form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
T
|
Quarterly Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
quarterly period ended March 31, 2009
or
*
|
Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For
the transition period from __________ to __________
Commission
file Number 000-17288
aVINCI
MEDIA CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
|
75-2193593
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
11781
South Lone Peak Parkway, Suite 270, Draper, UT
|
84020
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (801) 495-5700
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 requirement for
the past 90 days. Yes x
No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer *
|
|
Accelerated
filer *
|
Non-accelerated
filer *
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company T
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes *
No T
The
number of shares of common stock outstanding as of the close of business on
April 30, 2009 was 50,150,958
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
TABLE
OF CONTENTS
|
Page
|
|
|
PART I.
FINANCIAL INFORMATION
|
|
|
|
3
|
|
4
|
|
5
|
|
7
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|
11
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|
16
|
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16
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PART
II. OTHER INFORMATION
|
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17
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17
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17
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17
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17
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17
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17
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PART I.
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
86,027
|
|
|
$
|
1,071,053
|
|
Accounts
receivable
|
|
|
160,801
|
|
|
|
261,592
|
|
Marketable
securities available-for-sale
|
|
|
93,416
|
|
|
|
131,754
|
|
Inventory
|
|
|
183,646
|
|
|
|
187,184
|
|
Prepaid
expenses
|
|
|
90,665
|
|
|
|
233,045
|
|
Deferred
costs
|
|
|
10,998
|
|
|
|
143,944
|
|
Deposits
and other current assets
|
|
|
5,987
|
|
|
|
5,987
|
|
Total
current assets
|
|
|
631,540
|
|
|
|
2,034,559
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
515,119
|
|
|
|
622,685
|
|
Intangible
assets, net
|
|
|
88,543
|
|
|
|
91,043
|
|
Other
assets
|
|
|
161,916
|
|
|
|
160,212
|
|
Total
assets
|
|
$
|
1,397,118
|
|
|
$
|
2,908,499
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
108,094
|
|
|
$
|
129,874
|
|
Accrued
liabilities
|
|
|
199,930
|
|
|
|
191,614
|
|
Current
portion of capital leases
|
|
|
141,844
|
|
|
|
143,199
|
|
Current
portion of deferred rent
|
|
|
49,860
|
|
|
|
48,195
|
|
Deferred
revenue
|
|
|
207,624
|
|
|
|
344,574
|
|
Total
current liabilities
|
|
|
707,352
|
|
|
|
857,456
|
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations, net of current portion
|
|
|
59,806
|
|
|
|
92,423
|
|
Deferred
rent, net of current portion
|
|
|
13,853
|
|
|
|
27,151
|
|
Total
liabilities
|
|
|
781,011
|
|
|
|
977,030
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value, authorized 50,000,000; no shares issued and
outstanding
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $0.01 par value, authorized 250,000,000 shares; issued and
outstanding 48,738,545 shares
|
|
|
487,385
|
|
|
|
487,385
|
|
Additional
paid-in capital
|
|
|
22,823,306
|
|
|
|
22,635,430
|
|
Accumulated
deficit
|
|
|
(22,656,246
|
)
|
|
|
(21,191,346
|
)
|
Accumulated
other comprehensive loss
|
|
|
(38,338
|
)
|
|
|
—
|
|
Total
stockholders’ equity
|
|
|
616,107
|
|
|
|
1,931,469
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,397,118
|
|
|
$
|
2,908,499
|
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
$
|
124,517
|
|
|
$
|
73,496
|
|
|
|
|
|
|
|
|
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
220,983
|
|
|
|
173,097
|
|
Research
and development
|
|
|
255,412
|
|
|
|
560,377
|
|
Selling
and marketing
|
|
|
278,738
|
|
|
|
517,161
|
|
General
and administrative
|
|
|
829,864
|
|
|
|
1,201,238
|
|
Total
operating expense
|
|
|
1,584,997
|
|
|
|
2,451,873
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,460,480
|
)
|
|
|
(2,378,377
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,692
|
|
|
|
11,129
|
|
Interest
expense
|
|
|
(6,112
|
)
|
|
|
(71,289
|
)
|
Total
other income (expense)
|
|
|
(4,420
|
)
|
|
|
(60,160
|
)
|
Loss
before income taxes
|
|
|
(1,464,900
|
)
|
|
|
(2,438,537
|
)
|
Income
tax benefit
|
|
|
—
|
|
|
|
—
|
|
Net
loss
|
|
|
(1,464,900
|
)
|
|
|
(2,438,537
|
)
|
|
|
|
|
|
|
|
|
|
Distributions
on Series B redeemable convertible preferred units
|
|
|
—
|
|
|
|
(131,353
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to common stockholders
|
|
$
|
(1,464,900
|
)
|
|
$
|
(2,569,890
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average common and common equivalent shares used to calculate loss per
share:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
48,738,545
|
|
|
|
30,228,842
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss
|
|
|
|
|
|
|
|
|
Net
loss applicable to common stockholders
|
|
$
|
(1,464,900
|
)
|
|
$
|
(2,569,890
|
)
|
Unrealized
loss on marketable securities available-for-sale
|
|
|
(38,338
|
)
|
|
|
—
|
|
Comprehensive
loss
|
|
$
|
(1,503,238
|
)
|
|
$
|
(2,569,890
|
)
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,464,900
|
)
|
|
$
|
(2,438,537
|
)
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
|
|
|
cash
used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
110,066
|
|
|
|
110,607
|
|
Equity-based
compensation
|
|
|
187,876
|
|
|
|
74,244
|
|
(Gain)
loss on disposal of equipment
|
|
|
—
|
|
|
|
(38
|
)
|
Decrease
(increase) in:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
100,791
|
|
|
|
149,223
|
|
Inventory
|
|
|
3,538
|
|
|
|
(18,793
|
)
|
Prepaid
expenses and other assets
|
|
|
140,676
|
|
|
|
5,850
|
|
Deferred
costs
|
|
|
132,946
|
|
|
|
29,460
|
|
Deposits
and other current assets
|
|
|
—
|
|
|
|
35,171
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(21,780
|
)
|
|
|
(19,838
|
)
|
Accrued
liabilities
|
|
|
8,316
|
|
|
|
360,053
|
|
Deferred
rent
|
|
|
(11,633
|
)
|
|
|
4,066
|
|
Deferred
revenue
|
|
|
(136,950
|
)
|
|
|
(25,474
|
)
|
Net
cash used in operating activities
|
|
|
(951,054
|
)
|
|
|
(1,734,006
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
—
|
|
|
|
(24,295
|
)
|
Purchase
of intangible assets
|
|
|
—
|
|
|
|
(425
|
)
|
Net
cash used by investing activities
|
|
|
—
|
|
|
|
(24,720
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable
|
|
|
—
|
|
|
|
1,500,000
|
|
Proceeds
from exercise of warrants to common units
|
|
|
—
|
|
|
|
414,626
|
|
Principal
payments under capital lease obligations
|
|
|
(33,972
|
)
|
|
|
(29,508
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
(33,972
|
)
|
|
|
1,885,118
|
|
Net
change in cash and cash equivalents
|
|
|
(985,026
|
)
|
|
|
126,392
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
1,071,053
|
|
|
|
859,069
|
|
Cash
and cash equivalents at end of period
|
|
$
|
86,027
|
|
|
$
|
985,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
6,112
|
|
|
$
|
11,428
|
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)
Supplemental
schedule of non-cash investing and financing activities:
During
the three months ended March 31, 2009:
·
|
The
Company incurred an unrealized loss on marketable securities
available-for-sale of $38,338.
|
During
the three months ended March 31, 2008:
·
|
The
Company accrued distributions payable on Series B redeemable convertible
preferred units of $131,353.
|
·
|
The
Company acquired $19,429 of office equipment through capital lease
agreements.
|
See
Accompanying Notes to Condensed Consolidated Financial Statements
aVINCI
MEDIA CORPORATION AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Description
of Organization and Summary of Significant Accounting Policies
Organization
and Nature of Operations
aVinci
Media Corporation (the Company), was formed as a result of a merger transaction
between Sequoia Media Group, LC (Sequoia), a Utah limited liability company, and
Secure Alliance Holdings Corporation (SAH), a publicly held
company. The Company is a Delaware corporation that develops and
sells an engaging way for anyone to tell their “Story” with personal digital
expressions. The Company’s products simplify and automate the process of
creating professional-quality multi-media productions using personal photos and
videos.
Basis
of Presentation
The
accompanying condensed consolidated financial statements are presented in
accordance with U.S. generally accepted accounting principles (US
GAAP).
Unaudited
Information
In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements as of March 31, 2009 and December 31, 2008 and for the
three months ended March 31, 2009 and 2008 reflect all adjustments (consisting
only of normal recurring items) necessary to present fairly the financial
information set forth therein. Certain information and note disclosures normally
included in financial statements prepared in accordance with US GAAP have been
condensed or omitted pursuant to SEC rules and regulations, although the Company
believes that the following disclosures, when read in conjunction with the
annual financial statements and the notes included in the Company’s Form 10-K
for the year ended December 31, 2008, are adequate to make the information
presented not misleading. Results for the three month period ended March 31,
2009 are not necessarily indicative of the results to be expected for the year
ended December 31, 2009.
Net
Loss per Common Share
Basic
earnings (loss) per share (EPS) is calculated by dividing income (loss)
available to common stockholders by the weighted-average number of common shares
outstanding during the period. The weighted average shares used in
the computation of EPS for the three month periods ended March 31, 2009 and 2008
include the shares issued in connection with the reverse merger on June 6,
2008. In accordance with US GAAP, these shares are retroactively
reflected as having been issued at the beginning of the periods
presented.
Diluted
EPS is similar to Basic EPS except that the weighted-average number of common
shares outstanding is increased using the treasury stock method to include the
number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. Such potentially dilutive
common shares include stock options and warrants. Shares having an antidilutive
effect on periods presented are not included in the computation of dilutive
EPS.
The
average number of shares of all stock options and warrants granted, all
convertible preferred units, redeemable convertible preferred units and
convertible debentures have been omitted from the computation of diluted net
loss per common share because their inclusion would have been anti-dilutive for
the three month periods ended March 31, 2009 and 2008.
As of
March 31, 2009 and 2008, the Company had 7,521,175 and 18,541,704 potentially
dilutive shares of common stock, respectively, not included in the computation
of diluted net loss per common share because it would have decreased the net
loss per common share. Stock options and warrants could be dilutive in the
future.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Income
Taxes
At March
31, 2009, management had recorded a full valuation allowance against the net
deferred tax assets related to temporary differences and current operating
losses. The valuation allowance was recorded in accordance with the provisions
of Statement of Financial Accounting Standards (SFAS) No. 109 “Accounting for
Income Taxes”, which requires that a valuation allowance be established when
there is significant uncertainty as the realizability of the deferred tax
assets. Based on a number of factors, the currently available, objective
evidence indicates that it is more likely than not that the net deferred tax
assets will not be realized.
Recently
Adopted Accounting Pronouncements
In
March 2008, the Financial Accounting Standards Board (FASB) issued SFAS
No. 161 (SFAS 161), “Disclosures about Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133.” SFAS 161 amends and
expands the disclosure requirements of Statement 133 with the intent to provide
users of financial statements with an enhanced understanding of how and why an
entity uses derivative instruments, how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance, and cash flows.
SFAS 161 was effective beginning in the first quarter of fiscal 2009. The
adoption of this accounting pronouncement had no effect on the Company’s
consolidated financial position or results of operations.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007)
(SFAS 141R), Business Combinations and SFAS No. 160 (SFAS 160),
Noncontrolling Interests in Consolidated Financial Statements, an amendment of
Accounting Research Bulletin No. 51. SFAS 141R changes how business
acquisitions are accounted for and impacts financial statements both on the
acquisition date and in subsequent periods. SFAS 160 changes the accounting
and reporting for minority interests, which is recharacterized as noncontrolling
interests and classified as a component of equity. SFAS 141R and
SFAS 160 were effective for us beginning in the first quarter of fiscal
2009. The adoption of SFAS 141R and SFAS 160 had no effect on the
Company’s consolidated financial position or results of operations.
Recent
Accounting Pronouncements Not Yet Adopted
In April
2009, the FASB issued three FASB Staff Positions, or FSPs, to address concerns
about (1) measuring the fair value of financial instruments when the
markets become inactive and quoted prices may reflect distressed transactions
and (2) recording impairment charges on investments in debt securities. The
FASB also issued a third FSP to require disclosures of fair values of certain
financial instruments in interim financial statements.
FSP No.
FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly,” provides additional guidance to highlight and expand on
the factors that should be considered in estimating fair value when there has
been a significant decrease in market activity for a financial asset. This FSP
also requires new disclosures relating to fair value measurement inputs and
valuation techniques (including changes in inputs and valuation
techniques).
FSP No.
FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary
Impairments,” will change (1) the trigger for determining whether an
other-than-temporary impairment exists and (2) the amount of an impairment
charge to be recorded in earnings. To determine whether an other-than-temporary
impairment exists, an entity will be required to assess the likelihood of
selling a security prior to recovering its cost basis. This is a change from the
current requirement for an entity to assess whether it has the intent and
ability to hold a security to recovery or maturity. This FSP also expands and
increases the frequency of existing disclosure about other-than-temporary
impairments and requires new disclosures of the significant inputs used in
determining a credit loss, as well as a rollforward of that amount each
period.
FSP No.
FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial
Instruments,” increases the frequency of fair value disclosures from annual to
quarterly to provide financial statement users with more timely information
about the effects of current market conditions on their financial
instruments.
The
Company is currently evaluating the provisions of these three FSPs which require
adoption effective for the quarter ending June 30, 2009. The Company
believes that the future requirements of these three FSPs will not have a
material impact on its consolidated financial position or results of
operations.
2. Going
Concern and Liquidity
The
Company’s financial statements have been prepared under the assumption that it
will continue as a going concern. The report of the Company’s
independent registered public accounting firm included in its Annual Report on
Form 10-K for the year ended December 31, 2008, filed with the Securities and
Exchange Commission, includes an explanatory paragraph expressing substantial
doubt as to its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
aVinci
Media, LC, has operated at a loss since inception and is not currently
generating sufficient revenues to cover its operating expenses. The
Company is continuing to work to obtain new customers and to increase revenues
from existing customers. The Company contemplates raising additional
outside capital within the next 12 months to help fund current growth
plans. The Company has recently reduced monthly expenses and it
anticipates needing an additional $1 million to $1.5 million of capital from
outside sources to fund operations through the end of 2009 based on its current
plans and projections. In the event the Company is not able to meet
its revenue projections through the end of 2009, the Company may be required to
raise additional capital or further reduce operating expenses.
In March
2009, the Company initiated a private offering pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder to raise
up to an additional $1.5 million in two phases, $750,000 from April to June 2009
and an additional $750,000 by the end of July 2009. The investment is
in the form of Series A preferred shares, $0.01 per share par value with a
stated value of $1.00 per share, convertible into common shares at the rate of
$.20 per common share. For each Series A preferred share, investors in the
offering also receive a warrant to purchase 1.25 shares of common stock at $.25
per share at any time within five years. As of April 30, 2009, the Company
had received proceeds of $420,000 from the sale of 420,000 Series A preferred
shares. The preferred shares also carry a cumulative dividend at an annual rate
of 8%. If new sources of financing are insufficient or
unavailable, the Company will modify its growth and operating plans to the
extent of available funding, if any. Any decision to modify the
Company’s business plans would harm its ability to pursue its aggressive growth
plans. If the Company ceases or stops operations, its shares could
become valueless. Historically, the Company has funded its operating,
administrative and development costs through the sale of equity capital or debt
financing. If the Company’s plans and/or assumptions change or prove
inaccurate, or it is unable to obtain further financing, or such financing and
other capital resources, in addition to projected cash flow, if any, prove to be
insufficient to fund operations, its continued viability could be at
risk. To the extent that any such financing involves the sale of its
common stock or common stock equivalents, its current stockholders could be
substantially diluted. There is no assurance that the Company will be
successful in achieving any or all of these objectives in 2009.
3. Equity-Based
Compensation
The
Company currently has a stock option plan that allows the Company to grant stock
options, restricted stock and other equity based awards to employees, directors,
and consultants. The plan is discussed in more detail in our Annual Report on
Form 10-K.
Equity-based
compensation expense, included in general and administrative expense on the
consolidated statement of operations, totaled $187,876 and $74,244, respectively
for the three months ended March 31, 2009 and 2008.
There
were no awards granted during the three months ending March 31, 2009 or
2008.
As of
March 31, 2009, there was approximately $1,008,126 of total unrecognized
equity-based compensation expense related to option grants that will be
recognized over a weighted average period of 1.3 years. All common unit options
outstanding as of the date of the merger were converted into options to purchase
the common stock of SAH.
4. Commitments
and Contingencies
Litigation
On
December 17, 2007, Robert L. Bishop, who worked with the Company in a limited
capacity in 2004 and is a current member of a limited liability company that
owns an equity interest in the Company, filed a legal claim alleging a right to
unpaid wages and/or commissions (with no amount specified) and Company equity.
The complaint was served on the Company on January 7, 2008. The Company timely
filed an answer denying Mr. Bishop’s claims and counterclaiming interference by
Mr. Bishop with the Company’s capital raising efforts. The Company intends to
vigorously defend against Mr. Bishop’s claims and pursue its
counterclaim.
5. Fair
Value
SFAS No.
157 establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. SFAS No. 157 describes three levels of inputs that aVinci
uses to measure fair value:
·
|
Level
1: Quoted prices (unadjusted) for identical assets or liabilities in
active markets that the entity has the ability to access as of the
measurement date.
|
·
|
Level
2: Level 1 inputs for assets or liabilities that are not actively traded.
Also consists of an observable market price for a similar asset or
liability. This includes the use of “matrix pricing” used to value debt
securities absent the exclusive use of quoted
prices.
|
·
|
Level
3: Consists of unobservable inputs that are used to measure fair value
when observable market inputs are not available. This could include the
use of internally developed models, financial forecasting,
etc.
|
Fair
value is defined as the price that would be received to sell an asset or paid to
transfer a liability between market participants at the balance sheet date. When
possible, the Company looks to active and observable markets to price identical
assets or liabilities. When identical assets and liabilities are not traded in
active markets, the Company looks to observable market data for similar assets
and liabilities. However, when certain assets and liabilities are not traded in
observable markets aVinci must use other valuation methods to develop a fair
value.
The
following table presents financial assets and liabilities measured on a
recurring basis:
|
|
Fair
Value Measurements at Reporting Date Using
|
Description
|
Balance
at March 31, 2009
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Significant
Other Observable
Inputs
(Level
2)
|
SignificantUnobservable
Inputs
(Level
3)
|
Available-for-sale
securities
|
$ 93,416
|
$ 93,416
|
—
|
—
|
6. Subsequent
Event
As
discussed in Note 2 above, in March 2009, the Company initiated a private
offering pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated thereunder to raise up to an additional $1.5 million in two
phases, $750,000 from April to June 2009 and an additional $750,000 by the end
of July 2009. The investment is in the form of Series A preferred
shares, $0.01 per share par value with a stated value of $1.00 per share,
convertible into common shares at the rate of $.20 per common share. For
each Series A preferred share, investors in the offering also receive a warrant
to purchase 1.25 shares of common stock at $.25 per share at any time within
five years. As of April 30, 2009, the Company had received proceeds of
$420,000 from the sale of 420,000 Series A preferred shares. The preferred
shares also carry a cumulative dividend at an annual rate of
8%. If new sources of financing are insufficient or
unavailable, the Company will modify its growth and operating plans to the
extent of available funding, if any.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Some of
the information in this filing contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate” and “continue,” or similar words. You should read statements that
contain these words carefully because they:
·
|
discuss
our future expectations;
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
·
|
state
other “forward-looking”
information.
|
We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict or over which we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under “Risk Factors,”
“Business” and elsewhere in this prospectus.
Overview
Through
our subsidiary, aVinci Media, LC, we deploy a software technology that employs
“Automated Multimedia Object Models,” a patent-pending way of turning consumer
captured images, video, and audio into complete digital files in the form of
full-motion movies, DVD’s, photo books, posters and streaming media
files. We make software technology and package the software in
various forms available to mass retailers, specialty retailers, Internet portals
and web sites that allow end consumers to use an automated process to create
products such as DVD productions, photo books, posters, calendars, and other
print media products from consumer photographs, digital pictures, video, and
other media. Under our business model, our customers are retailers and other
vendors. We enable our customers to sell our products to the end
consumer who remain customers of the vendor. Only a small percentage
of our business will be generated from the ultimate consumer. Through
2007, aVinci Media, LC generated revenues through the sales of DVD products
created using its technology. During 2008, aVinci Media, LC deployed its
technology to create photo books and posters as well.
We will
continue to utilize the current revenue model of entering into agreements and
receiving a fee for each product made using our technology. Our
revenue model generally includes a per product fee. With all product
deployments, except with respect to our retail kit product, we receive a fee
from our retailer customer each time an end customer makes a product utilizing
our technology. From the fees received, we pay the fees associated
with licensed media and technology. If we are performing product fulfillment, we
also pay the costs of goods associated with the production of the product. If
our customer utilizes in-store fulfillment, its end consumer pays the cost of
goods associated with production.
aVinci
Media, LC signed its first agreement in 2004 under which it supplied its
software technology to BigPlanet, a company that markets, sells, and fulfilled
personal DVD products for its customers. Through 2006 all of aVinci’s revenues
were generated through BigPlanet. Under the terms of this agreement, BigPlanet
was required to make minimum annual guaranteed payments to aVinci in the amount
of $1 million to be paid in 12 equal monthly installments. The BigPlanet
agreement included software development, software license, post-contract support
and training. As a result of the agreement terms, aVinci Media, LC determined to
use the percentage-of-completion method of accounting to record the revenue for
the entire contract. aVinci Media, LC utilized the ratio of total actual costs
incurred to total estimated costs incurred related to BigPlanet to determine the
proportional amount of revenue to be recognized at each reporting
date. The BigPlanet agreement expired on its terms at the end of
2007. During the last months of the agreement term, BigPlanet
reassessed and repositioned its photo offering and determined it would not
actively pursue photo archiving which generated the sale of DVD movies as an
ancillary product offering using the our technology. Accordingly the
agreement was not renewed based upon BigPlanet’s business
strategy.
During
2006, aVinci Media, LC signed an additional agreement to provide its technology
in Meijer stores. The technology began being deployed in Meijer stores in April
2008 and has begun generating revenues in each store where the technology has
been deployed. Full deployment in all 180 Meijer stores occurred in May
2008.
In 2007,
aVinci Media, LC signed an agreement with Fujicolor to deploy its technology on
Fujicolor kiosks located in domestic Wal-Mart stores. aVinci Media, LC has begun
generating limited revenues through Wal-Mart and anticipates generating
additional revenues through its Wal-Mart deployment during 2009.
We
currently manufacture DVDs for certain customers in our Draper, Utah facility
and use services of local third-party vendors to produce print DVD covers and
inserts and to assemble and ship final products. During November
2008, we began the first roll out of our software to allow retailers to create
our DVD product in-store.
On
October 2, 2008, we announced an agreement with Preclick to distribute our photo
movie software along with Preclick's Walmart Digital Photo Manager software on
millions of photo CD discs distributed by Walmart each year. Preclick
is the default photo manager software distributed with all CD lab orders
fulfilled by Walmart Photo Centers. Beginning in November 2008, aVinci Studio
software will come preinstalled on all CDs distributed by Walmart with the
Preclick Digital Photo Manager.
We
showcase our products on aVinciStudio.com. We do not plan to actively
promote sales via this website as we want end users to purchase products through
our customers.
Future
Model
We plan
to continue with a strategy of focusing on mass retailers to offer our products
on kiosks, online and through software take-home kits. We believe we
can capitalize on consumers trending away from traditional print output for
images by offering DVD photo archiving, DVD photo movies, photobook and
poster-print products.
Results
of Operations
For the
first three months of 2009, we had revenues of $124,517, an operating loss of
$1,460,480, and a net loss of $1,464,900. This compares to revenues of $73,496,
an operating loss of $2,378,377, a net loss of $2,438,537, and a net loss
applicable to common stockholders of $2,569,890 for the same period in
2008.
The
following table sets forth, for the periods indicated, the percentage
relationship of selected items from our statements of operations to total
revenues.
|
|
Three
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
178%
|
|
|
|
235%
|
|
Research
and development
|
|
|
205%
|
|
|
|
762%
|
|
Selling
and marketing
|
|
|
224%
|
|
|
|
704%
|
|
General
and administrative
|
|
|
666%
|
|
|
|
1,635%
|
|
Total
operating expense
|
|
|
1,273%
|
|
|
|
3,336%
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,173%
|
)
|
|
|
(3,236%
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1%
|
|
|
|
15%
|
|
Interest
expense
|
|
|
(5%
|
)
|
|
|
(97%
|
)
|
Total
other income (expense)
|
|
|
(4%
|
)
|
|
|
(82%
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,177%
|
)
|
|
|
(3,318%
|
)
|
|
|
|
|
|
|
|
|
|
Distributions
on Series B redeemable convertible preferred units
|
|
|
—
|
|
|
|
(179%
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to common stockholders
|
|
|
(1,177%
|
)
|
|
|
(3,497%
|
)
|
Revenues.
Total
revenues increased $51,021, or 69 percent, to $124,517 for the three months
ended March 31, 2009, as compared to $73,496 for the same period in 2008. The
increase in revenue during the three months ended March 31, 2009 over the same
period in 2008 is due to increased sales volume from year to year.
Three
customers accounted for a total of 81 percent of aVinci’s revenues for the three
months ending March 31, 2009 (individually 36 percent, 31 percent, and 14
percent) compared to four customers accounting for 94 percent of the revenue for
the same period in 2008 (individually 51 percent, 17 percent, 15 percent, and 11
percent). No other single customer accounted for more than 10 percent of
aVinci’s total revenues for the three months ended March 31, 2009 or the same
period in 2008. Given our large net loss applicable to common stockholders for
the quarter ended March 31, 2009, the loss of any of our customers would not
materially increase our net losses.
Operating
Expenses.
Cost of Goods
Sold. Our cost of goods sold increased $47,886 to $220,983 for the three
months ended March 31, 2009, compared to $173,097 for the same period in 2008.
The increase in cost of goods sold is primarily due to recognition of license
fees in 2009 ($52,000 increase from year to year) for prepaid music and other
prepaid licensed property. For the three months ended March 31, 2009 the
majority of cost of goods sold, are for costs associated with fulfillment. For
the three months ended March 31, 2008, cost of goods sold includes $143,637 in
costs associated with fulfillment; and $29,460 for the cost of
hardware.
Research and
Development. Our research and development expense decreased $304,965, or
54%, to $255,412 for the three months ended March 31, 2009, compared to $560,377
for the same period in 2008. The decrease is primarily due to a decrease in the
average headcount during this period from year to year. Additional research and
development resources were needed during the quarter ending March 31, 2008 in
preparation for the launching of our products at Costco and Meijer. The decrease
in headcount accounts for approximately $235,000 of the decrease. The three
months ended March 31, 2008 also included a $35,000 bonus accrual. Reduced usage
of outside resources reduced research and development expense by approximately
$31,000.
Selling and
Marketing. Our selling and marketing expense decreased $238,423, or 46%,
to $278,738 for the three months ended March 31, 2009 compared to $517,161 for
the same period in 2008. The decrease is due to marketing and advertising costs
incurred during the quarter ended March 31, 2008 associated with the launch of
our product at Costco and Meijer. Marketing and advertising expenses decreased
by almost $99,000 from year to year. The decrease is also due to a decrease in
the average headcount during this period from year to year. The decrease in
headcount accounts for approximately $96,000 of the decrease. Finally, the three
months ended March 31, 2008 included a $30,000 bonus accrual.
General and
Administrative. Our general and administrative expense decreased
$371,374, or 31%, to $829,864 for the three months ended March 31, 2009,
compared to $1,201,238 for the same period in 2008. The decrease is due to a
decrease of $250,000 in consulting and outside services, with $243,000 of this
amount as a result of the consulting agreement with Amerivon Investments, LLC
(“Amerivon”) (a related party). General and administrative expenses also
decreased by $103,000 for employee benefits due to a decrease in overall
headcount from year to year, and employees began paying 20 percent of their
benefits beginning in 2009.
Interest
Expense. Our interest expense decreased $65,177, or 91%, to $6,112 for
the three months ended March 31, 2009, compared to $71,289 for the same period
in 2008. In connection with the Agreement and Plan of Merger, aVinci Media, LC
entered into a Loan and Security Agreement and Secured Note with Secure Alliance
Holdings (“SAH”) on December 6, 2007 in order to ensure adequate funds through
the merger closing date. The agreement provided for SAH to loan a total of up to
$2.5 million to aVinci Media, LC through the merger closing date. A total of $1
million was received under the Secured Note as of December 31, 2007. An
additional $1,500,000 was advanced during the three months ended March 31, 2008.
The amounts advanced under the Secured Note were secured by all assets of aVinci
Media, LC, accrued interest at 10% per annum and principal and interest were due
and payable on December 31, 2008. In connection with the merger on June 6, 2008,
the balance of notes payable of $2.5 million and the related accrued interest of
approximately $104,000 were eliminated.
Income Tax
Expense. For the three months ended March 31, 2009 and 2008, no
provisions for income taxes were required. Prior to June 6, 2008, aVinci Media
LC was a flow-through entity for income tax purposes and did not incur income
tax liabilities.
At March
31, 2009, management has recognized a valuation allowance for the net deferred
tax assets related to temporary differences and current operating losses. The
valuation allowance was recorded because there is significant uncertainty as the
realizability of the deferred tax assets. Based on a number of factors, the
currently available, objective evidence indicates that is more likely than not
that the net deferred tax assets will not be realized.
Distributions on
Series B redeemable convertible preferred units. The Series B redeemable
convertible preferred unit holders were entitled to an annual distribution of
$0.06 per unit. The distributions on Series B redeemable convertible preferred
units decreased $131,353, or 100%, to $0 for the three months ended March 31,
2009, compared to $131,353 for the same period in 2008. The change is due to the
distribution accrual beginning in May 2007, and ending (due to the reverse
merger) in June 2008.
Balance
Sheet Items
The
following were changes in our balance sheet accounts.
Cash. Cash decreased
$985,026, or 92%, to $86,027 at March 31, 2009, from $1,071,053 at December 31,
2008. The decrease is due to continued cash operating deficits.
Prepaid Expenses. Prepaid
expenses decreased $142,380, or 61%, to $90,665 at March 31, 2009 from $233,045
at December 31, 2008. The decrease is due to several factors including
recognizing expiring and other music license fees ($48,000), recognizing prepaid
conference fees ($24,000), recognizing prepaid directors and officers insurance
($21,000), recognizing prepaid other monthly license fees ($15,000), recognizing
prepaid rent ($14,000), and recognizing prepaid investor relations expenses
($13,000).
Deferred Costs. Deferred
costs decreased $132,946, or 92%, to $10,998 at March 31, 2009, from $143,944 at
December 31, 2008. The decrease is due to Qualex cancelling its contract with us
in December 2008. As a result of the cancelled contract, Qualex will be
returning equipment to us and we will discontinue recognizing the related
deferred costs and deferred revenue over the life of the original
contract.
Deferred Revenue. Deferred
revenue decreased $136,950, or 40%, to $207,624 at March 31, 2009, from $344,574
at December 31, 2008. The decrease is a result of Qualex cancelling its contract
with us in December 2008. As a result of the cancelled contract, Qualex will be
returning equipment to us and we will discontinue recognizing the related
deferred costs and deferred revenue over the life of the original
contract.
Liquidity and
Capital Resources.
|
|
Unaudited
|
|
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
Statements
of Cash Flows
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
$ |
(951,054 |
) |
|
$ |
(1,734,006 |
) |
Cash
Flows from Investing Activities
|
|
|
— |
|
|
|
(24,720 |
) |
Cash
Flows from Financing Activities
|
|
|
(33,972 |
) |
|
|
1,885,118 |
|
Increase
(Decrease) in cash and cash equivalents
|
|
|
(985,026 |
) |
|
|
126,392 |
|
Operating
Activities. For the three months ended March 31, 2009, net cash used in
operating activities was $(951,054) compared to $(1,734,006) for the same period
in 2008. The changes were due to higher operating expenses for the three months
ended March 31, 2008 for the pursuit of new customers and development of
additional delivery methods for software technology which required substantial
additional human, equipment and property resources.
Investing
Activities. For the three months ended March 31, 2009, aVinci’s cash
flows used in investing activities was $0 compared to $(24,720) for the same
period in 2008. The change was due to purchasing less property and equipment in
the three months ended March 31, 2009 than in the same period in
2008.
Financing
Activities. For the three months ended March 31, 2009, financing
activities used $(33,972) of cash compared to providing $1,885,118 for the same
period in 2008. During the three months ended March 31, 2009, we used $33,972
for principal payments under capital lease obligations. During the three months
ended March 31, 2008, aVinci Media LC received $1.5 million from Secure Alliance
Holdings Corporation (SAH), and $414,626 from Amerivon Investments, LLC from the
pre-merger exercise of 1,727,605 warrants to purchase additional common units
(converted to 1,504,680 shares after the merger). Also during this period aVinci
Media LC used $29,508 for principal payments under capital lease
obligations.
As
discussed in Note 2 above, in March 2009, the Company initiated a private
offering pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated thereunder to raise up to an additional $1.5 million in two
phases, $750,000 from April to June 2009 and an additional $750,000 by the end
of July 2009. The investment is in the form of Series A preferred
shares, $0.01 per share
par value with a stated value of $1.00 per share, convertible into common shares
at the rate of $.20 per common share. For each Series A preferred share,
investors in the offering also receive a warrant to purchase 1.25 shares of
common stock at $.25 per share at any time within five years. As of April
30, 2009, the Company had received proceeds of $420,000 from the sale of 420,000
Series A preferred shares. The preferred shares also carry a cumulative dividend
at an annual rate of 8%. If new sources of financing
are insufficient or unavailable, the Company will modify its growth
and operating plans to the extent of available funding, if
any.
Any
decision to modify the Company’s business plans would harm its ability to pursue
its aggressive growth plans. If the Company ceases or stops
operations, its shares could become valueless. Historically, the
Company has funded its operating, administrative and development costs through
the sale of equity capital or debt financing. If the Company’s plans
and/or assumptions change or prove inaccurate, or it is unable to obtain further
financing, or such financing and other capital resources, in addition to
projected cash flow, if any, prove to be insufficient to fund operations, its
continued viability could be at risk. To the extent that any such
financing involves the sale of its common stock or common stock equivalents, its
current stockholders could be substantially diluted. There is no
assurance that the Company will be successful in achieving any or all of these
objectives in 2009.
New
Accounting Pronouncements
In
March 2008, the Financial Accounting Standards Board (FASB) issued SFAS
No. 161 (SFAS 161), “Disclosures about Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133.” SFAS 161 amends and
expands the disclosure requirements of Statement 133 with the intent to provide
users of financial statements with an enhanced understanding of how and why an
entity uses derivative instruments, how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance, and cash flows.
SFAS 161 was effective beginning in the first quarter of fiscal 2009. The
adoption of this accounting pronouncement had no effect on the Company’s
consolidated financial position or results of operations.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007)
(SFAS 141R), Business Combinations and SFAS No. 160 (SFAS 160),
Noncontrolling Interests in Consolidated Financial Statements, an amendment of
Accounting Research Bulletin No. 51. SFAS 141R changes how business
acquisitions are accounted for and impacts financial statements both on the
acquisition date and in subsequent periods. SFAS 160 changes the accounting
and reporting for minority interests, which is recharacterized as noncontrolling
interests and classified as a component of equity. SFAS 141R and
SFAS 160 were effective for us beginning in the first quarter of fiscal
2009. The adoption of SFAS 141R and SFAS 160 had no effect on the
Company’s consolidated financial position or results of operations.
In April
2009, the Financial Accounting Standards Board (FASB) issued three FASB Staff
Positions, or FSPs, to address concerns about (1) measuring the fair value
of financial instruments when the markets become inactive and quoted prices may
reflect distressed transactions and (2) recording impairment charges on
investments in debt securities. The FASB also issued a third FSP to require
disclosures of fair values of certain financial instruments in interim financial
statements.
FSP No.
FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly,” provides additional guidance to highlight and expand on
the factors that should be considered in estimating fair value when there has
been a significant decrease in market activity for a financial asset. This FSP
also requires new disclosures relating to fair value measurement inputs and
valuation techniques (including changes in inputs and valuation
techniques).
FSP No.
FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary
Impairments,” will change (1) the trigger for determining whether an
other-than-temporary impairment exists and (2) the amount of an impairment
charge to be recorded in earnings. To determine whether an other-than-temporary
impairment exists, an entity will be required to assess the likelihood of
selling a security prior to recovering its cost basis. This is a change from the
current requirement for an entity to assess whether it has the intent and
ability to hold a security to recovery or maturity. This FSP also expands and
increases the frequency of existing disclosure about other-than-temporary
impairments and requires new disclosures of the significant inputs used in
determining a credit loss, as well as a rollforward of that amount each
period.
FSP No.
FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial
Instruments,” increases the frequency of fair value disclosures from annual to
quarterly to provide financial statement users with more timely information
about the effects of current market conditions on their financial
instruments.
The
Company is currently evaluating the provisions of these three FSPs which require
adoption effective for the quarter ending June 30, 2009. The Company
believes that the future requirements of these three FSPs will not have a
material impact on its consolidated financial position or results of
operations.
Off-Balance
Sheet Arrangements
aVinci
does not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital resources that is material to investors.
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
applicable.
ITEM
4. CONTROLS
AND PROCEDURES
Disclosure
Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934 (the “Exchange Act”)) designed to provide
reasonable assurance that the information required to be disclosed in our
reports under the Exchange Act is processed, recorded, summarized and reported
within the time periods specified in the SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
Principal Executive Officer and Principal Financial and Accounting Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As
required by SEC Rule 13a-15(b), we carried out an evaluation, under the
supervision and with the participation of our management, including our
Principal Executive Officer and Principal Financial and Accounting Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report. Based
on this evaluation, Chett P. Paulsen, our Principal Executive Officer, and
Edward B. Paulsen, our Principal Financial and Accounting Officer, concluded
that these disclosure controls and procedures were effective at the reasonable
assurance level as of March 31, 2009.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal control over financial reporting identified
in connection with the evaluation required by Rule 13a-15(d) or Rule 15d-15(d)
under the Exchange Act that occurred during the quarter ended March 31, 2009
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II-OTHER INFORMATION
ITEM
1. LEGAL
PROCEEDINGS
We are
not aware of any material pending or threatened legal proceedings, other than
the litigation referenced below.
On
December 17, 2007, Robert L. Bishop, who worked with the Company in a limited
capacity in 2004 and is a current member of a limited liability company that
owns an equity interest in the Company, filed a legal claim alleging a right to
unpaid wages and/or commissions (with no amount specified) and Company equity.
The complaint was served on the Company on January 7, 2008. The Company timely
filed an Answer denying Mr. Bishop’s claims and counterclaiming interference by
Mr. Bishop with the Company’s capital raising efforts. Discovery in the case is
ongoing and the Company intends to vigorously defend against Mr. Bishop’s claims
and pursue its counterclaim.
ITEM
1A. RISK
FACTORS
There
have been no material changes from the risk factors disclosed in the “Risk
Factors” section of our Form 10-K as filed with the SEC on March 31,
2009.
ITEM
2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not
applicable.
ITEM
3. DEFAULTS
UPON SENIOR SECURITIES
ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM
5. OTHER
INFORMATION
Not
applicable.
ITEM
6. EXHIBITS
(a)
Exhibits
Exhibit
Number
|
Description
of Exhibit
|
|
|
31.1
|
Certification
of the Principal Executive Officer pursuant to Exchange Act Rule
13a-14(a)
|
31.2
|
Certification
of the Principal Financial and Accounting Officer pursuant to Exchange Act
Rule 13a-14(a)
|
32
|
Certification
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act of 2002
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
aVinci
Media Corporation
|
|
|
|
Date:
May 14, 2009
|
By:
|
/s/
Chett B. Paulsen
|
|
|
|
Principal
Executive Officer
|
Date:
May 14, 2009
|
By:
|
/s/
Edward B. Paulsen
|
|
|
|
Principal
Financial and Accounting
Officer
|