s22-9188_10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
x
|
Quarterly
report pursuant Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
quarterly period ended March 31,
2009
o
|
Transition
report pursuant Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
transition period from _______ to _______.
Commission
file number
000-52404
VALUERICH,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
41-2102385
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
1804
N. Dixie Highway, Suite A
West
Palm Beach, Florida 33407
(Address
of Principal Executive Offices) (Zip Code)
1-561-370-3617
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
As
of May 15, 2009, the Company had 8,669,571 outstanding shares of common stock,
par value $0.01.
Part
I – FINANCIAL INFORMATION
|
3
|
Item
1. Financial Statements
|
3
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
17
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
23
|
Item
4. Controls and Procedures
|
23
|
PART
II - OTHER INFORMATION
|
24
|
Item
1. Legal Proceedings
|
24
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
24
|
Item
3. Defaults Upon Senior Securities
|
24
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
24
|
Item
5. Other Information
|
24
|
Item
6. Exhibits
|
24
|
SIGNATURES |
25
|
Part
I – FINANCIAL INFORMATION
Item 1. Financial
Statements
VALUERICH,
Inc.
CONDENSED BALANCE
SHEETS
AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,757,757 |
|
|
$ |
920,908 |
|
Trade
accounts receivable
|
|
|
1,713 |
|
|
|
1,713 |
|
Prepaid
consulting
|
|
|
1,555 |
|
|
|
23,333 |
|
Investments
in marketable securities
|
|
|
502,770 |
|
|
|
1,957,993 |
|
Other
current assets
|
|
|
10,371 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
2,274,166 |
|
|
|
2,903,947 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net of accumulated depreciation
|
|
|
429,762 |
|
|
|
113,547 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
2,703,928 |
|
|
$ |
3,017,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
244,578 |
|
|
$ |
240,757 |
|
Deferred
revenue
|
|
|
37,500 |
|
|
|
45,000 |
|
Convertible
notes payable - current portion
|
|
|
25,000 |
|
|
|
25,000 |
|
Shareholder
notes payable
|
|
|
9,500 |
|
|
|
9,500 |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
316,578 |
|
|
|
320,257 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common
stock; $0.01 par value; 100,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
8,669,670
shares issued and outstanding as
|
|
|
|
|
|
|
|
|
of
March 31, 2009 and December 31, 2008, respectively
|
|
|
86,696 |
|
|
|
86,696 |
|
Additional
paid-in capital
|
|
|
7,194,184 |
|
|
|
7,175,789 |
|
Accumulated
other comprehensive income
|
|
|
48,000 |
|
|
|
108,000 |
|
Accumulated
deficit
|
|
|
(4,941,530 |
) |
|
|
(4,673,248 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
2,387,350 |
|
|
|
2,697,237 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
2,703,928 |
|
|
$ |
3,017,494 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
|
VALUERICH,
Inc.
CONDENSED
STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$ |
37,485 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
|
|
- |
|
|
|
6,230 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
37,485 |
|
|
|
(6,230 |
) |
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
106,996 |
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
48,680 |
|
|
|
205,018 |
|
Professional
fees
|
|
|
95,486 |
|
|
|
239,029 |
|
Financing
costs
|
|
|
- |
|
|
|
- |
|
Depreciation
and amortization expense
|
|
|
11,965 |
|
|
|
5,039 |
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
263,127 |
|
|
|
449,086 |
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(225,642 |
) |
|
|
(455,316 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
Dividend
and interest income, net
|
|
|
20,357 |
|
|
|
32,097 |
|
Unrealized
loss on marketable securities
|
|
|
(138,779 |
) |
|
|
|
|
Realized
gain on marketable securities
|
|
|
65,236 |
|
|
|
|
|
Other
income (expense)
|
|
|
10,546 |
|
|
|
1,450 |
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME (EXPENSES)
|
|
|
(42,640 |
) |
|
|
33,547 |
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
|
|
(268,282 |
) |
|
|
(421,769 |
) |
|
|
|
|
|
|
|
|
|
INCOME
TAX BENEFIT
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$ |
(268,282 |
) |
|
$ |
(421,769 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE - BASIC AND DILUTED
|
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON EQUIVALENT
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - BASIC AND DILUTED
|
|
|
8,669,670 |
|
|
|
8,406,875 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
|
|
VALUERICH,
Inc.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2007
|
|
|
6,492,644 |
|
|
$ |
64,926 |
|
|
$ |
2,039,559 |
|
|
$ |
- |
|
|
$ |
(1,914,666 |
) |
|
$ |
189,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of warrants at $2 per share
|
|
|
41,668 |
|
|
|
417 |
|
|
|
83,336 |
|
|
|
|
|
|
|
- |
|
|
|
83,753 |
|
Deferred
financing cost
|
|
|
- |
|
|
|
- |
|
|
|
12,572 |
|
|
|
|
|
|
|
- |
|
|
|
12,572 |
|
Shares
issued for Initial Public Offering at $3.50 per share
|
|
|
1,617,230 |
|
|
|
16,172 |
|
|
|
5,644,134 |
|
|
|
|
|
|
|
- |
|
|
|
5,660,306 |
|
Joint
venture agreement issuance of stock
|
|
|
100,000 |
|
|
|
1,000 |
|
|
|
102,000 |
|
|
|
|
|
|
|
- |
|
|
|
103,000 |
|
Value
of options issued for joint venture agreement
|
|
|
- |
|
|
|
- |
|
|
|
75,560 |
|
|
|
|
|
|
|
- |
|
|
|
75,560 |
|
Shares
issued for web development
|
|
|
25,000 |
|
|
|
250 |
|
|
|
28,500 |
|
|
|
|
|
|
|
- |
|
|
|
28,750 |
|
Fund
raising costs
|
|
|
- |
|
|
|
- |
|
|
|
(958,695 |
) |
|
|
|
|
|
|
- |
|
|
|
(958,695 |
) |
Net
loss for the year ended December 31, 2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(1,747,987 |
) |
|
|
(1,747,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
8,276,542 |
|
|
|
82,765 |
|
|
|
7,026,966 |
|
|
|
- |
|
|
|
(3,662,653 |
) |
|
|
3,447,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of common stock issued for consulting services
|
|
|
290,000 |
|
|
|
2,900 |
|
|
|
85,600 |
|
|
|
|
|
|
|
|
|
|
|
88,500 |
|
Shares
of common stock canceled
|
|
|
(25,000 |
) |
|
|
(250 |
) |
|
|
(28,500 |
) |
|
|
|
|
|
|
|
|
|
|
(28,750 |
) |
Value
of warrants granted for consulting services
|
|
|
|
|
|
|
|
|
|
|
29,954 |
|
|
|
|
|
|
|
|
|
|
|
29,954 |
|
Shares
of common stock issued in repayment of note payable
|
|
|
128,128 |
|
|
|
1,281 |
|
|
|
61,769 |
|
|
|
|
|
|
|
|
|
|
|
63,050 |
|
Unrealized
gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,000 |
|
|
|
|
|
|
|
108,000 |
|
Net
loss for period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,010,595 |
) |
|
|
(1,010,595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
8,669,670 |
|
|
$ |
86,696 |
|
|
$ |
7,175,789 |
|
|
$ |
108,000 |
|
|
$ |
(4,673,248 |
) |
|
$ |
2,697,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants granted for consulting services
|
|
|
|
|
|
|
|
|
|
|
18,395 |
|
|
|
|
|
|
|
|
|
|
|
18,395 |
|
Unrealized
gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,000 |
) |
|
|
|
|
|
|
(60,000 |
) |
Net
loss for period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(268,282 |
) |
|
|
(268,282 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,669,670 |
|
|
$ |
86,696 |
|
|
$ |
7,194,184 |
|
|
$ |
48,000 |
|
|
$ |
(4,941,530 |
) |
|
$ |
2,387,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
|
VALUERICH,
Inc.
CONDENSED
STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(268,282 |
) |
|
$ |
(421,769 |
) |
Adjustment
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
11,965 |
|
|
|
5,039 |
|
Unrealized
loss on marketable securities
|
|
|
138,779 |
|
|
|
- |
|
Realized
gain on marketable securities
|
|
|
(65,236 |
) |
|
|
- |
|
Value
of warrants granted for consulting services
|
|
|
18,395 |
|
|
|
- |
|
Common
stock issued for consulting services
|
|
|
- |
|
|
|
57,833 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
21,778 |
|
|
|
73,600 |
|
Other
current assets
|
|
|
(10,371 |
) |
|
|
- |
|
Accounts
payable and accrued expenses
|
|
|
3,822 |
|
|
|
(23,393 |
) |
Deferred
revenue
|
|
|
(7,500 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(156,650 |
) |
|
|
(308,690 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of fixed assets
|
|
|
(328,181 |
) |
|
|
(40,667 |
) |
Purchases
of marketable securities
|
|
|
(929,423 |
) |
|
|
- |
|
Proceeds
from sale of marketable securities
|
|
|
2,251,103 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
993,499 |
|
|
|
(40,667 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayments
of notes payable
|
|
|
- |
|
|
|
(25,000 |
) |
Offering
costs
|
|
|
- |
|
|
|
(150 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
- |
|
|
|
(25,150 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
836,849 |
|
|
|
(374,507 |
) |
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, Beginning of period
|
|
|
920,908 |
|
|
|
3,568,535 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, End of period
|
|
$ |
1,757,757 |
|
|
$ |
3,194,028 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
- |
|
|
$ |
3,538 |
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
|
|
|
|
|
|
|
|
|
Non-cash
stock issuance
|
|
$ |
- |
|
|
$ |
57,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
|
Note
1 - Organization and Basis of Presentation
The
accompanying unaudited condensed financial statements have been prepared by
ValueRich, Inc. (the “Company”) in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, these
condensed financial statements do not include all of the disclosures required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, the unaudited
interim condensed financial statements furnished herein include all adjustments,
all of which are of a normal recurring nature, necessary for a fair statement
of the results for the interim period presented. Although management
believes the disclosures and information presented are adequate to make the
information not misleading, it is suggested that these interim condensed
financial statements be read in conjunction with the Company's audited financial
statements and notes included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008. Operating results for the three
months ended March 31, 2009 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2009.
Use of
Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. The
Company bases its estimates on historical experience, management expectations
for future performance, and other assumptions as appropriate. Key areas affected
by estimates include the assessment of the recoverability of long-lived assets,
which is based on such factors as estimated future cash flows. The Company
re-evaluates its estimates on an ongoing basis; actual results may vary from
those estimates.
Concentration of Credit
Risk
Cash
includes cash on hand and demand deposits in accounts maintained within the
United States. Certain financial instruments, which subject the Company to
concentration of credit risk, consist of cash. The Company maintains balances at
financial institutions which, from time to time, may exceed Federal Deposit
Insurance Corporation insured limits for the banks located in the Unites States.
As of March 31, 2009 and December 31, 2008, the Company had deposits in excess
of federally-insured limits totaling $164,579 and $782,283, respectively. The
Company has not experienced any losses in such accounts.
Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
Marketable
Securities
The
Company has designated its investments in marketable securities as trading and
available-for-sale. Marketable securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains and losses
recognized in earnings. Marketable equity securities not classified as trading
are classified as available for sale, and are carried at fair market value, with
the unrealized gains and losses, net of tax, included in the determination of
comprehensive income and reported in shareholders’ equity. Investment income is
recognized on an accrual basis.
The fair
value of substantially all securities is determined by quoted market prices. The
estimated fair value of securities for which there are no quoted market prices
is based on similar types of securities that are traded in the
market.
Property, Plant and
Equipment
Property
and equipment are stated at historical cost and are depreciated using the
straight-line method over their estimated useful lives. The useful life and
depreciation method are reviewed periodically to ensure that the depreciation
method and period are consistent with the anticipated pattern of future economic
benefits. Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized. Gains and losses on
disposals are included in the results of operations.
The
Company provides for depreciation over the assets estimated lives as
follows:
Computers, software and equipment
|
|
|
3
years
|
|
Furniture and fixtures
|
|
|
5
years
|
|
Leasehold improvements
|
|
|
Lesser
of lease life or economic life
|
|
The
Company applies the provisions of Statement of Financial Accounting Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of March 31, 2009 and December 31, 2008, there were no significant
impairments of its long-lived assets.
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follows:
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
The
Company’s investments in marketable securities are carried at fair value
totaling $502,770 and $1,957,993 at March 31, 2009 and December 31, 2008,
respectively. The Company used Level 1 inputs for its valuation methodology as
the securities’ quoted prices are publicly available.
|
|
Fair
Value
As
of
March
31, 2009
|
|
|
Fair
Value Measurements at
March
31, 2009
Using
Fair Value Hierarchy
|
|
Assets
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Investments
in marketable securities
|
|
$ |
502,770 |
|
|
$ |
502,770 |
|
|
|
- |
|
|
|
- |
|
The
Company did not identify any other assets or liabilities that are required to be
presented on the balance sheets at fair value in accordance with SFAS No.
157.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value
option has been elected are reported in earnings. SFAS 159 is effective as of
the beginning of an entity’s first fiscal year that begins after November 15,
2007. The Company adopted SFAS 159 on January 1, 2008. The Company chose
not to elect the option to measure the fair value of eligible financial assets
and liabilities.
Revenue
Recognition
Revenue
is recognized in the period that services are provided. For revenue from product
sales, the Company recognizes revenue in accordance with Staff Accounting
Bulletin No. 104, “Revenue Recognition” (“SAB104”), which superseded Staff
Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”
(“SAB101”). SAB 101 requires that four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectability is reasonably assured. Determination of criteria (3) and (4) are
based on management’s judgments regarding the fixed nature of the selling prices
of the products delivered and the collectability of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund will
be required. Payments received in advance are deferred until the product is
delivered or service is rendered. SAB 104 incorporates Emerging Issues Task
Force 00-21 (“EITF 00-21”), “Multiple-Deliverable Revenue Arrangements.” EITF
00-21 addresses accounting for arrangements that may involve the delivery or
performance of multiple products, services and/or rights to use assets. The
effect of implementing EITF 00-21 on our financial position and results of
operations was not significant.
In 2008,
the Company has focused on the transition from its old line of financial media
products including the ValueRich financial Expos and the ValueRich Magazine to
web-based products such as www.WallStreetHDTV.com, the second generation of
www.iValueRich.com and www.ValueRichTV.com (expected to launch in the second
quarter of 2009). The new ValueRich products have mostly been in the
design, development and implementation stages throughout the 2008 calendar year.
Accordingly, the Company has not earned any revenue from its old line of
financial media products during the three months ended March 31, 2008. During
2008, the Company entered into two consulting agreements to assist foreign-based
companies manage their financial statement reporting, regulatory and compliance
issues in the United States. The Company does not recognize revenue on its
consulting business until persuasive evidence of an arrangement exists, delivery
has occurred (the Company has performed according to the terms of the consulting
agreement), the selling price is fixed and determinable, and collectability is
reasonably assured. See Note 3.
Income
Taxes
Income
taxes are provided based upon the asset and liability method of accounting in
accordance with SFAS No. 109, “Accounting for Income Taxes”. Pursuant to SFAS
No. 109 the Company is required to compute deferred income tax assets for net
operating losses carried forward. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income in the period that includes the enactment
date. Realizing of deferred tax assets is assessed throughout the year and a
valuation allowance is recorded if necessary to reduce net deferred tax assets
to the amount more likely than not to be realized. The potential benefits of net
operating losses (“NOLs”) have not been recognized in these financial statements
because the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years.
The
Company has an NOL carry forward for income tax reporting purposes that may be
offset against future taxable income. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Accordingly, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements, because the Company is uncertain if they will ever be in a position
to utilize the NOL carry forward. Accordingly, the potential tax benefits of the
loss carry forward are offset by a valuation allowance of the same
amount.
The
Company is current in its filing of federal income tax returns. The Company
believes that the statutes of limitations for its federal income tax returns are
open for years after 2004. The Company is not currently under examination by the
Internal Revenue Service or any other taxing authority.
The
Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
Taxes”, during 2007. A tax position is recognized as a benefit only if it is
“more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is greater than 50% likely
of being realized on examination. For tax positions not meeting the “more likely
than not” test, no tax benefit is recorded. The adoption had no affect on the
Company’s financial statements.
The
Company’s practice is to recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses. At March 31,
2009 and December 31, 2008, the Company had no accrued interest or
penalties.
Basic and Diluted Losses Per
Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share for
all periods presented have been restated to reflect the adoption of SFAS No.
128. Basic earnings per share is based upon the weighted average number of
common
shares outstanding. Diluted earnings per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period. All
dilutive securities were excluded from the diluted loss per share due to the
anti-diluted effect.
The
computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial
statements.
|
|
Loss
|
|
Shares
|
Per-Share
|
|
|
(Numerator)
|
|
(Denominator)
|
Amount
|
|
|
|
|
|
|
|
|
For
the Three Months Ended March 31, 2009:
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
Loss
to common stockholders
|
|
$ |
(268,282)
|
|
8,669,670
|
$
|
(0.03)
|
For
the Three Months Ended March 31, 2008:
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
Loss
to common stockholders
|
|
$ |
(421,769)
|
|
8,406,875
|
$
|
(0.05)
|
As of
March 31, 2009 and 2008, the following potential dilutive shares were excluded
from diluted loss per share for all periods presented because of their
anti-dilutive effect.
|
|
March
31 , 2009
|
|
March
31, 2008
|
Options
|
|
100,000
|
|
100,000
|
Warrants
|
|
1,235,715
|
|
1,836,494
|
Convertible
notes
|
67,000
|
|
134,000
|
Total
|
|
1,402,715
|
|
2,070,494
|
Stock-Based
Compensation
The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and
non-employees, estimated using the Black-Scholes option pricing model. No
options or warrants were exercised during the year ended December 31,
2008. During the year ended December 31, 2008, 1,390,779 warrants
expired. As of March 31, 2009 and December 31, 2008, there were 1,235,715
warrants and 100,000 options and 1,185,715 warrants and 100,000 options
outstanding, respectively.
Special Purpose
Entities
The
Company does not have any off-balance sheet financing activities.
Certain
reclassifications have been made to the 2008 financial statements to
conform to the 2009 financial statement presentation. These
reclassifications had no effect on net income or cash flows as previously
reported.
Recent
Pronouncements
In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Values When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.” This FSP provides guidance on (1) estimating the fair value
of an asset or liability when the volume and level of activity for the asset or
liability have significantly declined and (2) identifying transactions that
are not orderly. The FSP also amends certain disclosure provisions of SFAS
No. 157 to require, among other things, disclosures in interim periods of
the inputs and valuation techniques used to measure fair value. This
pronouncement is effective prospectively beginning April 1, 2009. The
Company is currently evaluating the impact of this standard, but would not
expect it to have a material impact on the Company’s consolidated results of
operations or financial condition.
In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2).
This FSP modifies the requirements for recognizing other-than-temporarily
impaired debt securities and changes the existing impairment model for such
securities. The FSP also requires additional disclosures for both annual
and interim periods with respect to both debt and equity securities. Under the
FSP, impairment of debt securities will be considered other-than-temporary if an
entity (1) intends to sell the security, (2) more likely than not will
be required to sell the security before recovering its cost, or (3) does
not expect to recover the security’s entire amortized cost basis (even if the
entity does not intend to sell). The FSP further indicates that, depending on
which of the above factor(s) causes the impairment to be considered
other-than-temporary, (1) the entire shortfall of the security’s fair value
versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulated other comprehensive income. This pronouncement is effective
April 1, 2009. The Company does not believe this standard will have a
material impact on the Company’s consolidated results of operations or financial
condition.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments.” This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company is currently
evaluating the requirements of these additional disclosures.
Effective
July 1, 2008 and continuing for a period of 2 years, the Company has been
engaged to perform strategic business consulting services to Bodisen Biotech. As
compensation for the consulting services, Bodisen Biotech has agreed
to:
(a)
|
Issue
to the Company 400,000 shares of Bodisen Biotech common stock to the
Company up front;
|
(b)
|
Issue
to the Company options to purchase 400,000 shares of its common stock. The
options will be exercisable at $0.70 per share and will have an exercise
period of 5 years;
|
(c)
|
Pay
the Company $10,000 per month for the 24-month consulting period, equaling
a total of $120,000 per year.
|
The
Company has also recorded $60,000 in marketable securities and corresponding
revenue for the 400,000 shares received on September 18, 2008. The marketable
securities have been classified as available-for-sale. These securities are
carried at fair value with unrealized gains and losses, net of deferred income
taxes, reported as accumulated other comprehensive income (loss), a separate
component of stockholder's equity.
The
Company has valued the options received under the consulting agreement using the
Black-Scholes option pricing model. The option exercise price is $0.70 per
share. The fair value of the options was $25,800 and the following
assumptions: term of 2.5 years, a risk free interest rate
of 2.1%, a dividend yield of 0% and volatility of 128%. Management has
performed an analysis and determined the options are impaired at March 31, 2009,
and therefore the Company has recorded a 100% allowance against the value of the
options.
For the
three months ended March 31, 2009, the Company has recognized $30,000, less wire
fees, in consulting revenues relating to the cash component of its consulting
compensation.
Note
4 – Marketable Securities
The
Company’s marketable securities consist of trading and available-for-sale
securities, all of which are classified as marketable securities and are carried
at their fair value based on the quoted market prices of the securities at March
31, 2009 and December 31, 2008. Net unrealized gains and losses on trading
securities are included in net earnings. Available-for sale securities consist
of the 400,000 shares received in July 2008 for consulting services performed
for Bodisen Biotech (see Note 3). These securities are carried at fair value
with unrealized gains and losses, net of deferred income taxes, reported as
accumulated other comprehensive income (loss), a separate component of
stockholder's equity. The investment in these shares has been valued at $108,000
at March 31, 2009, and accordingly a $48,000 unrealized gain has been recognized
in accumulated other comprehensive income at March 31, 2009 in the accompanying
balance sheets. Realized gains and losses on trading and available-for-sale
securities are included in net earnings in the period earned or incurred. For
purpose of determining realized gains and losses, the const of securities sold
is based on specific identification.
The
composition of marketable securities, classified as current assets, is as
follows at March 31, 2009 and December 31, 2008.
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Fair
Value
|
|
Available-for-sale
securities
|
|
$ |
60,000 |
|
|
$ |
108,000 |
|
|
$ |
60,000 |
|
|
$ |
168,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual
Funds
|
|
|
387,016 |
|
|
|
361,550 |
|
|
|
1,249,431 |
|
|
|
1,331,571 |
|
Common
Stock
|
|
|
31,407 |
|
|
|
33,220 |
|
|
|
421,497 |
|
|
|
458,422 |
|
Total
marketable securities
|
|
$ |
478,423 |
|
|
$ |
502,770 |
|
|
$ |
1,730,928 |
|
|
$ |
1,957,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income for the three months ended March 31, 2009 and 2008 consists of the
following:
|
|
2009
|
|
|
2008
|
|
Gross
realized gains from sale of trading securities
|
|
$ |
171,187 |
|
|
$ |
- |
|
Gross
realized losses from sale of trading securities
|
|
|
(105,951 |
) |
|
|
- |
|
Dividend
and interest income
|
|
|
20,357 |
|
|
|
- |
|
Net
unrealized holding loss
|
|
|
(138,779 |
) |
|
|
- |
|
Net
investment income
|
|
$ |
(53,186 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Management
evaluates securities for other-than-temporary impairment at least on a yearly
basis, and more frequently when economic or market conditions warrant such
evaluation. Consideration is given to the length of time and amount of the loss
relative to cost, the nature and financial condition of the issuer and the
ability and intent of the Company to hold the investment for a time sufficient
to allow any anticipated recovery in fair value. There were no securities with
unrealized losses which management considers to be other-than-temporary
impairments at March 31, 2009 and December 31, 2008.
Proceeds
from the sale of investments in trading securities during the three months ended
March 31, 2009 and 2008 were $2,254,348 and $0, respectively. As of March 31,
2009 and December 31, 2008, the Company had no significant concentration of
credit risk related to investments.
Property
and equipment consisted of the following at March 31, 2009 and December 31,
2008:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Building
|
|
$ |
225,682 |
|
|
$ |
- |
|
Computers
and equipment
|
|
|
113,691 |
|
|
|
31,859 |
|
Furniture
and fixtures
|
|
|
33,427 |
|
|
|
29,366 |
|
Leasehold
improvements
|
|
|
82,257 |
|
|
|
82,257 |
|
Website
|
|
|
71,745 |
|
|
|
55,140 |
|
|
|
|
526,802 |
|
|
|
198,622 |
|
Accumulated
depreciation
|
|
|
(97,040 |
) |
|
|
(85,075 |
) |
Fixed
assets, net
|
|
$ |
429,762 |
|
|
$ |
113,547 |
|
|
|
|
|
|
|
|
|
|
Depreciation
expense amounted to $11,965 and $5,039 for the three months ended March 31,
2009, and 2008, respectively.
Note
7 – Accounts Payable and Accrued Expenses
Accrued
expenses and other liabilities comprises of the following:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Acounts
payable
|
|
$ |
202,968 |
|
|
$ |
216,252 |
|
Accrued
interest
|
|
|
6,000 |
|
|
|
6,000 |
|
Other
accrued expenses
|
|
|
35,610 |
|
|
|
18,505 |
|
Total
|
|
$ |
244,578 |
|
|
$ |
240,757 |
|
|
|
|
|
|
|
|
|
|
Note
8 – Operating Lease and Other Commitments
The
Company leases a 1,750 square foot office facility at $3,190 per month ($38,280
per year) from Joseph C. Visconti CEO and President. There is no long-term lease
arrangement and the company pays on a month-to-month basis.
Note
9 – Debt
The
Company’s debt at March 31, 2009 and December 31, 2008 is detailed as
follows:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Shareholders
Notes Payable:
|
|
|
|
|
|
|
Notes
payable to an individual 10% interest accrued, Issued 12/03, Matures
5/09
|
|
|
9,500 |
|
|
|
9,500 |
|
|
|
|
|
|
|
|
|
|
Convertible
Notes Payable:
|
|
|
|
|
|
|
|
|
Note
payable to an individual 6% interest accrued, Issued 10/04, convertible
Matured 12/07 (in default)
|
|
|
25,000 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
In
addition to the information stated above, other material terms of the
convertible debt instruments include: 1) a conversion price of $0.60 per share;
2) a debt penalty to include the issuance of additional shares upon conversion
totaling 10% of the shares into which the note may convert if the Company’s
shares are not listed for public trading on or before October 1, 2004; 3) a debt
penalty to include the issuance of additional shares upon conversion totaling
15% of the shares into which the note may convert if the Company’s shares are
not listed for public trading on or before December 31, 2004 and 4) a warrant to
purchase the same number of shares into which the original principal amount
could be converted at an exercise price of $2.00 per share.
The
Company has adopted Emerging Issues Task Force (“EITF”) Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios,” and EITF Issue No. 00-27,
“Application of EITF Issue No. 98-5 to Certain Convertible Instruments.” During
2004 and 2005 we incurred debt with a conversion feature that provides for a
rate of conversion, but with no trading market value there was no beneficial
conversion feature to record.
The
Company repaid $0 and $25,000 of its shareholder notes payable in cash during
the three months ended March 31, 2009 and 2008, respectively.
Note
10 – Equity
The
Company did not issue shares of its common stock during the three months ended
March 31, 2009.
The
following is a summary of shares of the Company’s common stock issued during
2008:
·
|
On
March 31, 2008, the Company issued 290,000 shares of its common stock at
approximately $0.31 per share to four consultants for strategic, financial
and business consulting services performed in
2008.
|
·
|
On
September 30, 2008, the Company canceled 25,000 shares of its common stock
at $1.15 per share issued in 2007 for software development services
related to its intangible asset.
|
·
|
On
October 1, 2008, the Company issued 128,128 shares of common stock at
approximately $0.42 per share and 50,000 warrants (see Note 11) in
repayment of a convertible note payable with a face amount of
$25,000.
|
Note
11 – Warrants and Deferred Financing Costs
On March
19, 2009, the Company granted 50,000 warrants to purchase common stock at $0.25
per share in connection with consulting services. The warrants were
valued at $18,395 using the Black-Scholes pricing model with the following
assumptions: (1) dividend yield of 0%; (2) expected volatility
of 184%; (3) risk-free interest rate of 0.87%, and expected life of 2
years. The amount was recorded to professional fees in the
accompanying statements of operations and comprehensive loss for the three
months ended March 31, 2009.
The
following table summarizes the changes in warrants outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. These warrants were granted in connection with the convertible
shareholder notes payable and for consulting services.
A summary
of warrant activity for the three months ended March 31, 2009 is presented
below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Value
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life
(in years)
|
|
|
|
(000)
|
|
Outstanding,
January 1, 2008
|
|
|
2,376,494 |
|
|
$ |
2.00 |
|
|
|
0.37 |
|
|
$ |
- |
|
Granted
|
|
|
200,000 |
|
|
|
0.55 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,390,779 |
) |
|
|
1.89 |
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2008
|
|
|
1,185,715 |
|
|
|
1.61 |
|
|
|
2.59 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2008
|
|
|
1,185,715 |
|
|
|
1.61 |
|
|
|
2.59 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 1, 2009
|
|
|
1,185,715 |
|
|
|
1.61 |
|
|
|
2.59 |
|
|
|
- |
|
Granted
|
|
|
50,000 |
|
|
|
0.25 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Expired
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Outstanding,
March 31, 2009
|
|
|
1,235,715 |
|
|
|
1.55 |
|
|
|
2.32 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
March 31, 2009
|
|
|
1,235,715 |
|
|
$ |
1.55 |
|
|
|
2.32 |
|
|
$ |
16 |
|
The
aggregate intrinsic value in the table above is before applicable income taxes
and is calculated based on the difference between the exercise price of the
warrants and the quoted price of the Company’s common stock as of the reporting
date.
Note
11 – Related Party Transactions
The
Company leases a 1,750 square foot office facility at $3,190 per month ($38,280
per year) from Joseph C. Visconti CEO and President. See Note 8.
Various
shareholders have made loans to the company. At March 31, 2009 and December 31,
2008, one shareholder note was outstanding for $9,500. See Note 9.
Note
13 – Subsequent Events
None.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
This
discussion and analysis should be read in conjunction with the accompanying
Condensed Financial Statements and related notes. Our discussion and analysis of
our financial condition and results of operations are based upon our condensed
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of any
contingent liabilities at the financial statement date and reported amounts of
revenue and expenses during the reporting period. On an on-going basis we review
our estimates and assumptions. Our estimates are based on our historical
experience and other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those estimates under
different assumptions or conditions. Our critical accounting policies, the
policies we believe are most important to the presentation of our financial
statements and require the most difficult, subjective and complex judgments, are
outlined below in ‘‘Critical Accounting Policies,’’ and have not changed
significantly.
FORWARD-LOOKING
STATEMENTS
Certain
statements made in this report may constitute “forward-looking statements on our current expectations and
projections about future events”. These forward-looking statements
involve known or unknown risks, uncertainties and other factors that may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. In some cases you can identify
forward-looking statements by terminology such as “may,” “should,” “potential,”
“continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” and similar expressions. These statements are based on our current
beliefs, expectations, and assumptions and are subject to a number of risks and
uncertainties. Although we believe that the expectations reflected-in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. These forward-looking statements are
made as of the date of this report, and we assume no obligation to update these
forward-looking statements whether as a result of new information, future
events, or otherwise, other than as required by law. In light of these
assumptions, risks, and uncertainties, the forward-looking events discussed in
this report might not occur and actual results and events may vary significantly
from those discussed in the forward-looking statements.
General
The
following discussion and analysis should be read in conjunction with our
condensed financial statements and related footnotes for the year ended December
31, 2007 included in our Form 10K-SB for the year ended December 31, 2007 filed
with the Securities and Exchange Commission. The discussion of
results, causes and trends should not be construed to imply any conclusion that
such results or trends will necessarily continue in the future.
Our
Corporate History
ValueRich,
Inc., (the Company), was incorporated under the laws of the state of Florida on
July 11, 2003 and reincorporated in Delaware on March 3, 2006. The Company owns
various online and offline media-based properties for corporate and financial
professionals. Its properties include 1) iValueRich.com, 2) ValueRich magazine
and 3) the ValueRich Small-cap Financial Expo. iValueRich.com is an online
community providing a range of business solutions for public companies and the
many industry related businesses and professionals that seek to do business with
each other. The small-cap financial expo is a unique expo-style financial
conference format for small-cap public companies to showcase their products and
services and have continuous access to investment bankers and buy-side
professionals.
We have a
limited operating history. We launched iValuerich.com in June 2006, we hosted
our first financial expo in March 2005, and we published our first edition of
ValueRich magazine in the spring of 2004. During our limited operating history,
we have not been profitable. For the three months ended March 31, 2009, we
incurred a net loss of $268,282.
Our
corporate mission is to create an active community of Wall Street professionals
and small-cap public company executives. To accomplish this we will use our
online and offline properties, including our global Internet community, print
publishing and financial events to connect the corporate and financial
professionals that make up the securities industry. We seek to accomplish this
through our integrated portfolio of products and services that we now provide
for the small public capitalization market place.
Results
of Operations
Our
results of operations for the three months ended March 31, 2009 have been
significantly impacted by our decision to revise our financial expo line of
business to be a co-branded or partnered expo in response to increased
competition we have experienced in the financial convention
space. Since we were unable until the mid-second quarter 2008 to find
a suitable partner to co-brand or partner our expos, we did not have any expo
events during the first three quarters of 2008 as we had planned, and therefore
we did not derive any revenue from expos during such quarters.
Throughout
2008, we have focused on the transition of our old line financial media products
including the ValueRich financial Expos and the ValueRich Magazine to web-based
products such as www.WallStreetHDTV.com, the second generation of
www.iValueRich.com and the soon to be launched
www.ValueRichTV.com. The new ValueRich products have mostly been in
design, development and implementation stages throughout the 2008 calendar
year.
By the
first quarter of 2009, we had launched the second generation of the ValueRich
platform, which added a full spectrum of financial and web-based tools for
small-cap companies seeking to go public and raise capital via a web-based
Direct Offering (“DO”) format. Companies that want to raise capital
could file their own registration statement through the DO process and pay us
for the use of our technology platform and access to their our of financial
related professionals to assist in funding the issuing company’s
deal. For the first time, users of the ValueRich technology platform
who have verified their qualified investor’s status will be able to discover and
participate in Direct Offerings featured on the ValueRich
platform. While we are not a registered broker-dealer or investment
advisor, soon we will be able to provide companies with technology and marketing
tools they need to communicate directly with qualified investors.
In
January 2009, we announced plans to create a business talk show called ValueRich
TV, which will be produced at a dedicated studio next door to our headquarters.
Its purpose is to create a successful Wall Street based talk show that can be
streamed over the internet for worldwide distribution. In January 2009, we
purchased and closed on the building to be used as the studio.
In August
2008, we implemented a stock repurchase program for up to $400,000 shares of our
common stock on the open market. As you know, our stock has become somewhat
illiquid due to very light volume. To date, the $400,000 buy back program has
resulted in only approximately $30,000 of stock being repurchased in the open
market.
For the three month period
ended March 31, 2009 vs. the three month period ended March 31,
2008
During
the quarter ended March 31, 2009, we generated $37,485 in revenue that arose
primarily from consulting services we provided. During the same
period of 2008 we had revenues of $0. Our total cost of sales for the three
months ended March 31, 2009 was $0 as compared to $6,230 for the three months
ended March 31, 2008. Total operating expenses decreased
significantly from $449,086 for the three months ended March 31, 2008 to
$263,127 for the three months ended March 31, 2009. The decrease in
total operating expenses was primarily attributable to a decrease in salaries as
a result in downsizing due to a change in our focus. Net loss for the quarter
ended March 31, 2009 as compared to the period ended March 31, 2008 decreased
from $421,769 to $268,282 primarily as a result of the decrease in staffing
costs as well as consulting revenue earned in the three months ended March 31,
2009.
Liquidity
and Capital Resources
For the
three months ended March 31, 2009 we had an increase in total cash resources of
$836,849. The increase in cash was primarily due to the sales of marketable
securities and a corresponding gain on sale of $65,236.
We have
spent, and expect to continue to spend, substantial amounts in connection with
the implementation of our business strategy, including our revisions to our
current lines of business and our future endeavors. Based on our current plans,
we believe that our cash will be sufficient to enable us to meet our planned
operating needs at least for the next 12 months. Because of current economic and
market conditions and due to the unknown future of our nations’s economic
health, we have taken prudent measures to manage our cash position and not force
the growth of our core business.
Off-Balance
Sheet Arrangements
We do not
maintain any off-balance sheet arrangements, transactions, obligations or other
relationships with unconsolidated entities that would be expected to have a
material current or future effect upon our financial condition or results of
operations.
Critical
Accounting Policies
Use of
Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. We
base our estimates on historical experience, management expectations for future
performance, and other assumptions as appropriate. Key areas affected by
estimates include the assessment of the recoverability of long-lived assets,
which is based on such factors as estimated future cash flows. We re-evaluate
our estimates on an ongoing basis; actual results may vary from those
estimates.
Concentration of Credit
Risk
Financial
instruments, which potentially subject us to concentrations of credit risk,
consist of cash and cash equivalents and accounts receivables. We place our cash
with high quality financial institutions and at times may exceed the FDIC
insurance limit. We extend credit based on an evaluation of the customer’s
financial
condition, generally without collateral. Exposure to losses on receivables is
principally dependent on each customer’s financial condition. We monitor our
exposure for credit losses and maintain allowances for anticipated losses, as
required. Accounts are “written-off” when deemed uncollectible.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
Marketable
Securities
The
Company has designated its investments in marketable securities as trading and
available-for-sale. Marketable securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains and losses
recognized in earnings. Marketable equity securities not classified as trading
are classified as available for sale, and are carried at fair market value, with
the unrealized gains and losses, net of tax, included in the determination of
comprehensive income and reported in shareholders’ equity. Investment income is
recognized on an accrual basis.
The fair
value of substantially all securities is determined by quoted market prices. The
estimated fair value of securities for which there are no quoted market prices
is based on similar types of securities that are traded in the
market.
Fair Value of Financial
Instruments and Concentrations
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follows:
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
The
Company’s investments in marketable securities are carried at fair value
totaling $502,770 and $1,957,993 at March 31, 2009 and December 31, 2008,
respectively. The Company used Level 1 inputs for its valuation methodology as
the securities’ quoted prices are publicly available.
|
|
Fair
Value
As
of
March
31, 2009
|
|
|
Fair
Value Measurements at
March
31, 2009
Using
Fair Value Hierarchy
|
|
Assets
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Investments
in marketable securities
|
|
$ |
502,770 |
|
|
$ |
502,770 |
|
|
|
- |
|
|
|
- |
|
For the
three months ended March 31, 2009 and 2008, the Company recognized unrealized
losses on its trading securities in its statements of operations and
comprehensive loss in the amounts of $138,779 and $0, respectively. For the
three months ended March 31, 2009 and 2008, the Company recognized unrealized
losses on its available-for-sale securities in its statements of stockholders’
equity in the amounts of $60,000 and $0, respectively, for the changes in the
valuation of the aforementioned assets.
The
Company did not identify any other assets or liabilities that are required to be
presented on the balance sheets at fair value in accordance with SFAS No.
157.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
The Company adopted SFAS 159 on January 1, 2008. The Company chose not to elect
the option to measure the fair value of eligible financial assets and
liabilities.
Revenue
Recognition
Revenue
is recognized in the period that services are provided. For revenue from product
sales, the Company recognizes revenue in accordance with Staff Accounting
Bulletin No. 104, “Revenue Recognition” (“SAB104”), which superseded Staff
Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”
(“SAB101”). SAB 101 requires that four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectability is reasonably assured. Determination of criteria (3) and (4) are
based on management’s judgments regarding the fixed nature of the selling prices
of the products delivered and the collectability of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund will
be required. Payments received in advance are deferred until the product is
delivered or service is rendered. SAB 104 incorporates Emerging Issues Task
Force 00-21 (“EITF 00-21”), “Multiple-Deliverable Revenue Arrangements.” EITF
00-21 addresses accounting for arrangements that may involve the delivery or
performance of multiple products, services and/or rights to use assets. The
effect of implementing EITF 00-21 on our financial position and results of
operations was not significant.
In 2008,
the Company has focused on the transition from its old line of financial media
products including the ValueRich financial Expos and the ValueRich Magazine to
web-based products such as www.WallStreetHDTV.com, the second generation of
www.iValueRich.com and www.ValueRichTV.com (expected to launch in the second
quarter of 2009). The new ValueRich products have mostly been in the
design, development and implementation stages throughout the 2008 calendar year.
Accordingly, the Company has not earned any revenue from its old line of
financial media products during the three months ended March 31, 2008. During
2008, the Company entered into two consulting agreements to assist foreign-based
companies manage their financial statement reporting, regulatory and compliance
issues in the United States. The Company does not recognize revenue on its
consulting business until persuasive evidence of an arrangement exists, delivery
has occurred (the Company has performed according to the terms of the consulting
agreement), the selling price is fixed and determinable, and collectability is
reasonably assured.
Basic and Diluted Losses Per
Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share for
all periods presented have been restated to reflect the adoption of SFAS No.
128. Basic earnings per share is based upon the weighted average number of
common shares outstanding. Diluted earnings per share is based on the assumption
that all dilutive convertible shares and stock options were converted or
exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. All dilutive securities were excluded from the diluted loss per
share due to the anti-diluted effect.
The
computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial
statements.
|
|
Loss
|
|
Shares
|
Per-Share
|
|
|
(Numerator)
|
|
(Denominator)
|
Amount
|
|
|
|
|
|
|
|
|
For
the Three Months Ended March 31, 2009:
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
Loss
to common stockholders
|
|
$ |
(268,282)
|
|
8,669,670
|
$
|
(0.03)
|
For
the Three Months Ended March 31, 2008:
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
|
|
|
|
|
|
Loss
to common stockholders
|
|
$ |
(421,769)
|
|
8,406,875
|
$
|
(0.05)
|
As
of March 31, 2009 and 2008, the following potential dilutive shares were
excluded from diluted loss per share for all periods presented because of their
anti-dilutive effect.
|
|
March
31 , 2009
|
|
March
31, 2008
|
Options
|
|
100,000
|
|
100,000
|
Warrants
|
|
1,235,715
|
|
1,836,494
|
Convertible
notes
|
67,000
|
|
134,000
|
Total
|
|
1,402,715
|
|
2,070,494
|
Stock-Based
Compensation
The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and
non-employees, estimated using the Black-Scholes option pricing model. No
options or warrants were exercised during the year ended December 31,
2008. During the year ended December 31, 2008, 1,390,779 warrants
expired. As of March 31, 2009 and December 31, 2008, there were 1,235,715
warrants and 100,000 options and 1,185,715 warrants and 100,000 options
outstanding, respectively.
Recent
Pronouncements
In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Values When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.” This FSP provides guidance on (1) estimating the fair value
of an asset or liability when the volume and level of activity for the asset or
liability have significantly declined and (2) identifying transactions that
are not orderly. The FSP also amends certain disclosure provisions of SFAS
No. 157 to require, among other things, disclosures in interim periods of
the inputs and valuation
techniques
used to measure fair value. This pronouncement is effective prospectively
beginning April 1, 2009. The Company is currently evaluating the impact of
this standard, but would not expect it to have a material impact on the
Company’s consolidated results of operations or financial
condition.
In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2).
This FSP modifies the requirements for recognizing other-than-temporarily
impaired debt securities and changes the existing impairment model for such
securities. The FSP also requires additional disclosures for both annual and
interim periods with respect to both debt and equity securities. Under the FSP,
impairment of debt securities will be considered other-than-temporary if an
entity (1) intends to sell the security, (2) more likely than not will
be required to sell the security before recovering its cost, or (3) does
not expect to recover the security’s entire amortized cost basis (even if the
entity does not intend to sell). The FSP further indicates that, depending on
which of the above factor(s) causes the impairment to be considered
other-than-temporary, (1) the entire shortfall of the security’s fair value
versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulated other comprehensive income. This pronouncement is effective
April 1, 2009. The Company does not believe this standard will have
a material impact on the Company’s consolidated results of operations or
financial condition.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments.” This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company is currently
evaluating the requirements of these additional disclosures.
N/A
Item
4 – Controls and Procedures
As
required by SEC rules, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures at the end of the period
covered by this report. This evaluation was carried out under the supervision
and with the participation of our management, including our Chief Executive
Officer, who is our principal executive officer and principal financial
officer. Based on this evaluation, this officer has concluded
that the design and operation of our disclosure controls and procedures are
effective. During the quarter ended March 31, 2009, there were no changes in our
internal control over financial reporting or in other factors that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that 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.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including principal executive officer and
principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating our controls and procedures, our
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of disclosure controls and procedures are
met. Additionally, in designing disclosure controls and procedures,
our management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures also
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
None.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
None.
Item
6. Exhibits
31.1
|
Section 302
Certification of Chief Executive Officer and Principal Financial
Officer.*
|
|
|
32.1
|
Certification
of Chief Executive Officer and Principal Financial Officer pursuant to 18
U.S.C. Section 1350.*
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
VALUERICH
INC.
|
|
|
|
|
Date:
May 18, 2009
|
By:
|
/s/
Joseph C.
Visconti
|
|
|
|
Joseph
C. Visconti,
Director
and Chief Executive Officer
(Principal
Executive Officer and Principal Financial Officer)
|
|
25