined under Rule 16b-3 of the Securities and Exchange Act of
1934, and “outside directors” as defined by Section 162(m) of the Code. The
Board has full and final authority to: grant Options; determine the fair
market value of the shares subject to Options; determine the exercise price of
the Options granted; select the persons to whom awards may be granted; determine
the time or times at which Options shall be granted; interpret the Plan;
prescribe, amend and rescind rules and regulations relating to the Plan; to
modify or amend Options or defer the exercise date of the Options, with the
consent of the optionee; and to make all other determinations deemed necessary
for the administration of the Plan.
Under the
Plan, each option granted will be evidenced in a form satisfactory to the Plan
administrator, executed by the Company and the option grantee. Options issued
under the Plan have a term of no more than 10 years, an exercise price equal to
at least 100% of the fair market value of the Company's common stock on the
date of grant, are exercisable immediately as of the effective date of the stock
option agreement granting the option or in accordance with a schedule as may be
set up by the Plan administrator (each such date on such schedule, the
“Vesting Base Date”), and unless otherwise determined by the Board, may not be
transferred except by will, the laws of descent and distribution, or pursuant to
a domestic relations order. Option grants to any person owning more than 10% of
the total combined voting power of all of the Company’s classes of stock, either
directly or through attribution as defined by the Code, or any affiliate as
defined by the rules and regulations of the SEC (“Affiliate”), may not
carry an exercise price of less than 110% of the fair market value of the
Company’s common stock at the date of grant. The exercise period of ISOs granted
may not exceed ten years after the date of grant. Upon termination of
employment, all options immediately vest unless stipulated otherwise by the
Plan administrator at the time of issuance.
The
2008 Equity Incentive Plan was approved by the stockholders of
the Company on September 11, 2008.
Stock Options
Granted
On
September 11, 2008, the Board of Directors approved the issuance of stock
options as described below in accordance with the 2008 Equity Incentive
Plan. The employee options have a cliff vesting schedule over a three year
period that vest one third after one year of service and then 4.2% per month
over the remaining
twenty-four
months. Options issued to non-employees for meeting performance-based goals vest
immediately.
|
Option
Group
|
|
|
Number
of
Stock
Options
Issued
|
|
|
Exercise
Price
|
|
Expiration
|
|
|
$0.70
|
|
|
|
450,000
|
|
|
$
|
|
|
0.70
per share
|
|
September 10,
2019
|
|
|
$0.80
|
|
|
|
20,000
|
|
|
$
|
|
|
0.80
per share
|
|
September 10,
2019
|
|
|
$0.90
|
|
|
|
451,049
|
|
|
$
|
|
|
0.90
per share
|
|
September 10,
2019
|
|
|
$1.01
|
|
|
|
73,271
|
|
|
$
|
|
|
1.01
per share
|
|
September 10,
2019
|
|
|
$1.50
|
|
|
|
120,000
|
|
|
$
|
|
|
1.50
per share
|
|
September 10,
2019
|
The
estimated fair value of the aforementioned options was calculated using the
Black-Scholes model. Consequently, the Company recorded a share-based
compensation expense of $630,832 for the year ended December 31, 2008.
Total
compensation costs to be recognized over the next 2.4 weighted average number of
years will be $931,989 for all non-vested employee options as of December 31,
2008.
The following table summarizes the weighted average of the
assumptions used in the method.
|
|
|
Year
ending
December 31,
2008
|
|
|
Year
ending
December 31,
2007
|
|
|
Expected
volatility
|
|
|
100%
|
|
|
|
n/a
|
|
|
Dividend
yield
|
|
|
n/a
|
|
|
|
n/a
|
|
|
Expected
terms (in years)
|
|
|
5-10
|
|
|
|
n/a
|
|
|
Risk-free
rate
|
|
|
1.50%-2.9%
|
|
|
|
n/a
|
|
The
following table summarizes the Company’s stock option activity and related
information:
|
|
|
Number
of
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
Balance
as of January 1, 2008
|
|
|
-
|
|
|
Granted
|
|
|
1,114,320
|
|
|
Options
to be issued
|
|
|
-
|
|
|
Expired/forfeit
|
|
|
-
|
|
|
Balance
as of December 31, 2008
|
|
|
1,114,.320
|
|
|
|
|
|
OPTIONS
OUTSTANDING
|
|
|
OPTIONS
EXERCISABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.70
|
|
|
|
450,000
|
|
9.75
years
|
|
$
|
0.70
|
|
|
|
69,300
|
|
|
$
|
0.70
|
|
$
|
0.80
|
|
|
|
20,000
|
|
9.75
years
|
|
$
|
0.80
|
|
|
|
--
|
|
|
$
|
0.80
|
|
$
|
0.90
|
|
|
|
451,049
|
|
9.75
years
|
|
$
|
0.90
|
|
|
|
448,584
|
|
|
$
|
0.90
|
|
$
|
1.01
|
|
|
|
73,271
|
|
9.75
years
|
|
$
|
1.01
|
|
|
|
56,502
|
|
|
$
|
0.90
|
|
$
|
1.50
|
|
|
|
120,000
|
|
9.75
years
|
|
$
|
1.50
|
|
|
|
103,300
|
|
|
$
|
1.50
|
The
weighted-average grant-date fair value of the option granted during the years
ending December 31, 2008 was $0.89.
Dividends
In 2007
at the time of the merger and conversion of the preferred stock the Company
issued an additional 599,221 shares of common stock to the preferred
stockholders in full payment of preferred dividends totaling
$188,964.
The
Company anticipates that all future earnings will be retained to finance future
growth. The payment of dividends, if any, in the future to the
Company’s common stockholders is within the discretion of the Board of Directors
of the Company and will depend upon the Company’s earnings, its capital
requirements and financial condition and other relevant factors. The
Company has not paid a dividend on its common stock and does not anticipate
paying any dividends on its common stock in the foreseeable future but instead
intends to retain all earnings, if any, for use in the Company’s business
operations
.
NOTE
9 – INCOME TAXES
A
reconciliation of the statutory income tax rates and the Company’s effective tax
rate is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Statutory
U.S. federal rate
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
|
Permanent
differences
|
|
|
-
|
|
|
|
7.00
|
%
|
|
Valuation
allowance
|
|
|
34.00
|
%
|
|
|
27.00
|
%
|
|
Provision
for income tax expense(benefit)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The tax
effects of the temporary differences and carry forwards that give rise to
deferred tax assets consist of the following:
|
|
|
2008
|
|
|
2007
|
|
|
Deferred tax
assets:
|
|
|
|
|
|
|
|
Net operating
loss carryforwards
|
|
|
5,106,757
|
|
|
|
1,306,238
|
|
|
Unamortized start
up costs
|
|
|
18,000
|
|
|
|
18,000
|
|
|
Accrued
expenses
|
|
|
219,729
|
|
|
|
-
|
|
|
Non-cash
compensation
|
|
|
678,392
|
|
|
|
-
|
|
|
Derivative
liabilities
|
|
|
606,925
|
|
|
|
-
|
|
|
Deferred
revenue
|
|
|
242,985
|
|
|
|
-
|
|
|
Total
deferred tax assets
|
|
|
6,872,788
|
|
|
|
1,324,238
|
|
|
Deferred tax
liabilities
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion features
|
|
|
(426,016
|
)
|
|
|
-
|
|
|
Deferred
commissions
|
|
|
(103,591
|
)
|
|
|
-
|
|
|
Total deferred tax
liabilities
|
|
|
(529,607
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(6,343,181
|
)
|
|
|
(1,324,238
|
)
|
|
Net deferred tax
asset
|
|
|
-
|
|
|
|
-
|
|
At
December 31, 2008 the Company had U.S. federal net operating losses of
approximately $13,174,000 for income tax purposes which will expire in 2017 and
2018. For financial reporting purposes, the entire amount of the net
deferred tax assets has been offset by a valuation allowance due to uncertainty
regarding the realization of the assets. The net change in the total
valuation allowance for the year ended December 31, 2008 was an increase of
$5,018,983.
As of
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN
48), which requires a company to evaluate whether a tax position taken by the
company will “more likely than not” be sustained upon examination by the
appropriate tax authority. Pursuant to FIN 48, the Company has
analyzed filing positions in all of the federal and state jurisdictions where it
is required to file income tax returns, as well as all open tax years in these
jurisdictions. The Company believes that its income tax filing positions and
deductions would be sustained on audit and does not anticipate any adjustments
that would result in a material change to its financial
position. Therefore, no reserves for uncertain income tax positions
have been recorded pursuant to F
IN
48. In addition, the Company did not record a cumulative effect
adjustment related to the adoption of FIN 48.
The following table summarizes the
activity related to the Company's gross unrecognized tax
benefits:
|
|
|
Amount
|
|
|
Gross unrecognized tax benefits at
December 31,2007
|
|
|
-
|
|
|
Increases in tax positions for
current year
|
|
|
-
|
|
|
Settlements
|
|
|
-
|
|
|
Lapse in statute of
limitations
|
|
|
-
|
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at
December 31,2008
|
|
|
-
|
|
The Company is subject to
U.S.
federal income tax including state and
local jurisdictions. Currently, no federal or state income tax returns are under
examination by the respective taxing jurisdictions.
The Company's accounting policy is to
recognize interest and penalties related to uncertain tax positions in income
tax expense. The Company has not accrued interest for any
periods.
|
NOTE
10
|
COMMITMENTS
and CONTINGENCIES
|
Operating
Lease
The
Company leases certain office space, under operating leases which generally
require the Company to pay taxes, insurance and maintenance expenses related to
the leased property. The leases for office space have lease extension
renewal options for an added two to three years at fair market rent values. The
Company believes that in the normal course of business, leases will be renewed
or replaced by other leases. In December 2007 the Company entered
into a four year lease for 4,560 square feet in Henderson, Nevada which houses
its corporate office.
On May 1,
2008 the Company relocated its Orange County office to Irvine, California. The
Irvine lease is for a twelve month period for approximately 2,042 square feet of
office space. The lease in Irvine houses the Company’s marketing and content
employees. Total rent expense incurred by the Company, which includes the leases
above and sundry month to month rental expenditures was $225,006 and $125,421
for the twelve month period ended December 31, 2008 and 2007,
respectively. The Company signed an amendment to its lease in Henderson, Nevada
in February 2009, effective March 16, 2009 for an additional 5,634 square feet
of office space adjacent to the current office. This amendment ties
to the expiration of the present lease and will expire January 31,
2012. The Company has future minimum lease obligations as follows:
|
Twelve months
ending
December 31,
|
|
2008
|
|
|
2009
|
|
$
|
270,496
|
|
|
2010
|
|
|
290,025
|
|
|
2011
|
|
|
298,726
|
|
|
2012
|
|
|
12,138
|
|
|
Total
|
|
$
|
871,385
|
|
NOTE 11
– SIGNIFICANT
CUSTOMERS AND SUPPLIERS
The
Company will derive a significant portion of its revenue from e-commerce based
customers. This is a very competitive market with many suppliers for the
products the Company offers. The Company believes that it can replace any one
product line with another supplier without any disruptions in
activity.
NOTE 12 – SEGMENT
REPORTING
Beyond
Commerce, Inc manages its operations through two business segments:
BOOMj.com dba i-Supply and Local Ad Link . Each unit owns and
operates the segments under the respective names.
The
Company evaluates performance based on net operating profit. Administrative
functions such as finance, treasury, and information systems are centralized and
although they are not considered operating segments are presented below for
informative purposes. However, where applicable, portions of the administrative
function expenses are allocated between the operating segments. The operating
segments do share facilities in Henderson NV. In the event any supplies and/or
services are provided to one operating segment by the other, the transaction is
valued according to the company’s transfer policy, which approximates market
price. The costs of operating the segments are captured discretely within each
segment. The Company’s leasehold improvements, property, computer equipment,
inventory, and results of operations are captured and reported discretely within
each operating segment.
Summary
financial information for the two reportable segments is as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
______________Operations:
I-Supply dba BOOMj.com
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
1,060,272
|
|
|
$
|
94,485
|
|
|
Gross
Margin
|
|
|
(23,102
|
)
|
|
|
(3,394
|
)
|
|
Depreciation
|
|
|
181,134
|
|
|
|
137,255
|
|
|
Assets
|
|
|
598,016
|
|
|
|
852,202
|
|
|
Capital
Expenditures
|
|
|
111,882
|
|
|
|
149,698
|
|
|
______________Operations:
Local Ad Link
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
782,959
|
|
|
|
-
|
|
|
Gross
Margin
|
|
|
(108,766
|
)
|
|
|
-
|
|
|
Depreciation
|
|
|
1,668
|
|
|
|
-
|
|
|
Assets
|
|
|
644,927
|
|
|
|
-
|
|
|
Capital
Expenditures
|
|
|
10,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Consolidated
Operations:
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
1,843,231
|
|
|
$
|
94,485
|
|
|
Depreciation
|
|
|
182,802
|
|
|
|
137,255
|
|
|
Assets
|
|
|
1,242,940
|
|
|
|
925,056
|
|
|
Capital
Expenditures
|
|
|
121,882
|
|
|
|
149,689
|
|
NOTE 13 – RELATED
PARTIES
Rhett
McNulty is the son of Robert J. McNulty, our CEO. Rhett McNulty owns Linlithgow
Holdings, LLC, which is the Company’s largest shareholder. Rhett McNulty is also
the Chief Operating Officer and an 18% owner of Hype/Swapin Networks, Inc. In
December 2006 Boomj.com, Inc. purchased its proprietary website software from
Hype/Swapin Networks, Inc. for 500,000 shares of Boomj Series A Preferred stock.
Prior to the acquisition of BOOMj these 500,000 Series A Preferred shares were
converted into 550,000 shares of Boomj.com’s common stock. In connection the
acquisition of BOOMj.com, we issued 1,111,000 shares of our common stock in
exchange for these 550,000 shares.
During
2007 Boomj.com borrowed $218,000 from Linlithgow Holdings LLC in a series
of transactions. All of the loans bore interest at 12% per year and have since
been repaid. In connection with these loans Boomj.com issued Linlithgow Holdings
warrants to purchase 34,835 shares of its common stock. The warrants are
exercisable at price ranges from $0.01 to $1.00 per share and expire on December
31, 2011. The Company also paid Linlithgow Holdings $195,000 in consulting
fees for services provided. In 2008 we paid Linlithgow Holdings
$53,450 in commissions and consulting fees.
We also
have related party transactions with FA Corp in which the principal shareholder
is a member of our board of directors, Murray Williams. We paid FA
Corp in 2008 $102,673 for services rendered. Another one of our directors, Mr.
Barry Falk is a partner in the law firm Irvine Venture Law Firm. The Company
paid $185 in 2007 and $336 in 2008 for legal services provided to the Company by
Mr. Falk’s firm.
In 2009,
we started using a debit card issued by TAC Financial, Inc., which as of
December 31, 2008 was 85% owned by Linlithgow Holdings, LLC. Additionally, one
of our employees, Clark McNulty, the son of Robert J. McNulty, sits on the Board
of TAC Financial, Inc. The Company has not incurred any expenses
related to these debit cards in 2008. The Company uses their VISA
debit card as a means to pay commissions to our Local Ad Link sales
representatives. As of March 13, 2009 Linlithgow Holdings, LLC
ownership percentage of TAC Financial, Inc. was reduced to approximately
75%.
NOTE 14 – NET LOSS PER SHARE
OF COMMON STOCK
The
Company has adopted Financial Accounting Standards Board ("FASB") Statement
Number 128, "Earnings per Share," which requires presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. In the accompanying financial statements, basic loss
per share of common stock is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the
year. Basic net loss per common share is based upon the weighted
average number of common shares outstanding during the period. 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. However,
shares associated with convertible debt, stock options and stock warrants
are not included because the inclusion would be anti-dilutive (i.e. reduce the
net loss per common share). The total number of such stock options
shares excluded from the diluted net loss per common share presentation was
19,010,108 and 1,151,764 at December 31, 2008 and 2007,
respectively.
Outstanding
warrants of 10,034,900, 1,114,320 stock options, 6,764,285 convertible
debt to purchase the Company’s common stock are not included in the
computation of diluted earnings per share because the effect of these
instruments would be anti-dilutive (i.e., reduce the loss per share) for the
year ended December 31, 2008. The following is a reconciliation of the numerator
and denominator of the basic and diluted earnings per share computations for the
period ended December 31, 2008 and the year ended December 31,
2007:
Basic and
diluted net loss per share:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
loss available to common stockholders
|
|
$
|
(12,857,990
|
)
|
|
$
|
(4,973,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average number of shares outstanding
|
|
|
38,580,296
|
|
|
|
24,533,552
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$
|
(0.33
|
)
|
|
$
|
(0.20
|
)
|
NOTE 15
SUPPLEMENTAL
DISCLOSURES OF CASH FLOWS (not described elsewhere)
The
Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95. The Company paid $48,192
and $13,575 for the year ended December 31, 2008 and 2007, respectively for
interest. The Company did not make any payments for income tax during the year
ended December 31, 2008. As of December 31, 2008, prepaid loan fees included
$263,007 (net of amortization) of debt related fees, which were paid by issuing
common stock and warrants.
During
2007, prepaid expenses included $52,000 of prepaid loan and consulting fees
which were paid by issuing common stock. Also, during 2007 a note for $100,000
and interest expense of $1,907 was converted into Series B preferred
stock.
During
2007, the Company issued 202,000 shares of Series A preferred stock in payment
of a payable of $50,000 and issued warrants valued at $22,908 for additional
debt financing.
During
2007, the Company issued 404,000 shares of common stock valued at $96,775 as
additional consideration for a $500,000.
NOTE 16
SUBSEQUENT
EVENTS
In
January 2009, we issued 10,000 shares of our common stock for services provided
as a commission, and an addition 1,000 shares of common stock to an individual
for services rendered with setting up our debit card program used for paying our
sales representatives.
On
January 12, 2009 we issued 25,000 shares of common stock for cash at $0.80 per
share to an accredited investor.
On
January 7, 2009 we received a bridge loan of $100,000 at 12% interest due May 7,
2009. In addition we issued warrants to the investor to purchase
100,000 shares of our common stock at an exercise price of $1.00.
On
January 26, 2009 we issued stock options to two of our Board members of 56,625
each with a $0.70 exercise price.
In
February 2009, we issued 52,000 shares of our common stock for services rendered
in connection with our convertible bridge loans procured during the fourth
quarter 2008.Also in February, we issued 5,000 shares of stock as compensation
to an employee.
During
the first quarter of 2009, three of our note holders converted the principal and
interest of their convertible promissory notes into shares of our common stock
at a conversion rate of $.70 per share. Total principal converted was
$205,000, which amount was converted into 292,858 common
shares. Total accrued interest converted was $23,627 into 33,752
common shares.
During
March 2009, the holders of $2,025,000 of our secured convertible promissory
notes that were scheduled to mature on March 31, 2009 agreed to extend the
maturity date to July 31, 2009. As consideration for their agreement
to extend the maturity date, we issued three-year warrants to the note holders
granting them the right to purchase an aggregate of 600,000 shares of our common
stock, at an exercise price of $1.00 per share.
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