As
filed with the Securities and Exchange Commission on June 24,
2010
Registration
No. 333-166896
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 1
To
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
(Exact
name of registrant as specified in its charter)
Delaware
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7200
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98-0412432
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(State
or other jurisdiction of
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(Primary
Standard Industrial
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(I.R.S.
Employer
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incorporation
or organization)
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Classification
Code Number)
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Identification
No.)
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200
E. Broward Boulevard, Suite 1200
Fort
Lauderdale, Florida 33301
(954)
915-1550
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Daniel
Brauser
200
E. Broward Boulevard, Suite 1200
Fort
Lauderdale, Florida 33301
(954)
915-1550
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies to:
Michael
D. Harris, Esq.
Brian
S. Bernstein, Esq.
Harris
Cramer LLP
1555
Palm Beach Lakes Boulevard, Suite 310
West
Palm Beach, Florida 33401
(561)
478-7077
Approximate
date of commencement of proposed sale to the public: From time to time after the
effective date of this registration statement.
If any of
the securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box: x
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
number of the earlier effective registration statement for the same
offering. ¨
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 definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company x
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CALCULATION
OF REGISTRATION FEE
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Title of Each
Class of Securities
to be Registered
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Amount to be
Registered (1)
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Proposed
Maximum
Offering Price
Per Share (2)
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Proposed
Maximum
Aggregate
Offering Price
(2)
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Amount of
Registration Fee(3)
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Common
stock, $0.0001 par value per share
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14,241,995 |
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$ |
0.11 |
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$ |
1,584,422 |
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$ |
113.00 |
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(1)
Under Rule 416 of the Securities Act of 1933, the shares being registered
include such indeterminate number of shares of common stock as may be issuable
with respect to the shares being registered in this registration statement as a
result of any stock splits, stock dividends.
(2) The
proposed maximum offering price per share and the proposed maximum aggregate
offering price have been estimated solely for the purpose of calculating the
amount of the registration fee in accordance with Rules 457(c) under the
Securities Act of 1933 on the basis of the average of the bid and asked price of
our common stock on the OTC Bulletin Board on June 21, 2010, a date within five
trading days prior to the date of the filing of this registration
statement.
(3) A
fee of $90.33 was paid on the date of filing the Form S-1.
The registrant hereby amends this
registration statement on such date or date(s) as may be necessary to delay its
effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, or
until the registration statement shall become effective on such date as the
Commission acting pursuant to said Section 8(a) may
determine.
The
information in this prospectus is not complete and may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission of which this
prospectus is a part becomes effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject
to Completion, Dated June 24, 2010
UPSTREAM
WORLDWIDE, INC.
PROSPECTUS
14,241,995
Shares of Common Stock
This
prospectus relates to the sale of up to 14,241,995 shares of our common
stock which may be offered by the selling shareholders identified in this
prospectus.
We will
not receive any proceeds from the sales of shares of our common stock by the
selling shareholders named on page ____.
Our
common stock trades on the Over-the-Counter Bulletin Board under the symbol
“MFGD”. As of the last trading day before the date of this
prospectus, the closing price of our common stock was $_.__ per
share.
The
common stock offered in this prospectus involves a high degree of
risk. See “Risk Factors” beginning on page __ of this prospectus to
read about factors you should consider before buying shares of our common
stock.
The
selling shareholders are offering these shares of common stock. The
selling shareholders may sell all or a portion of these shares from time to time
in market transactions through any market on which our common stock is then
traded, in negotiated transactions or otherwise, and at prices and on terms that
will be determined by the then prevailing market price or at negotiated prices
directly or through a broker or brokers, who may act as agent or as principal or
by a combination of such methods of sale. The selling shareholders
will receive all proceeds from the sale of the common stock. For
additional information on the methods of sale, you should refer to the section
entitled “Plan of Distribution.”
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined whether this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The
date of this prospectus is ________________, 2010
TABLE
OF CONTENTS
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Page
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1
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2
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3
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5
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FORWARD-LOOKING
STATEMENTS
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13
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14
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14
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14
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15
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15
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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17
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35
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MANAGEMENT
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39 |
PRINCIPAL
SHAREHOLDERS
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52 |
RELATED
PERSON TRANSACTIONS
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56 |
SELLING
SHAREHOLDERS
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56 |
DESCRIPTION
OF SECURITIES
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58 |
PLAN
OF DISTRIBUTION
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59 |
LEGAL
MATTERS
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61 |
EXPERTS
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62 |
ADDITIONAL
INFORMATION
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62 |
You
should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information that is different from
that contained in this prospectus. The selling shareholders are not
offering to sell or seeking offers to buy shares of common stock in
jurisdictions where offers and sales are not permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully including
the section entitled “Risk Factors” before making an investment decision.
On June 11, 2010, a Certificate of Amendment was filed with the Secretary of
State of Delaware changing our name from Money4Gold Holdings, Inc. to
Upstream Worldwide, Inc. Upstream Worldwide, Inc. is referred to throughout this
prospectus as “Upstream,” “we,” “our” or “us.” In reviewing this
prospectus and the financial statements found elsewhere herein, investors should
note that any reference to Money4Gold Holdings, Inc. is referring to Upstream
Worldwide, Inc.
Our
Company
Upstream
Worldwide, Inc. (formerly, Money4Gold Holdings, Inc.) is an emerging global
leader in direct-from-consumer, reverse logistics, currently specializing in the
procurement and aggregation of precious metals to be recycled. We
utilize consumer oriented advertising efforts to solicit individuals interested
in liquidating unwanted items. Through our global platform, we
facilitate an end-to-end consumer solution, from acquisition through
liquidation. We have a low cost, highly scalable and flexible business model
that allows us to quickly and efficiently adapt to entry into new markets,
changes in economic conditions, supply and demand levels and other similar
factors.
Our focus
has been on providing a fast, secure and convenient service that enables the
public to discretely sell their precious metals from the comfort and security of
their home or office. Our relationship with Republic Metals
Corporation, or the Refinery, allows us to secure current market prices for all
of the precious metals we purchase on a daily basis. We are exploring several
alternatives to diversify our business beyond precious metals by evaluating
reverse logistics services for small consumer electronics and similar related
components. In connection with these plans, on May 7, 2010, we
entered into a letter of intent to acquire all of the stock of Office Products
Recycling Associates, Inc., or OPRA, a recycler of cell phones, smart
phones, inkjet printer cartridges and toners within the business-to-business and
direct-from-consumer markets.
Corporate
Information
We are
based in Florida and operate in the United States, Canada, the United Kingdom
and Germany, through our wholly owned subsidiaries. Our corporate
headquarters is located at 200 E. Broward Boulevard, Suite 1200, Fort
Lauderdale, Florida 33301. Our phone number is (954) 915-1550 and our
website can be found at www.money4gold.com. The
information on our website is not incorporated into this prospectus.
THE
OFFERING
Common
stock outstanding prior to the offering:
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196,345,002 shares
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Common
stock offered by the selling shareholders:
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14,241,995
shares, which were outstanding prior to the offering. This does
not include any shares owned by our Chief Executive Officer, Mr. Douglas
Feirstein. Mr. Feirstein invested in our private placement,
which is described elsewhere in this prospectus, and received registration
rights with respect to the 333,334 shares of common stock
purchased. Mr. Feirstein has no intention of selling these
shares and is not a selling shareholder.
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Common
stock outstanding immediately following
the
offering:
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196,345,002 shares
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Use
of proceeds:
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We
will not receive any proceeds from the sale of the shares of common
stock.
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Risk
Factors:
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See
“Risk Factors” beginning on page __ of this prospectus for a discussion of
factors you should carefully consider before deciding to invest in shares
of our common stock.
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The
number of shares of common stock to be outstanding prior to and after this
offering excludes:
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a
total of 17,575,597 shares of common stock issuable upon the exercise
of outstanding stock
options;
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·
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a
total of 20,402,394 shares of common stock reserved for future
issuance under our 2008 Equity Incentive
Plan;
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a
total of 17,633,336 shares of common stock issuable upon the exercise
of warrants; and
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·
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a
total of 400,000 shares of common stock issuable upon the conversion
of Series A Preferred
Stock.
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SUMMARY
FINANCIAL DATA
The
following summary of our financial data should be read in conjunction with, and
is qualified in its entirety by reference to “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our financial
statements, appearing elsewhere in this prospectus. The data for the
year ended December 31, 2009 and the period ended December 31, 2008 has been
taken from our audited financial statements.
Statements
of Operations Data
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Year Ended
December
31,
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For the Period
From February
14, 2008
(Inception) to
December 31,
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Quarter Ended
March 31
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Quarter Ended
March 31
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2009
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2008
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2010
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2009
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(Unaudited)
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Revenue
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$ |
28,998,982 |
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$ |
1,561,444 |
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$ |
17,272,133 |
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$ |
1,195,638 |
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Gross
profit
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$ |
18,440,784 |
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$ |
698,862 |
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$ |
10,936,473 |
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$ |
645,748 |
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Net
loss
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$ |
(4,055,129 |
) |
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$ |
(3,209,608 |
) |
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$ |
(2,479,923 |
) |
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$ |
(1,355,692 |
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Net
loss per share – basic and diluted
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$ |
(0.03 |
) |
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$ |
(0.06 |
) |
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$ |
(0.01 |
) |
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$ |
(0.02 |
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Weighted
average common shares (basic and diluted)
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136,640,303 |
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50,978,524 |
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185,502,671 |
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79,116,959 |
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Balance
Sheet Data
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March 31,
2010
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December 31,
2009
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(Unaudited)
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(Audited)
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Cash
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$
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204,820
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$
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297,426
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Working
capital (deficit)
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$
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(2,118,724)
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$
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(204,004)
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Total
assets
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$
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14,055,470
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$
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15,087,437
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Total
current liabilities
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$
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4,080,161
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$
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3,295,912
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Accumulated
deficit
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$
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(9,751,996)
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$
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(7,272,073
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)
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Total
shareholders’ equity
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$
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9,975,309
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$
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11,791,525
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Investing
in our common stock involves a high degree of risk. You should
carefully consider the following risk factors before deciding whether to invest
in Upstream. Additional risks and uncertainties not presently known
to us, or that we currently deem immaterial, may also impair our business
operations or our financial condition. If any of the events discussed
in the risk factors below occur, our business, consolidated financial condition,
results of operations or prospects could be materially and adversely
affected. In such case, the value and marketability of the common
stock could decline.
Because
we have a limited operating history to evaluate our company, the likelihood of
our success must be considered in light of the problems, expenses, difficulties,
complications and delay frequently encountered by a new company.
We
commenced our current operations in July 2008. Since we have a
limited operating history and completed a significant acquisition in May 2009,
we cannot assure you that our business will be profitable. Early
stage companies often are unsuccessful and encounter unanticipated expenses and
difficulties, investors should consider this risk in determining whether to
purchase or sell our common stock.
Because
we had a working capital deficit and are growing rapidly, we may encounter
significant problems if we do not have sufficient working capital.
We
are growing rapidly and our revenue for the quarter ending December 31, 2009
exceeded our revenue for the first nine months of 2009. This growth
has been fueled in part by our marketing costs which have increased
significantly. If we do not generate more revenue than we spend, we
will face working capital limitations. At March 31, 2010, we had a
working capital deficit of over $2.1 million. Our first quarter 2010
revenue was lower than the fourth quarter 2009, as a result of the holiday
season in December 2009, during which time our advertising and marketing
campaigns are less effective, and ineffective new media, which we stopped
using. We incurred a net loss of almost $2.5 million during the first
quarter of 2010 as a result of the lower revenues combined with higher
advertising investments and infrastructure costs. Maintaining our level of
advertising at a time when revenue does not grow results in pressure on working
capital. This working capital pressure may force us to reduce our
advertising investments, which, in turn, could result in lower revenue and lower
profitability, or even losses from operations, in the future.
If
we need additional capital to fund our growing operations, we may not be able to
obtain sufficient capital and may be forced to limit the scope of our
operations.
We just
completed a private placement in which we raised $1,151,667 of the $2,907,407 we
offered. In connection with the offering, investors purchased an
equal number of our shares of common stock at $0.20 per share and shares from
our former Chief Operating Officer at $0.10 per share.
In order
to complete our proposed acquisition and to meet our working capital needs, we
need to complete another financing. The severe recession, freezing of the
global credit markets and the decline in the stock market may adversely affect
our ability to raise capital. If adequate additional financing is not
available on reasonable terms or at all, we may not be able to undertake
expansion, we may have to reduce our marketing efforts and we will have to
modify our business plans accordingly.
Even if
we do find a source of additional capital, we may not be able to negotiate terms
and conditions for receiving the additional capital that are acceptable to
us. Any future capital investments will dilute or otherwise
materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or debt securities issued by us to obtain
financing could have rights, preferences and privileges senior to our common
stock. We cannot give you any assurance that any additional financing
will be available to us, or if available, will be on terms favorable to
us.
If
we cannot manage our growth effectively, we may not become
profitable.
Businesses
which grow rapidly often have difficulty managing their growth. If we
continue to grow as rapidly as we anticipate, we will need to expand our
management by recruiting and employing experienced executives and key employees
capable of providing the necessary support. Moreover, our
international expansions with differing laws and cultures present additional
management challenges. We cannot assure you that our management will
be able to manage our growth effectively or successfully. Our failure
to meet these challenges could cause us to lose money, and your investment could
be lost.
If
we fail to retain our key personnel, we may not be able to achieve our
anticipated level of growth and our business could suffer.
Our
future depends, in part, on our ability to attract and retain key personnel and
the continued contributions of our executive officers, each of whom may be
difficult to replace. In particular, Doug Feirstein, our Chief
Executive Officer, Hakan Koyuncu, our President, Daniel Brauser, our Chief
Financial Officer, and Michael Brachfeld, our Chief Accounting Officer are
important to the management of our business and operations and the development
of our strategic direction. The loss of the services of any
of these officers and the process to replace any key personnel would
involve significant time and expense and may significantly delay or prevent the
achievement of our business objectives.
Because
the future direction of our business is uncertain, any diversification may not
be successful.
Our
management is considering a number of changes to our business to reduce our
reliance on the price of gold and other precious metals. As we
implement this diversification policy, we may not be successful. We
may enter into a new business opportunity where we face heavy competition from
larger and better capitalized companies. Additionally, we may not
have a key advantage in implementing a new business opportunity like the
advantage the relationship with Republic Metals Corporation, or the Refinery,
has provided us with our current business. Any failure will result in
losses, reduction of our working capital and a diversion of our managements’
time and attention. If these future diversification efforts are not
successful, our future stock price is likely to fall.
If
the future price gold is substantially lower than current levels, customers
would be less likely to recycle their jewelry which could adversely affect our
business.
Our
ability to obtain additional and continuing funding and our profitability will
be significantly affected by changes in the market price of
gold. Gold prices are at or near record highs but historically
fluctuate widely and are affected by numerous factors, all of which are beyond
our control. Some of these factors include:
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economic
conditions including employment and unemployment
rates;
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the
sale or purchase of gold by central banks and financial
institutions;
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currency
exchange rates;
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·
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inflation
or deflation;
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·
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fluctuation
in the value of the United States dollar and other
currencies;
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·
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global
and regional supply and demand, including investment, industrial and
jewelry demand; and
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·
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the
political and economic conditions of major gold or other mineral-producing
countries throughout the world, such as Russia and South
Africa.
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The price
of gold or other minerals have fluctuated widely in recent years, and a decline
in the price of gold could cause a significant decrease in the value of our
properties, limit our ability to raise money, and limit our
profitability. If the future price for gold is substantially lower
than today’s market price, our business may suffer. Additionally,
like any market, there may be a point where consumers have recycled much or most
or all of their gold and precious metals. This will result in a
reduction of the demand for our services.
If
the U.S. and global economies improve, we may experience reduced revenue and our
results of operations may be adversely affected.
The price
of gold and other precious metals historically rises as economic conditions
worsen or if investors fear conditions will deteriorate. Gold and other
prices are at or near their historical high prices. We expect that if
the current economic recession continues, consumers will seek to recycle their
gold, silver and other precious metals in order to raise cash. Once the
recession ends, our business may be adversely affected. Additionally,
as we diversify our business, other products may be less affected
by business cycles. At the same time, as the economy improves
consumers may be less likely to recycle used items.
Because
our executive offices and our Refinery are located in the South Florida area, in
the event of a hurricane our operations could be adversely
affected.
Because
South Florida is in a hurricane sensitive area, we are susceptible to the risk
of damage to the Refinery, which we believe provides us with a competitive
advantage over our competitors. If damage caused to the Refinery were
to cause it to be inoperable for any amount of time, we may need to enter into
an agreement with another refiner. Presumably, any agreement would
not contain the favorable terms that we presently have with the
Refinery. We are not insured against any losses or expenses that may
arise from a disruption to our business or to the business of the Refinery due
to hurricanes.
If
our customers choose to transact business directly with store-based competitors
rather than with us, our profitability will be limited.
Sellers
of precious metals may prefer to do business with local store-based competitors
where there is a feeling of security and immediacy. This will result
in us generating lower revenues. Specific factors that could prevent
consumers from transacting business in response to our television or online
advertisements include:
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recent
adverse publicity concerning our
industry;
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concerns
about transacting in precious metals items or jewelry without a physical
storefront or face-to-face interaction with
personnel;
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the
extra shipping time associated with Internet or mail
orders;
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pricing
that does not meet consumer
expectations
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·
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concerns
about loss due to theft and mail, delayed or damaged
shipments;
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concerns
about the security of online transactions and the privacy of personal
information; or
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·
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the
inconvenience associated with dealing with a remote
purchaser.
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Our
future growth and profitability will depend in large part upon the effectiveness
of our marketing and advertising expenditures.
Our
future growth and profitability will depend in large part upon our media
performance, including our ability to:
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create
greater awareness of our brand and our
program;
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identify
the most effective and efficient level of spending in each market and
specific media vehicle;
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determine
the appropriate creative message and media mix for advertising, marketing
and promotional expenditures; and
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effectively
manage marketing costs (including creative and
media).
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Our
planned marketing expenditures may not result in increased revenue or generate
sufficient levels of brand name and program awareness. If our media
performance is not effective, our future results of operations and financial
condition will be adversely affected.
Because
we face intense competition for business, our future results of operations and
our future financial condition may be adversely affected.
We
operate in an extremely competitive business. The procurement and
aggregation of gold and other precious metals is dominated by Cash4Gold in the
United States. In addition, we face competition in foreign markets
from Cash4Gold, who has recently begun to expand internationally, and multiple
local market competitors. Our smaller size, shorter operating history
and limited working capital may limit our advertising investment levels, our
ability to expand successfully into new markets or effectively compete against
these other companies. If we are not able to compete effectively, our
future business will be adversely affected and our future results of operations
and financial condition will be adversely affected.
If
there is any disturbance in our relationship with the Refinery, it could affect
our future operating results.
We rely
heavily on our relationship with the Refinery. We believe that our
relationship with the Refinery accelerates our cash collections timeframe
and permits us to offer competitive pricing. If our relationship with
the Refinery is harmed, diminished or interrupted in any way for any significant
period of time, our business and results of operations would be substantially
harmed. In particular, we may face longer cash collection times, higher expenses
and/or a lower level of service. This could lead to us being unable
to pay top market rates to consumers, requiring longer leads times to process
and value gold and other precious metals, which could have an adverse impact on
our business and results of operations.
Since
our business is subject to the risk of theft or loss in transit, material theft
or loss could hurt our reputation and affect our revenue.
We face
the risk of theft from inventory or during shipment to the
Refinery. We have taken steps to prevent such theft by implementing
comprehensive surveillance and security measures and we maintain insurance to
cover losses resulting from theft or loss. However, if security
measures fail, losses exceed our insurance coverage or we are not able to
maintain insurance at a reasonable cost, we could incur significant losses from
theft, which would substantially harm our business and results of
operations.
Our
business is subject to a variety of U.S. and foreign laws, rules and regulations
that could subject us to claims or otherwise harm our business.
Government
regulation of the Internet and e-commerce is evolving and unfavorable changes
could substantially harm our business and results of operations. We
are subject to a variety of laws in the U.S. and abroad that affect advertising,
that are costly with which to comply, can result in negative publicity and
diversion of management time and effort, and can subject us to claims or other
remedies. In some countries like the United Kingdom, regulatory
bodies are required to pre-approve advertising spots and to investigate
complaints from the public. The failure to obtain approval and/or
required revisions as a result of complaints has resulted, and can in the future
result, in delays which may reduce our revenue, increase our expenses and
adversely affect our profitability. In addition, the laws relating to
the liability of providers of online services are currently unsettled both
within the U.S. and abroad. Claims can be brought under both U.S. and
foreign law for defamation and other tort claims, unlawful activity, copyright
and trademark infringement.
The
Digital Millennium Copyright Act has provisions that limit, but do not
necessarily eliminate, our liability for listing or linking to third-party
websites that include materials that infringe copyrights or other rights, so
long as we comply with the statutory requirements of this act. The
Child Online Protection Act and the Children’s Online Privacy Protection Act
restrict the distribution of materials considered harmful to children and impose
additional restrictions on the ability of online services to collect information
from minors. In the area of data protection, the European Union and many states
have passed laws requiring notification to users when there is a security breach
for personal data, such as California’s Information Practices Act. We must comply with the
Federal Trade Commission’s unfair trade practices rules and state consumer
protection laws including “little” unfair trade practice
rules. Additionally, Florida regulates secondhand
dealers. We have received a certificate of registration authorizing
us to conduct business as a secondhand dealer in Florida. Any failure
on our part to comply with these laws, rules and regulations may subject us to
additional liabilities.
Because
we provide our services internationally and are subject to risks frequently
associated with international operations, we may sustain large losses if we
cannot deal with these risks.
Outside
of the United States, we currently operate in Canada and several countries in
Europe including but not limited to, the United Kingdom and Germany, and expect
further expansion in 2010. If we are able to successfully develop
international markets, we would be subject to a number of risks,
including:
|
·
|
Changes
in laws, rules or regulations resulting in more burdensome governmental
controls, tariffs, restrictions, embargoes or export license
requirements;
|
|
·
|
Review
of our advertising by regulators;
|
|
·
|
Laws
which require that local citizens or residents own a majority of a
business;
|
|
·
|
Difficulties
in obtaining required export
licenses;
|
|
·
|
Volatility
in currency exchange rates;
|
|
·
|
Political
and economic instability;
|
|
·
|
Payment
terms different than those customarily offered in the
U.S.;
|
|
·
|
Difficulties
in managing representatives outside the
U.S.;
|
|
·
|
Compensation
limits on our senior executives;
and
|
|
·
|
Potentially
adverse tax consequences.
|
If we
cannot manage these risks, we may sustain large losses.
Risks
Related to Our Common Stock
Because
the market for our common stock is limited, persons who purchase our common
stock may not be able to resell their shares at or above the purchase price paid
for them.
Our
common stock trades on the Over-the-Counter Bulletin Board, or the Bulletin
Board, which is not a liquid market. There is currently only a
limited public market for our common stock. We cannot assure you that
an active public market for our common stock will develop or be sustained in the
future. If an active market for our common stock does not develop or
is not sustained, the price may continue to decline.
Because
we are subject to the “penny stock” rules, brokers cannot generally solicit the
purchase of our common stock which adversely affects its liquidity and market
price.
The
Securities and Exchange Commission, or the SEC, has adopted regulations which
generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share, subject to specific exemptions. The
market price of our common stock on the Bulletin Board has been substantially
less than $5.00 per share and therefore we are currently considered a “penny
stock” according to SEC rules. This designation requires any
broker-dealer selling these securities to disclose certain information
concerning the transaction, obtain a written agreement from the purchaser and
determine that the purchaser is reasonably suitable to purchase the
securities.
Due
to factors beyond our control, our stock price may be volatile.
Any of
the following factors could affect the market price of our common
stock:
|
·
|
Our
failure to increase revenue in each succeeding
quarter;
|
|
·
|
Our
failure to achieve and maintain
profitability;
|
|
·
|
Our
failure to meet our revenue and earnings
guidance;
|
|
·
|
The
loss of Republic as a refiner;
|
|
·
|
Announcements
of our results as we diversify our reverse logistics
business;
|
|
·
|
The
sale of a large amount of common stock by our
shareholders;
|
|
·
|
Our
announcement of a pending or completed acquisition or our failure to
complete a proposed acquisition;
|
|
·
|
Adverse
court ruling or regulatory action;
|
|
·
|
Our
failure to meet financial analysts’ performance
expectations;
|
|
·
|
Changes
in earnings estimates and recommendations by financial
analysts;
|
|
·
|
Changes
in market valuations of similar
companies;
|
|
·
|
Short
selling activities;
|
|
·
|
Our
announcement of a change in the direction of our
business;
|
|
·
|
Our
inability to manage our international operations;
or
|
|
·
|
Announcements
by us, or our competitors, of significant contracts, acquisitions,
commercial relationships, joint ventures or capital
commitments.
|
In the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been
instituted. A securities class action suit against us could result in
substantial costs and divert our management’s time and attention, which would
otherwise be used to benefit our business.
Because
we may not be able to attract the attention of major brokerage firms, it could
have a material impact upon the price of our common stock.
It is not
likely that securities analysts of major brokerage firms will provide research
coverage for our common stock since the firm itself cannot recommend the
purchase of our common stock under the penny stock rules referenced in an
earlier risk factor. The absence of such coverage limits the
likelihood that an active market will develop for our common
stock. It may also make it more difficult for us to attract new
investors at times when we acquire additional capital.
FORWARD-LOOKING
STATEMENTS
This
prospectus includes forward-looking statements. All statements other
than statements of historical facts contained in this prospectus, including
statements regarding our future financial position, liquidity, business strategy
and plans and objectives of management for future operations, are
forward-looking statements. The words “believe,” “may,” “estimate,”
“continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,”
“potential,” “is likely,” “will,” “expect” and similar expressions, as they
relate to us, are intended to identify forward-looking statements. We
have based these forward-looking statements largely on our current expectations
and projections about future events and financial trends that we believe may
affect our financial condition, results of operations, business strategy and
financial needs. These forward-looking statements are subject to a
number of risks, uncertainties and assumptions described in “Risk Factors”
elsewhere in this prospectus.
Other
sections of this prospectus may include additional factors which could adversely
affect our business and financial performance. Moreover, our business
is competitive and our business model is expected to change. New risk
factors emerge from time to time and it is not possible for us to predict all
such risk factors, nor can we assess the impact of all such risk factors on our
business or the extent to which any risk factor, or combination of risk factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.
Except as
otherwise required by applicable laws, we undertake no obligation to publicly
update or revise any forward-looking statements or the risk factors described in
this prospectus, whether as a result of new information, future events, changed
circumstances or any other reason after the date of this
prospectus.
DILUTION
The common stock to be sold by the
selling shareholders is issued and outstanding. Accordingly, there
will be no dilution to our existing shareholders.
PRIVATE
PLACEMENT
From
March 31, 2010 until April 14, 2010, we sold 5,758,337 shares of common stock to
the selling shareholders for $1,151,667 in a private placement. Two of the
investors are members of our management. Todd Oretsky, our former Chief
Operating Officer, sold an equal amount of shares under this offering to the
selling shareholders for $575,833. We are registering all of the shares,
including the shares sold by Mr. Oretsky, except for 333,334 shares purchased by
our Chief Executive Officer, Mr. Douglas Feirstein. See the section
of this prospectus entitled “Selling Shareholders” beginning at page
__. We agreed to file a registration statement registering the shares
sold in the private placement within 45 days of closing each
sale.
We are
using the proceeds from the private placement to support our growth and for
general corporate purposes, including working capital.
USE
OF PROCEEDS
We will
not receive any proceeds upon the sale of shares by the selling
shareholders.
CAPITALIZATION
The
following table sets forth our capitalization as of March 31,
2010. The table should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus:
|
|
As of
March 31, 2010
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
|
Convertible
Series A preferred stock, $0.0001 par value; 25,000,000 shares authorized,
400,000 issued and outstanding
|
|
$
|
40
|
|
|
|
$
|
19,154
|
|
Subscriptions
receivable |
|
|
(1,001,667 |
) |
Additional
paid-in capital
|
|
|
20,889,328
|
|
Accumulated
deficit
|
|
|
(9,751,996
|
)
|
Accumulated
other comprehensive loss
|
|
|
(179,550
|
) |
Total
shareholders’ equity
|
|
$
|
9,975,309
|
|
MARKET
FOR COMMON STOCK
Our
common stock is quoted on the Bulletin Board under the symbol
“MFGD”. As of the date prior to the date of this prospectus, the last
reported sale price of our common stock as reported by the Bulletin Board was
$0.___. As of that date, there were approximately _____
shareholders of record. The following table provides the high and low
bid price information for our common stock for the periods indicated which
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.
Year
|
|
Quarter Ended
|
|
Stock Price
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
($)
|
|
|
($)
|
|
2010
|
|
March
31
|
|
0.40
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
March 31
|
|
0.33
|
|
|
0.17
|
|
|
|
June 30
|
|
0.31
|
|
|
0.15
|
|
|
|
September 30
|
|
0.18
|
|
|
0.08
|
|
|
|
December 31
|
|
0.18
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
March 31
|
|
0.25
|
|
|
0.07
|
|
|
|
June 30
|
|
0.68
|
|
|
0.03
|
|
|
|
September 30
|
|
1.65
|
|
|
0.30
|
|
|
|
December 31
|
|
0.89
|
|
|
0.22
|
|
Dividend
Policy
We have
not paid any cash dividends on our common stock and do not plan to pay any such
dividends in the foreseeable future. We currently intend to use all
available funds to develop our business. We can give no assurances
that we will ever have excess funds available to pay dividends.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s
discussion and analysis of financial condition and results of operations for the
quarter ended March 31, 2010 is based upon our unaudited interim condensed
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these unaudited interim condensed consolidated financial
statements as well as the audited consolidated financial statements for the year
ended December 31, 2009 and for the period ended 2008 requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates and assumptions,
including, but not limited to, those related to revenue recognition, allowance
for doubtful accounts, income taxes, goodwill and other intangible assets, and
contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates and
assumptions.
Company
Overview
Overview
Upstream
Worldwide, Inc. is an emerging global leader in direct-from-consumer, reverse
logistics, currently specializing in the procurement and aggregation of precious
metals to be recycled. Recently we have initiated our cell phone
recycling model. We utilize consumer oriented advertising efforts to solicit
individuals interested in liquidating unwanted items. Through our
global platform, we facilitate an end-to-end consumer solution, from acquisition
through liquidation. We have a low cost, highly scalable and flexible
business model that allows us to quickly and efficiently adapt to entry into new
markets, changes in economic conditions, supply and demand levels and other
similar factors.
Our focus
has been on providing a fast, secure and convenient service that enables the
public to discretely sell their precious metals from the comfort and security of
their home or office. Our relationship with Republic Metals
Corporation, or the Refinery, allows us to secure current market prices for all
of the precious metals we purchase on a daily basis. We are currently exploring
additional future expansion plans that include the introduction of similar
reverse logistics services for products other than precious
metals.
Our
corporate headquarters are located at 200 East Broward Blvd., Suite 1200 in Ft.
Lauderdale, Florida. Our phone number is (954) 915-1550 and our corporate
website can be found at www.money4gold.com.
Corporate
History and Acquisitions
We
were incorporated in Delaware on November 18, 2003. On July 23, 2008,
we acquired Money4Gold, Inc., an early stage precious metals company, and
changed our name to Money4Gold Holdings, Inc. and on June 11, 2010, we changed
our name to Upstream Worldwide, Inc. On May 7, 2009, we acquired MGE
Enterprises Corporation, a Wyoming corporation, or MGE, operating in the United
States under the names mygoldenvelope.com and sobredeoro.com. MGE brought
extensive experience in creating and growing businesses that provide shareholder
value in a broad array of industries, including direct response, Internet
marketing and national retail distribution and sales. MGE’s ability
to reach a broader number of consumers through their experience in
multi-language television advertising, direct response, and retail distribution
and sales greatly accelerated our growth and increased our depth of management
experience.
Diversification
Plans
We are
exploring several alternatives to diversify our business beyond precious metals
by evaluating reverse logistics services for small consumer electronics and
similar related components. In connection with these plans, on May 7,
2010, we entered into a letter of intent to acquire all of the stock of OPRA,
a recycler of cell phones, smart phones, inkjet printer cartridges and
toners within the business-to-business and direct-from-consumer
markets.
Recent
Trends
Our
revenue during the third quarter 2009, the fourth quarter 2009 and the first
quarter of 2010 was $6.8 million, $19.6 million, and $17.3 million,
respectively. For the first quarter of 2010, we experienced a lower
Media Efficiency Rate, or MER. As discussed in more detail below under the
Liquidity section, we believe this is a result of seasonality, recent negative
portrayal of our industry by the media, and an under-performing advertising and
marketing campaign aired during the first quarter of 2010, mainly in our
European markets. In response to these recent trends and
developments, we are developing a replacement advertising and marketing
campaign, examining our expense structure in each of our markets, and have
slowed and/or temporarily suspended some projects while we re-evaluate our
implementation strategy for our future plans.
Critical
Accounting Policies
In
response to financial reporting release FR-60, Cautionary Advice Regarding
Disclosure About Critical Accounting Policies, from the SEC, we have
selected our more subjective accounting estimation processes for purposes of
explaining the methodology used in calculating the estimate, in addition to the
inherent uncertainties pertaining to the estimate and the possible effects on
the our financial condition. The accounting estimates are discussed below and
involve certain assumptions that, if incorrect, could have a material adverse
impact on our results of operations and financial condition. See Note 4 to
our unaudited interim condensed consolidated financial statements found
elsewhere in this prospectus and Note 4 to our audited consolidated
financial statements for the year ended December 31, 2009 for further
discussion regarding our critical accounting policies and
estimates.
Goodwill
Goodwill
is tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests if
an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying value. These events or
circumstances could include a significant change in the business climate, legal
factors, operating performance indicators, competition or sale or disposition of
a significant portion of a reporting unit. Application of the goodwill
impairment test requires judgment, including the identification of reporting
units, assignment of assets and liabilities to reporting units, assignment of
goodwill to reporting units, and determination of the fair value of each
reporting unit. The fair value of each reporting unit is estimated using a
discounted cash flow methodology. This requires significant judgments including
estimation of future cash flows, which is dependent on internal forecasts,
estimation of the long-term growth rate of our business, the useful life over
which cash flows will occur, and determination of our weighted average cost of
capital. Changes in these estimates and assumptions could materially affect the
determination of fair value and/or goodwill impairment charge for each reporting
unit.
Common
Stock Purchase Warrants and Derivative Financial Instruments
We review
any common stock purchase warrants and other freestanding derivative financial
instruments at each balance sheet date and classify them on our balance sheet
as:
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
We assess
classification of our common stock purchase warrants and other freestanding
derivatives at each reporting date to determine whether a change in
classification between assets and liabilities is required.
Revenue
Recognition
We
generate revenue from the sale of precious metals, including gold, silver and
platinum, and from the sale of diamonds and other precious stones. Revenue
is recognized when all of the following conditions exist: (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred, (3) the sales
price is fixed or determinable, and (4) collectability is reasonably
assured.
Precious
Metals
We grade
the quality of the precious metals purchased from the public and estimate the
total quantity of pure gold, silver and platinum received. We then
lock in the current spot rate of each metal sufficient to cover the total
quantity received in the current batch with the Refinery. After a holding
period of at least 10 days to allow for returns, the precious metals are
delivered to the Refinery to be melted. Upon melting the precious metals,
the Refinery validates the quality of pure gold, silver, and platinum and remits
the net payment to us based on the quantity of each precious metal at the agreed
upon spot rates, as described above. Revenue is recognized upon melting of
the precious metals and the validation of the quality and quantity of each
precious metal by the Refinery.
No
returns are accepted from the Refinery and upon delivery of the precious metals
to the refiner, we have no further obligations.
Diamonds
and Other Precious Stones
Diamonds
and other precious stones are generally purchased from the public in connection
with the purchase of precious metals. We value diamonds and other precious
stones based on a variety of factors including size and quality and then resell
them. To date, all diamonds and other precious stones have been sold to an
affiliate of an officer of one of our wholly-owned subsidiaries. Revenue is
recognized upon the acceptance of the diamonds and other precious stones by the
purchaser.
Deferred
Revenue
Upon our
estimate of the total quantity of pure gold, silver, and platinum received and
the locking in of the current spot rate for each precious metal, we are able to
estimate the total value of the batch received. The Refinery advances to us, up
to 80% of the value of the precious metals we have received, but not yet
delivered. This amount is recorded as deferred revenue until the specific
batch is melted and processed as described above, at which time, it is recorded
as revenue.
Share-Based
Payment Arrangements
Generally,
all forms of share-based payments, including stock option grants, restricted
stock grants and stock appreciation rights are measured at their fair value on
the awards’ grant date, based on the estimated number of awards that are
ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The expense resulting from share-based payments are
recorded in cost of goods sold or general and administrative expense in the
unaudited interim condensed consolidated statement of operations, depending on
the nature of the services provided.
Results
of Operations
We
currently generate revenue exclusively from the sale of precious metals,
including gold, silver and platinum, and from the sale of
diamonds. Our operations in each of our markets exhibit similar
financial performance metrics and have similar economic
characteristics. As such, we have aggregated our operations around
the world into a single operating segment. Based upon the response to our recent
advertising, we expect to generate some revenue from the recycling of cell
phones for the quarter ending June 30, 2010.
We
acquired MGE on May 7, 2009 using the purchase method of
accounting. As such, the results of operations for MGE are only
included in our consolidated results of operations from that date
onward. The pro forma results of operations as if the acquisition of
MGE had occurred as of January 1, 2009 can be found in Note 6 to
the unaudited interim condensed consolidated financial statements for
the three months ended March 31, 2010 and 2009, however the comparison of the
pro forma results are not meaningfully different than the comparison of the
actual results as presented below.
Results
for the Three Months Ended March 31, 2010 Compared to the Three Months
Ended March 31, 2009
The
following table sets forth, for the periods indicated, results of operations
information from our unaudited interim condensed consolidated financial
statements:
|
|
For the Three Months Ended March 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
(Dollars)
|
|
|
(Percentage)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
17,272,133 |
|
|
$ |
1,195,638 |
|
|
$ |
16,076,495 |
|
|
|
1,345 |
% |
Cost
of Revenue
|
|
|
6,335,660 |
|
|
|
549,890 |
|
|
|
5,785,770 |
|
|
|
1,052 |
% |
Gross
Profit
|
|
|
10,936,473 |
|
|
|
645,748 |
|
|
|
10,290,725 |
|
|
|
1,594 |
% |
Sales
and Marketing
|
|
|
10,723,204 |
|
|
|
872,984 |
|
|
|
9,850,220 |
|
|
|
1,128 |
% |
General
and Administrative
|
|
|
2,682,395 |
|
|
|
1,100,012 |
|
|
|
1,582,383 |
|
|
|
144 |
% |
Operating
Loss
|
|
|
(2,469,126 |
) |
|
|
(1,327,248 |
) |
|
|
(1,141,879 |
) |
|
|
86 |
% |
Interest
Income (Expense), net
|
|
|
- |
|
|
|
(27,284 |
) |
|
|
27,284 |
|
|
|
(100 |
)% |
Other
Expense
|
|
|
(10,797 |
) |
|
|
(1,160 |
) |
|
|
(9,637 |
) |
|
|
831 |
% |
Net
Loss
|
|
$ |
(2,479,923 |
) |
|
$ |
(1,355,692 |
) |
|
$ |
(1,124,231 |
) |
|
|
83 |
% |
Our
revenue is largely dependent on the frequency and effectiveness of our direct
response advertising and marketing campaigns. As such, advertising
and marketing expenditures represent our most significant costs, amounting to
62% and 73% of revenue for the three months ended March 31, 2010 and 2009,
respectively. We manage our advertising and marketing campaigns, and
make allocation decisions, by measuring their effectiveness primarily based on
projected revenue earned as compared to the cost of the advertisement, which we
call our MER. There are a variety of factors that impact the MER
including:
|
1.
|
The
number of leads generated from an
advertisement,
|
|
2.
|
The
rate at which those leads convert into actual packs submitted by members
of the public, referred to as Sellers,
and
|
|
3.
|
The
average revenue generated from the packs
received.
|
Each of
these factors, and hence our MERs, vary by market and by the particular
advertising method utilized within each market.
The
1,345% increase in revenue during the three months ended March 31, 2010, as
compared to the same period in 2009 was driven by a 1,128% increase in the
volume of advertising in 2010, as well as an increase in the overall
effectiveness of those advertisements, as evidenced by the faster rate of growth
in revenue as compared to advertising. The experience brought by the
MGE management team enabled us to identify and capitalize on opportunities to
increase our MERs in our various markets during the three months ended March 31,
2010 as compared to the same period in 2009. In addition, during
2010, we operated in several foreign markets in which we did not compete during
the three months ended March 31, 2009, where less competition allows for higher
MERs. In each market, we were able to increase the number of leads
generated by a single advertisement and/or increase the conversion rate of the
leads into packs received back from Sellers either through better time slot
placement or via more effective advertising content. As discussed in
more detail below in the Liquidity section, although MERs during the three
months ended March 31 were higher in 2010 than in 2009, it was lower than in the
fourth quarter of 2009. Also contributing to the higher revenue was
the increase in the value of an ounce of gold, which has increased our revenue
per ounce of gold received.
Direct
advertising and marketing costs are expensed as incurred, but generally
result in revenue being generated over the eight to twelve week period following
the airing of the advertisement. As a result, advertising and
marketing investments made during the latter part of a financial period tend to
have a disproportionately negative impact on profitability within that period
and a disproportionately favorable impact on profitability in future
periods. This impact is generally difficult to measure as the future
revenue is generated over extended periods of time and is contingent upon a
variety of factors, including factors beyond our control.
Cost of
revenue increased to $6,335,660 during the three months ended March 31, 2010, as
compared to $549,890 during the same period in 2009. A significant portion of
this increase is proportional to the increase in our revenue. We generally pay
the Sellers a percentage of the market value of the gold we purchase from
them. Therefore, a portion of our cost of revenue is directly
correlated to our revenue, both on a volume and per unit basis. The other
components of our cost of revenue, such as the direct costs and expenses
required to ship, secure, grade, log and process the metals and stones
internally are not directly correlated to the price of gold and other precious
metals. As a result, although these costs have increased, our gross margin on
a percentage basis is higher for the three months ended March 31, 2010 as
compared to the same period in 2009 due to the increase in the value of an ounce
of gold and other precious metals.
General
and administrative expenses include professional fees for technology
development, legal and accounting services as well as consulting and internal
personnel costs for our back office support functions. General and
administrative expenses increased to $2,682,395 during the three months ended
March 31, 2010, as compared to $1,100,012 during the same period of 2009. The
increase is primarily a result of investments in our infrastructure to support
our expansion into new markets including initial development of a new technology
platform and the addition of several staff and multiple consulting projects
aimed at properly managing the growth and expansion into new product offerings
and new geographic markets. As discussed below under the Liquidity
section, based on recent trends and developments, we are examining our expense
structure in each of our markets and have slowed and/or temporarily suspended
some projects while we re-evaluate our implementation strategy for our future
plans. In addition, in 2010 we incurred depreciation expense on the
assets acquired to support the infrastructure investments.
Interest
expense, net of interest income, of $27,284 during the three months ended March
31, 2009 was primarily attributable to interest on our advances from the
Refinery and interest pertaining to the convertible note payable obtained on
March 4, 2009.
Comparison
of the Year Ended December 31, 2009 to the Period from February 14, 2008
(Inception) to December 31, 2008
The
following table sets forth, for the periods indicated, consolidated statements
of operations information:
|
|
Year Ended
December 31, 2009
|
|
|
For the Period
from February 14,
2008 (Inception)
to December 31,
2008
|
|
|
Change
(Dollars)
|
|
|
Change
(Percentage)
|
|
Revenue
- Related Party
|
|
$
|
28,998,982
|
|
|
$
|
1,561,444
|
|
|
$
|
27,437,538
|
|
|
|
1,757
|
%
|
Cost
of Revenue
|
|
|
10,558,198
|
|
|
|
862,582
|
|
|
|
9,695,616
|
|
|
|
1,124
|
%
|
Gross
Profit
|
|
|
18,440,784
|
|
|
|
698,862
|
|
|
|
17,741,922
|
|
|
|
2,539
|
%
|
Sales
and Marketing
|
|
|
16,267,244
|
|
|
|
1,428,591
|
|
|
|
14,838,653
|
|
|
|
1,039
|
%
|
General
and Administrative
|
|
|
4,980,303
|
|
|
|
2,443,634
|
|
|
|
2,536,669
|
|
|
|
104
|
%
|
Depreciation
and Amortization
|
|
|
70,163
|
|
|
|
38,884
|
|
|
|
31,279
|
|
|
|
80
|
%
|
Operating
Loss
|
|
|
(2,876,926
|
)
|
|
|
(3,212,247
|
)
|
|
|
335,321
|
|
|
|
(10
|
)%
|
Interest
Income (Expense), net
|
|
|
(236,181
|
)
|
|
|
2,639
|
|
|
|
(238,820
|
)
|
|
|
(9,050
|
)%
|
Other
Expense
|
|
|
(942,022
|
)
|
|
|
-
|
|
|
|
(942,022
|
)
|
|
|
100
|
%
|
Net
Loss
|
|
$
|
(4,055,129
|
)
|
|
$
|
(3,209,608
|
)
|
|
$
|
845,521
|
|
|
|
26
|
%
|
Our
revenues are largely dependent on the frequency and effectiveness of our direct
response advertising and marketing campaigns. As such, advertising
and marketing expenditures represent our most significant costs, amounting to
56% and 91% of revenue for the year ended December 31, 2009 and the period from
February 14, 2008 (Inception) to December 31, 2008,
respectively.
The
1,757% increase in revenue in 2009, as compared to 2008 was driven by a 1,039%
increase in the volume of advertising in 2009, as well as an increase in the
overall effectiveness of those advertisements, as evidenced by the faster rate
of growth in revenue as compared to advertising. The experience
brought by the MGE management team and a highly skilled marketing team hired in
2009 enabled us to identify and capitalize on opportunities to increase our MERs
in our various markets in 2009 as compared with 2008. In addition,
during 2009, we entered into several new foreign markets, where less competition
allows for higher MERs. In each market, we were able to increase the
number of leads generated by a single advertisement and/or increase the
conversion rate of the leads into packs received back from Sellers either
through better time slot placement or via more effective advertising
content. Also contributing to the higher revenue was the increase in
the value of an ounce of gold, which has increased the desire of the public to
sell their excess gold and has increased our revenue per ounce of gold
received.
Direct
advertising and marketing costs are expensed as incurred, but generally
result in revenue being generated over the eight to twelve week period following
the airing of the advertisement. As a result, advertising and
marketing investments made during the latter part of a financial period tend to
have a disproportionately negative impact on profitability within that period
and a disproportionately favorable impact on profitability in future
periods. This impact is generally difficult to measure as the future
revenues are generated over extended periods of time and are contingent upon a
variety of factors, including factors beyond our control.
Cost of
revenue increased to $10,558,198 during the year ended December 31, 2009, from
$862,582 for the period from February 14, 2008 (Inception) to December 31,
2008. A significant portion of this increase is proportional to the
increase in our revenue. We generally pay the Sellers
a percentage of the market value of the gold we purchase from
them. Therefore, a portion of our cost of revenue is directly
correlated to our revenue, both on a volume and per unit basis. The
other components of our cost of revenue, such as the direct costs and expenses
required to ship, secure, grade, log and process the metals and stones
internally are not directly correlated to the price of gold and other precious
metals. As a result, although these costs have increased, our gross
margin on a percentage basis is higher for the year ended December 31 2009
as compared with the period from February 14, 2008 (Inception) to December 31,
2008 due to the increase in the value of an ounce of gold and other
precious metals.
General
and administrative expenses include professional fees for legal and accounting
services as well as consulting and internal personnel costs for our back office
support functions. General and administrative expenses increased to
$4,980,303 during the year ended December 31, 2009, from $2,443,634 for the
period from February 14, 2008 (Inception) to December 31, 2008. The
increase is primarily a result of investments in our infrastructure to support
our expansion into new markets. In addition, in 2009 we incurred
depreciation expense on the assets acquired to support the infrastructure
investments.
Interest
expense, net of interest income, increased to $236,181 during the year ended
December 31, 2009, from interest income of $2,639 for the period from February
14, 2008 (Inception) to December 31, 2008 primarily as a result of our 2009
financing agreements including our media line of credit, our Convertible Note
Payable and our advances from the Refinery.
Other
expense, net of other income of $942,022 during the year ended December 31, 2009
was primarily attributable to a loss on the settlement of debt in the amount of
$550,175 and a charge of $218,400 pertaining to penalty shares issued in
connection with our February 2009 private placement.
Liquidity
and Capital Resources
During
the three months ended March 31, 2010, we incurred a net loss of $2,479,923
(including $889,764 of non-cash charges) and generated $194,377 from our
operations primarily as a result of an increase in our accounts payable of
$1,098,295 and a decrease in our accounts receivable of $610,323. As of
March 31, 2010, we had a $9,751,996 accumulated deficit and working capital
deficit of $2,118,724.
During
the three months ended March 31, 2010, our investing activities used net cash of
$159,476, to purchase fixed assets.
As
discussed above, we utilize direct response advertising and marketing campaigns,
including television, radio, print and Internet to solicit precious metals
including gold, silver and platinum as well as diamonds from the public. These
advertising and marketing campaigns are our most significant use of cash from
operations. Payment policies for these campaigns vary by country and range from
standard 30 day payment terms to prepayments of up to one-month prior to the
advertisement running. Once the advertisements run, we receive requests for mail
order kits from potential Sellers, which they fill with the items they wish to
sell and send the kit to our processing facility. After payment to the Sellers
and holding the precious metals for a minimum period of time, we aggregate the
precious metals received at our local processing facilities and prepare them for
sale to the Refinery. The Refinery advances us 80% of the estimated value of the
precious metals received each week, at an interest rate of 8% per annum. Upon
physical receipt of the precious metals, up to three weeks later, the Refinery
evaluates them to ascertain the final definitive value. At that point, we settle
with the Refinery and they send us the additional amounts due.
Mail
order kits are generally received back from the Sellers over an eight to twelve
week period following the date of the advertisement. As such, we generally
realize the cash benefits resulting from our advertisements in the two to
fourteen weeks following the date on which an advertisement runs.
Our
international operations were initiated by launching direct response advertising
and marketing campaigns in Canada in late 2008 and then in the United Kingdom in
early 2009. During 2009 we have experienced rapid growth in these
markets and, as a result, increased our advertising and marketing levels in
those countries and continued expanding by commencing operations in several
other European countries during the second half of 2009 and the first quarter of
2010.
Our
consolidated revenue for the third and fourth quarter of 2009 of $6.8 million
and $19.6 million, respectively, increased dramatically over the respective
prior quarters and the fourth quarter of 2009 was profitable. Our
revenue during the first quarter of 2010 however, declined to $17.3 million and
we incurred a net loss of $2,479,923. Because of our limited size in
the fourth quarter of 2008 and our rapid growth during 2009, we do not have
sufficient comparable history to determine the level of seasonality of our
business. We believe that the first quarter 2010 revenue was lower
than fourth quarter 2009, in part as a result of the holiday season in December
2009, during which time our advertising and marketing campaigns appear to be
less effective. Compounding the seasonal effects mentioned above
however, we believe that negative representation of our industry by multiple
media agencies in several of the markets in which we operate resulted in
pressure on our MER. These negative portrayals may have reduced the
confidence the general public had in our industry in general. Lastly,
we periodically revise and update our advertising and marketing campaigns to
replace certain aging commercials and keep our campaigns
fresh. During the first quarter of 2010, we aired several new
commercials, mainly in our European markets. These advertisements
were substantially less effective than campaigns we had run previously, and we
quickly reverted back to our prior campaigns. We are currently
developing new advertisements to replace the aging campaigns presently on the
air. This process requires time to create a concept and bring it through
production however, and there can be no assurance that when these new
advertisements are completed and aired, that they will be
successful.
As a
result of the lower MER, we expect that our revenue will be lower in the second
quarter of 2010 as compared to the first quarter of 2010, and possibly
beyond. We have re-evaluated our advertising and marketing campaigns
in each of our markets and have scaled back our spending levels to focus on the
markets and campaigns that continue to generate MER levels above certain minimum
targets. To minimize the impact of lower revenue on profitability and
cash flows, we are examining our expense structure in each of our markets and
have slowed and/or temporarily suspended some projects while we re-evaluate our
implementation strategy for our future plans. Specifically, we are
deferring all or part of our executive salaries, assessing staffing levels based
on current volume, reviewing contracts with minimum thresholds pertaining to
existing services to ensure we are utilizing these services in an optimal
fashion, and reassessing timing of our expansion plans.
Our
future expansion plans include the introduction of similar reverse logistics
services for products other than precious metals as a means of diversifying our
operations and minimizing the risks of having only one service
offering. Recently, we placed advertisements combining precious
metals and cell phone recycling. In connection with our future expansion plans,
on May 7, 2010, we entered into a letter of intent to acquire all of the stock
of OPRA, a recycler of cell phones, smart phones, inkjet printer cartridges and
toners within the business-to-business and direct-from-consumer
markets. To complete the acquisition of OPRA, we will need to raise
additional cash and/or issue additional shares of our stock which will be
dilutive towards existing shareholders.
There can
be no assurance that we can improve our MER or that we will continue to be
successful with the execution of the first stages of our business plan, nor can
there be assurance that continued implementation of our existing plans will
generate profitability and positive cash flows in the future. In
addition, our expansion plans into similar reverse logistics services for
products other than precious metals could require substantial amounts of capital
beyond our current capabilities.
On March
31, 2010, we closed on a private placement transaction whereby we sold 5,758,337
shares of our common stock at $0.20 per share. Gross proceeds from
the sale amounted to $1,151,667, of which $1,001,667 was received and was being
held in escrow as of March 31, 2010 and the remaining $150,000 was received
during the first week of April 2010. At March 31, 2010, we have
recorded $1,001,667 as subscriptions receivable on our unaudited condensed
consolidated balance sheet representing the sale of 5,008,335 shares of our
common stock. $1,151,667 was released to us from escrow in April
2010. The funds will be used for working capital. There
were no material offering costs associated with this transaction.
Included
in the March 2010 financing was an investment of $50,000 by Doug Feirstein, our
Chief Executive Officer and an investment of $25,000 from Michael Moran, our
Vice President of Corporate Development. In addition, as part of this
offering, Todd Oretsky, our former Chief Operating Officer, sold a number of
shares equal to the number of shares sold by us at $0.10 per
share.
We
do not yet have a sustained history of financial
stability. Historically our principal source of liquidity has been the
issuances of debt and equity securities, including preferred stock, common stock
and various debt financing transactions. We believe that the higher level
of revenue attained during the third and fourth quarters of 2009 and the first
quarter of 2010 is a result of the successful implementation of the first stages
of our business plan and that, if we can improve our returns on our media
investments, control our costs accordingly and raise sufficient capital to
successfully acquire, integrate, and grow OPRA, continued implementation will
generate steadily improving results and cash flows in the future. In
addition, we are currently attempting to raise additional funds through the
issuance of debt and/or equity securities.
Management
believes that our cash balance on June 17, 2010 of approximately $0.7 million,
current level of working capital, anticipated cash that will be received from
revenue generated from advertisements that have already aired, and additional
funds through the issuance of debt and/or equity securities will be sufficient
to sustain operations through at least March 31, 2011.
There can
be no assurance that the plans and actions proposed by management will be
successful, that we will continue to generate revenue from advertisements that
have already aired, or that unforeseen circumstances will not require us to seek
additional funding sources in the future or effectuate plans to conserve
liquidity. In addition, there can be no assurance that our efforts to
raise additional funds through the issuance of debt and/or equity
securities will be successful or that in the event additional sources of funds
are needed to continue operations, that they will be available on acceptable
terms, if at all.
Related
Party Transactions
Refinery
On
June 1, 2008, we entered into an agreement with Refinery, whereby we agreed
to sell all of our precious metals in the United States exclusively to the
Refinery and the Refinery agreed to refrain from entering into a relationship
with any third party that is similar to our relationship with them. The
agreement is for an initial term of five years. As consideration for this
agreement, the Refinery received 10,000,000 fully vested shares of our
common stock valued at $1,230,000. Of this amount, we ascribed $938,135 to
prepaid refining services, which is being amortized into cost of revenue on a
straight line basis over the term of the agreement, and we ascribed $291,865 to
an intangible asset, representing the value of the non-compete agreement, which
is being amortized into cost of revenue on a straight line basis over the term
of the agreement. In addition, we lease space for our United States processing
center on a month-to-month basis from the Refinery. An officer of the Refinery
is a member of our Board of Directors.
Marketing
Services
We
purchase online marketing and lead generation services from a company in which
our President is a 50% shareholder. Our pricing is calculated at a 10% markup to
their cost, capped at $1.50 per lead. This markup is exclusively for the
unrelated 50% shareholders. Our President does not share in any profits earned
by this vendor for services rendered to us.
New
Accounting Pronouncements
See
Note 4 to our unaudited interim condensed consolidated financial
statements for the three months ended March 31, 2010 and 2009 as well as
Note 3 to our consolidated financial statements for the year ended December 31,
2009 and for the period ended 2008 for a discussion of recent accounting
pronouncements.
BUSINESS
Company
Overview
Upstream
Worldwide, Inc. is an emerging global leader in direct-from-consumer, reverse
logistics, currently specializing in the procurement and aggregation of precious
metals to be recycled. We utilize consumer oriented advertising
efforts to solicit individuals interested in liquidating unwanted
items. Through our global platform, we facilitate an end-to-end
consumer solution, from acquisition through liquidation. We have a
low cost, highly scalable and flexible business model that allows us to quickly
and efficiently adapt to entry into new markets, changes in economic conditions,
supply and demand levels and other similar factors.
Our focus
is on providing a fast, secure and convenient service that enables the public to
discretely sell their precious metals from the comfort and security of their
home or office. Our relationship with the Refinery, allows us to
secure current market prices for all of the precious metals we purchase on a
daily basis. We are currently exploring additional future expansion
plans that include the possible introduction of similar reverse logistics
services for products other than precious metals. We have identified
several products and very recently broadened our advertising to include cellular
and mobile phones.
Our
corporate headquarters are located at 200 E. Broward Blvd., Suite 1200, Ft.
Lauderdale, Florida, 33301. Our phone number is (954) 915-1550 and
our corporate website can be found at www.money4gold.com. The
information on our website is not incorporated into this
prospectus.
Corporate
History and Acquisitions
We
were incorporated in Delaware on November 18, 2003. On
July 23, 2008, we acquired Money4Gold, Inc., an early stage precious metals
company, and changed our name to Money4Gold Holdings, Inc. and on June 11, 2010,
we changed our name to Upstream Worldwide, Inc. On May 7, 2009, we
acquired MGE. MGE brought extensive experience in creating and
growing businesses that provide shareholder value in a broad array of
industries, including direct response, Internet marketing and national retail
distribution and sales. MGE’s ability to reach a broader number of
consumers through their experience in multi-language television advertising,
direct response, and retail distribution and sales greatly accelerated our
growth and increased our depth of management experience.
Industry
and Competition
The
industry for individuals and businesses seeking to extract value from items,
such as jewelry, has changed dramatically over the past several
years. Historically, liquidation options were limited to pawn shops,
garage sales, newspaper and advertisements. With the continued
penetration of the Internet, additional avenues such as eBay Inc. and Craigslist
have become viable options as well. Although there may be benefits to
utilizing one of these options, often they can be time consuming, labor
intensive, involve safety risks or a lack of privacy. We believe that
our service overcomes all of these drawbacks.
There
are several companies that have an approach similar to ours, including Green
Bullion Financial Services, LLC (www.Cash4Gold.com),
BGC Management, Inc. (Brokengold.com), Lippincott, LLC (goldkit.com), and Postal
Gold. We believe that the remainder of the market is highly
fragmented and that the majority of the remaining competitors are small pawn
shops and jewelry stores that do not view this service as a primary component of
their businesses.
The
combination of the global economic downturn and the recent increases in precious
metal prices have led to a dramatic increase in the number of people wanting to
cash in their gold and other precious metal items. Although this has
contributed to the revenue growth the industry has experienced recently, it has
also resulted in an increase in the number of competitors in the
marketplace. Some of these competitors operate without regard to
legal requirements or to the overall reputation of the industry by disposing of
their customer’s items prior to the prescribed holding periods and by offering
extremely low purchase prices for the items to be sold. As a result
of these incidents, the media has portrayed the overall industry in a negative
light. This has resulted in additional customer scrutiny, increased
governmental regulations, and has applied pressure on purchase
costs.
Marketing
We
utilize direct response advertising and marketing campaigns, including
television, radio, print and the Internet to solicit precious metals from the
public. The methods of advertising used and the level of advertising
investment varies by market as well as by a variety of factors that influence
the effectiveness of direct response advertising such as time of year, local or
global televised events, etc. Television and radio advertisements can
be targeted toward specific demographics based on the type of show and time of
day. Internet marketing targets various demographics by
advertising on publisher websites, most commonly with banners and contextual
banners, focused on generating potential customers by driving traffic to our
websites. During 2008 and the first part of 2009, the majority of our
marketing efforts were focused on the Internet. Since the acquisition
of MGE in May 2009, we have focused a significantly greater portion of our
advertising and marketing campaigns on television.
Process
Individuals
responding to our advertisements, or the Sellers, contact us through one of our
inbound call-centers located around the world, or through our various websites,
where we collect basic information that is used to deliver our mail-order kit to
them. This kit includes a welcome letter, a Ziploc pouch, a tear free
prepaid shipping envelope and a form on which the customer provides their
contact information as well as a record of the items being sent. Upon
receipt, the Sellers fill the kit with the items they wish to sell and send the
kit to our processing facility located in their home market. Each
mail-order kit may be tracked via our website and upon its arrival the materials
are assessed. We immediately value the items received based on a variety
of factors including metal type, purity and weight, and issue payment to the
Seller. Our local processing facilities then aggregate the materials
received from the Sellers and prepare them for sale to the
Refinery.
The vast
majority of our sales are made to the Refinery under a five-year contract
entered into during June 2008. The Refinery holds a significant
number of shares of our common stock and one of its officers is a member of our
Board. They are one of the largest and fastest growing precious metal
refiners in the United States. Their knowledge, experience and
technical expertise, coupled with a state-of-the art refining facility, allows
them to control their costs and maximize their pricing on
purchases. These low costs are passed on to us, which, when coupled
with current day spot market purchase prices, help to provide us with a
competitive advantage in the marketplace.
Government
Regulation
Because
of the nature of our business, we are subject to the Federal Trade Commission’s
unfair trade practice rules and various state laws designed to protect consumers
including “little” unfair trade practice laws, as well as similar laws and
regulations in the other markets in which we operate. As we continue
to expand globally, we will be subject to the laws of each country where we
operate.
In
addition to general business requirements, some of these laws dictate licensing
and/or procedural requirements to operate as well as prescribing mandatory
holding periods after acquisition of items before they can be resold and/or
liquidated. We have adapted our processes and procedures to comply
with these requirements. Florida regulates “mail-in dealers” which is
defined in the statute. Our operations are run through a wholly owned
subsidiary, which is registered in Florida to conduct business as a Secondhand
Dealer.
As we
expand globally, we are subject to the laws of each country where we
operate. Among other restrictions, our advertising is subject to
prior approval in the United Kingdom.
Employees
As of
the date of this prospectus, we had approximately ____ employees of
which approximately _____ were full-time employees. None of
our employees is subject to a collective bargaining
agreement.
Intellectual
Property
We
currently rely on a combination of copyright, trademark and trade secret laws
and restrictions on disclosure to protect our intellectual property
rights. We enter into proprietary information and confidentiality
agreements with our employees, consultants and commercial partners and control
access to, and distribution of our software documentation and other proprietary
information.
Property
We lease
approximately 6,000 square feet for our corporate headquarters located at 200
East Broward Blvd., in Fort Lauderdale, Florida. In addition, we
lease approximately 2,900 square feet in Miami, Florida, approximately 2,400
square feet in London, England, and approximately 1,000 square feet in Montreal,
Canada for our aggregation facilities.
We
believe that our existing facilities are suitable and adequate and that we have
sufficient capacity to meet our current anticipated needs. None of
these facilities are critical to our operations because suitable alternatives
are available in substantially all of the locations where we conduct
business. We continuously review our anticipated requirements for
facilities and, on the basis of that review, may from time to time acquire or
lease additional facilities and/or dispose of existing facilities.
Legal
Proceedings
From time
to time, we are periodically a party to or otherwise involved in legal
proceedings arising in the normal and ordinary course of business. As
of the date of this prospectus, we are not aware of any proceeding, threatened
or pending, against us, which, if determined adversely, would have a material
effect on our business, results of operations, cash flows or financial
position.
MANAGEMENT
The
following is a list of our executive officers and directors. All
directors serve one-year terms or until each of their successors are duly
qualified and elected. There are two vacancies on our
Board. The officers are elected by the Board.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Douglas
Feirstein
|
|
39
|
|
Chief
Executive Officer and Director
|
|
|
|
|
|
Hakan
Koyuncu
|
|
34
|
|
President
and Vice Chairman of the Board
|
|
|
|
|
|
Daniel
Brauser
|
|
29
|
|
Chief
Financial Officer and Director
|
|
|
|
|
|
Michael
Brachfeld
|
|
39
|
|
Chief
Accounting Officer
|
|
|
|
|
|
Scott
Frohman
|
|
42
|
|
Chairman
of the Board
|
|
|
|
|
|
Grant
Fitzwilliam
|
|
42
|
|
Director
|
|
|
|
|
|
Charles
Pearlman
|
|
64
|
|
Director
|
|
|
|
|
|
Jason
Rubin
|
|
27
|
|
Director
|
Biographies
Douglas
Feirstein has served as our Chief Executive Officer and director since
May 7, 2009 when we acquired MGE. From March 2000 until 2004, Mr.
Feirstein served as the President and Chief Executive Officer of LiveOps, Inc.,
a company he founded. LiveOps, Inc. provides on demand call center
technology, as well as virtual call center services, in both direct response and
enterprise markets. In 2005, Mr. Feirstein founded and served as
a manager of Pink Package, LLC, d/b/a My Gold Envelope a predecessor to MGE
and since the date of MGE’s acquisition of My Gold Envelope, he had been an
executive officer of MGE. He currently serves as an advisor to
LiveOps. Prior to LiveOps, he was involved in developing call center
operations and technologies for catalog and electronic retailing
organizations. Mr. Feirstein was selected as a director for his
proven track record of success and his extensive experience managing the growth
of young companies from start-up through to maturity. In addition, as
a founder, Mr. Feirstein possesses a detailed understanding of the
characteristics unique to our business model.
Hakan
Koyuncu has served as our President since May 7, 2009 and previously
served as our Chief Executive Officer from July 23, 2008 until May 7,
2009. Mr. Koyuncu heads our European operations and is based in our
United Kingdom office. He has served as a director since
July 23, 2008. In 2004, Mr. Koyuncu co-founded
Leadcreations, LLC and has been its Chief Executive Officer since
2003. Leadcreations is an Internet marketing and online lead
generation company which provides services to us. In 2004,
Mr. Koyuncu founded Unitel Telecom, one of Turkey's first independent
telecommunications companies, which was acquired by another telecom company
within two years. Mr. Koyuncu was selected as a director for his
proven track record of success and his extensive experience managing the growth
of young companies from start-up through to maturity. In addition, as
a founder, Mr. Koyuncu possesses a detailed understanding of the characteristics
unique to our business model.
Daniel
Brauser has served as our Chief Financial Officer and as a director since
July 23, 2008. From July 23, 2008 through May 7, 2009,
Mr. Brauser also served as our President and Chief Operating
Officer. From 2004 through November 2005, Mr. Brauser
served as the interim Chief Financial Officer of Health Benefits Direct
Corporation and from November 2005 until September 2007 he served as
its Senior Vice President. Mr. Brauser was selected as a director for
his proven track record of success and his extensive experience managing the
growth of young companies from start-up through to maturity. In
addition, as a founder, Mr. Brauser possesses a detailed understanding of the
characteristics unique to our business model.
Michael
Brachfeld has served as our Vice President of Finance since
September 21, 2009 and our Chief Accounting Officer since March 30,
2010. From April 2007 to September 2009, Mr. Brachfeld was
employed at eLandia Group, Inc., a provider of information technology
products and services to small, medium-sized and large businesses as well as
government entities, primarily in Latin America. From October 2003
until April 2007, Mr. Brachfeld was the Corporate Controller of Affinity
Internet, Inc., a web hosting and on-line services company. He is a Certified
Public Accountant in Florida.
Scott
Frohman
has served as our Chairman of the Board since July 23,
2008. Since June 23, 2008, Mr. Frohman has been the
Chairman of the Board and Chief Executive Officer of Options Media Group
Holdings, Inc., an Internet based marketing and lead generation
company. From February 2004 through December 2006,
Mr. Frohman co-founded and served as the Chief Executive Officer and a
director of Health Benefits Direct Corporation. Mr. Frohman was
selected as a director for his general business management with specific
experience in marketing driven companies.
Grant
Fitzwilliam has served as our director since September 30,
2009. Mr. Fitzwilliam is currently the President of 3c InSight, a
software and consulting firm focused on providing operational excellence
solutions for companies throughout the United States he co-founded in
2008. From August 2005 until August 2007, Mr. Fitzwilliam served as
Executive Vice President of Finance and Chief Financial Officer of The Hackett
Group (NASDAQ: HCKT) a leading business and technology consulting firm and also
served as a Managing Director leading Hackett’s national Oracle and Sarbanes
Oxley business units. Mr. Fitzwilliam was formerly an auditor with KPMG
LLP and is a licensed CPA in Georgia. Mr. Fitzwilliam was
selected as a director for his accounting, financial and professional management
experience.
Charles
Pearlman has served as our director since September 23, 2009 and has
extensive experience in the areas of corporate and securities law. For
more than 20 years he practiced as a partner with the firm of Atlas &
Pearlman (which in 2001 was acquired by Adorno & Yoss). Thereafter, he
was a partner at Arnstein & Lehr (2006 to 2008), Roetzel & Andress
(2008-2009) and Rothstein Rosenfeldt Adler (September 2009 - October
2009). Since October 2009 Mr. Pearlman has been a member of Pearlman &
Pearlman LLC which is of counsel to Quintairos, Prieto, Wood & Boyer,
P.A. He previously served as a trial attorney, and ultimately Chief
Attorney with the Miami Branch Office for the Securities and Exchange
Commission. Mr. Pearlman is a member of the Huizenga School of Business
and Entrepreneurship at Nova Southeastern University, Board of Governors.
Mr. Pearlman was selected as a director for his knowledge and experience
regarding general, corporate and securities law as well as his experience
advising growing companies.
Jason
Rubin has served as a director since July 23, 2008. Since
1993, Mr. Rubin has been employed in numerous capacities at the Refinery
and is currently serving as its Vice President and General
Counsel. Mr. Rubin’s father is the founder of the Refinery, one
of the largest precious metal refineries in the United States. Mr.
Rubin was selected as a director for his in depth knowledge and unique expertise
specific to the precious metals industry.
Key Employee
Michael
Moran has
served as our Vice President of Corporate Development since February 1,
2010. From March 2008 to January 2010, Mr. Moran was employed at
Ser-Mat Corporation, a manufacturing company serving the US commercial airline
industry. From January 2005 to February 2008, Mr. Moran held a
variety of senior level positions at MGE prior to our acquisition of
MGE. Mr. Moran is 42 years old.
Corporate
Governance
Board
Responsibilities and Structure
The Board
oversees, counsels, and directs management in the long-term interest of
Money4Gold and its shareholders. The Board’s responsibilities
include:
|
·
|
Establishing
broad corporate policies and
|
|
·
|
Reviewing
the overall performance of
Money4Gold.
|
The Board
is not, however, involved in the operating details on a day-to-day
basis.
Board
Committees and Charters
The Board
and its Committees meet and act by written consent from time to time as
appropriate. The Board has formed and appoints members to its: Audit
and Compensation Committees. Committees regularly report on their activities and
actions to the Board. The Audit Committee and the Compensation
Committee each have a written charter approved by the Board.
The
following table identifies the independent and non-independent current Board and
Committee members:
Name
|
|
Independent
|
|
Audit
|
|
Compensation
|
|
|
|
|
|
|
|
Scott
Frohman
|
|
√
|
|
√
|
|
√
|
Hakan
Koyuncu
|
|
|
|
|
|
|
Daniel
Brauser
|
|
|
|
|
|
|
Douglas
Feirstein
|
|
|
|
|
|
|
Grant
Fitzwilliam
|
|
√
|
|
Chairman
|
|
√
|
Charles
Pearlman
|
|
√
|
|
√
|
|
Chairman
|
Jason
Rubin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formed
|
|
|
|
October
20, 2008
|
|
October
30,
2009
|
Our Board
has determined that Messrs. Fitzwilliam, Frohman, and Pearlman are independent
under the NASDAQ Stock Market listing rules.
Audit
Committee
The Audit
Committee’s primary role is to review our accounting policies and any issues
which may arise in the course of the audit of our financial
statements. The Audit Committee selects our independent registered
public accounting firm, approves all audit and non-audit services, and reviews
the independence of our independent registered public accounting
firm. The Audit Committee also reviews the audit and non-audit fees
of the auditors. Our Audit Committee is also responsible for certain
corporate governance and legal compliance matters including internal and
disclosure controls and compliance with the Sarbanes-Oxley Act of
2002.
Our Board
has determined that Grant Fitzwilliam is qualified as an Audit Committee
Financial Expert, as that term is defined by the rules of the SEC and in
compliance with the Sarbanes-Oxley Act of 2002.
Independent -
Audit Committee Standards
The Board
has determined that Messrs. Frohman, Pearlman and Fitzwilliam are independent in
accordance with the NASDAQ Stock Market independence standards for audit
committees.
Compensation
Committee
The
function of the Compensation Committee is to determine the compensation of our
executive officers. The Compensation Committee has the power to set
performance targets for determining periodic bonuses payable to executive
officers and may review and make recommendations with respect to shareholder
proposals related to compensation matters. Additionally, the
Compensation Committee is responsible for administering our 2008 Equity
Incentive Plan, or the Plan.
Board
Diversity
While we
do not have a formal policy on diversity, our Board considers diversity to
include the skill set, background, reputation, type and length of business
experience of our Board members as well as a particular nominee’s contributions
to that mix. Although there are many other factors, the Board seeks
individuals with experience on public company boards as well as experience with
public companies in general, legal and accounting skills, marketing expertise
and international background.
Board
Structure
The
Board has determined that having an independent director serve as Chairman of
the Board is in the best interest of shareholders at this time. This
structure has been particularly useful given our relatively new Chief Executive
Officer as the Board has considered significant changes in our strategic
direction. The structure ensures a greater role for the independent
directors in the oversight of Upstream and active participation of the
independent directors in setting agendas and establishing priorities and
procedures for the work of the Board.
Board
Assessment of Risk
Our
risk management function is overseen by our Board. Through our
policies, our Code of Ethics and our Board committees’ review of financial and
other risks, our management keeps our Board apprised of material risks and
provides our directors access to all information necessary for them to
understand and evaluate how these risks interrelate, how they affect Upstream,
and how management addresses those risks. Mr. Feirstein, a director
and Chief Executive Officer, and Mr. Brauser, a director and our Chief Financial
Officer, will work closely together with the Board once material risks are
identified on how to best address such risk. If the identified risk
poses an actual or potential conflict with management, our independent directors
may conduct the assessment. Presently, the primary risks affecting
Upstream are the lack of working capital and the inability to generate
sufficient revenue so that we have positive cash flow from
operations. The Board focuses on these key risks and interfaces
with management on seeking solutions.
Code
of Ethics
Our
Board has adopted a Code of Ethics that applies to all of our employees,
including our Chief Executive Officer and Chief Financial
Officer. Although not required, the Code of Ethics also applies to
our directors. The Code of Ethics provides written standards that we
believe are reasonably designed to deter wrongdoing and promote honest and
ethical conduct, including the ethical handling of actual or apparent conflicts
of interest between personal and professional relationships, full, fair,
accurate, timely and understandable disclosure and compliance with laws, rules
and regulations, including insider trading, corporate opportunities and
whistle-blowing or the prompt reporting of illegal or unethical
behavior. We will provide a copy, without charge, to anyone that
requests one in writing to Upstream Worldwide, Inc., 200 E. Broward Boulevard,
Suite 1200, Fort Lauderdale, Florida 33301, Attention: Mr. Daniel
Brauser.
Shareholder
Communications
Although
we do not have a formal policy regarding communications with our Board,
shareholders may communicate with the Board by writing to us at Upstream
Worldwide, Inc., 200 E. Broward Boulevard, Suite 1200, Fort Lauderdale,
Florida 33301, Attention: Mr. Daniel Brauser, or by facsimile (954)
915-1525. Shareholders who would like their submission directed to a
member of the Board may so specify, and the communication will be forwarded, as
appropriate.
Executive Compensation
The
following information is related to the compensation paid, distributed or
accrued by us to our Chief Executive Officer (principal executive officer)
serving at the end of the last fiscal year and the two other most highly
compensated executive officers whose total compensation exceeded $100,000 in
2009. We refer to these persons as the Named Executive
Officers. No executive officer received $100,000 during
2008.
2009
Summary Compensation Table
Name and
Principal Position
(a)
|
|
Year
(b)
|
|
Salary
($)(c)
|
|
|
Option
Awards
($)(f) (1)(2)(3)
|
|
|
Total
($)(j)
|
|
Douglas
Feirstein
|
|
2009
|
|
|
136,442 |
|
|
|
150,709 |
|
|
|
287,151 |
|
Chief
Executive Officer
|
|
2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Hakan
Koyuncu
|
|
2009
|
|
|
213,942 |
|
|
|
150,709 |
|
|
|
364,651 |
|
President
|
|
2008
|
|
|
94,231 |
|
|
|
- |
|
|
|
94,231 |
|
Daniel
Brauser
|
|
2009
|
|
|
213,942 |
|
|
|
2,185,277 |
|
|
|
2,239,219 |
|
Chief
Financial Officer
|
|
2008
|
|
|
94,231 |
|
|
|
- |
|
|
|
94,231 |
|
|
(1)
|
The
amounts in these columns represent the fair value of the award as of the
grant date as computed in accordance with FASB ASC Topic 718 and the
recently revised SEC disclosure rules. These rules also require
prior years amounts to be recalculated in accordance with the rule and
therefore any number previously disclosed in our Form 10-K
regarding compensation on this table or any other table may not
reconcile. These amounts represent awards that are paid in
options to purchase shares of our common stock and do not reflect the
actual amounts that may be realized by the Named Executive
Officers.
|
|
(2)
|
Includes
stock options to purchase 555,556 shares of our common stock at $0.27 per
share. These options vest each calendar quarter over four years
beginning March 31, 2010. These options were awarded outside of
the Plan.
|
|
(3)
|
For
Mr. Brauser, also includes options to purchase 7,500,000 shares of our
common stock at $0.27 per share. These options vest each
calendar quarter over four years beginning March 31,
2010. These options were awarded outside of the
Plan.
|
Executive
Employment Agreements
Douglas
Feirstein Employment Agreement
Effective
May 5, 2009, we entered into an employment agreement with Douglas Feirstein, our
Chief Executive Officer. The current term of the agreement expires on
May 5, 2012 and will be automatically renewed for additional one-year periods
until either we or Mr. Feirstein gives the other party written notice of
its intent not to renew at least 60 days prior to the end of the then current
term.
Hakan
Koyuncu Employment Agreement
Effective
July 23, 2008, we entered into an employment agreement with Hakan Koyuncu,
our President. On May 5, 2009, we amended the employment agreement
extending the expiration date to May 5, 2012. The term is
automatically renewed for additional one-year periods until either we or
Mr. Koyuncu gives the other party written notice of its intent not to renew
at least 60 days prior to the end of the then current term.
Daniel
Brauser Employment Agreement
Effective
July 23, 2008, we entered into an employment agreement with Daniel Brauser,
our Chief Financial Officer. On May 5, 2009, we amended the
employment agreement extending the expiration date to May 5,
2012. The term is automatically renewed for additional one-year
periods until either we or Mr. Brauser gives the other party written notice
of its intent not to renew at least 60 days prior to the end of the then current
term.
Amendments
On
November 23, 2009, the Compensation Committee approved an amendment to the
Employment Agreements for each of the above officers increasing each annual
salary from $225,000 to $275,000 effective December 1, 2009 and $300,000
beginning June 1, 2010.
2009
Option Grants To Executive Officers
On
December 22, 2009, we granted options to purchase 555,556 shares of our common
stock to each of the above officers as a bonus for 2009. Also, Mr.
Brauser was granted 7,500,000 options in order to provide Mr. Brauser with an
equity stake in line with the Chief Executive Officer and the then Chief
Operating Officer.
Termination
Provisions
The table
below describes the severance payments that Messrs.
Feirstein, Koyuncu and Brauser are entitled to in connection with a
termination of their employment upon death, disability, without cause, for Good
Reason and the non-renewal of their employment at our discretion:
|
|
Douglas
Feirstein
|
|
Hakan
Koyuncu
|
|
Daniel
Brauser
|
|
Death
|
|
Three
Months
Base
Salary
|
|
Three
Months
Base
Salary
|
|
Three
Months
Base
Salary
|
|
|
|
|
|
|
|
|
|
Total
Disability
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
|
|
|
|
|
|
|
|
Without
Cause
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
|
|
|
|
|
|
|
|
Good
Reason (1)
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
|
|
|
|
|
|
|
|
Non-Renewal
By the Company
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
18
Months
Base
Salary
|
|
(1)
|
Good
Reason is defined in their Employment Agreements to be the resignation by
the officer due to the failure of Money4Gold to meet any of its
obligations under the Employment Agreement or any other Agreement and the
failure to cure such obligation within 30 days of notice of the
breach.
|
On
February 2, 2010, Todd Oretsky resigned as our Chief Operating
Officer. Mr. Oretsky was receiving a base salary of $275,000 when he
resigned. His employment agreement provided for identical termination
provisions as the executives above. In connection with the
termination of his employment, we agreed to pay Mr. Oretsky severance of
$46,667 payable over three months. Also, Mr. Oretsky’s options to
purchase 555,556 shares of our common stock immediately vested and will remain
exercisable through February 1, 2011. Mr. Oretsky, through an
affiliate, is providing consulting services for a period of six months
for $32,500 per month. Additionally, Mr. Oretsky and the
affiliate have entered into a covenant not-to-compete for a 21 month period and
are receiving a total of $50,000 for such agreement, payable over three
months.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following chart reflects the number of awards granted under equity compensation
plans approved and not approved by shareholders and the weighted average
exercise price for such plans as of December 31, 2009.
Name Of Plan
|
|
Number of shares
of common stock to
be issued upon exercise
of outstanding
securities (1)
(a)
|
|
|
Weighted-average
exercise price of
outstanding
securities
(b)
|
|
|
Number of shares remaining
available for future issuance
under equity compensation
plans (excluding the
shares reflected
in column (a))
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
2,237,843 |
|
|
$ |
0.31 |
|
|
|
2,592,091 |
(2)
|
Equity
compensation plans not approved by security holders (3)
|
|
|
11,177,991 |
|
|
|
0.29 |
|
|
|
|
|
Total
|
|
|
13,415,834 |
|
|
$ |
0.29 |
|
|
|
2,592,091 |
|
(1)
|
Consists
of stock options.
|
(2)
|
On
December 31, 2009, we were authorized to issue 8,000,000 shares under the
Plan, which includes restricted stock and options. Because we
have issued 3,170,066 shares of restricted stock, the number of
securities available for grant has been reduced. On March 10, 2010,
the number of shares authorized under the Plan was increased to
27,000,000.
|
(3)
|
Represents
options granted outside the Plan. Includes 10,000,002
options granted to executive officers and directors with an exercise price
of $0.28, vesting quarterly in equal increments over four
years.
|
Outstanding
Equity Awards at Fiscal Year End
Listed
below is information with respect to unexercised options and stock that has not
vested, and equity incentive plan awards for each Named Executive Officer
outstanding as of December 31, 2009:
|
|
Outstanding
Equity Awards At 2009 Fiscal Year-End
|
|
Name
(a)
|
|
Number of Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
|
|
Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
(c)(1)
|
|
|
Option
Exercise Price
($)
(e)
|
|
Option
Expiration Date
(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
Feirstein
|
|
|
0 |
|
|
|
555,556 |
|
|
|
0.27 |
|
12/22/2014
|
|
Hakan
Koyuncu
|
|
|
0 |
|
|
|
555,556 |
|
|
|
0.27 |
|
12/22/2014
|
|
Daniel
Brauser
|
|
|
0 |
|
|
|
8,055,556 |
|
|
|
0.27 |
|
12/22/2014
|
|
|
(1)
|
These
options vest each calendar quarter over four years beginning March 31,
2010.
|
The
following chart reflects the number of stock options we awarded in 2009 to our
executive officers and directors.
Name
|
|
Number of
Options
|
|
|
Exercise Price per
Share
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
Scott
Frohman (1)
|
|
|
196,429 |
|
|
$ |
0.28 |
|
7/1/2014
|
Jason
Rubin (2)
|
|
|
294,643 |
|
|
$ |
0.28 |
|
7/1/2014
|
Neil
McDermott (3)
|
|
|
147,321 |
|
|
$ |
0.28 |
|
7/1/2014
|
Charles
Pearlman
|
|
|
263,158 |
|
|
$ |
0.19 |
|
9/23/2014
|
Grant
Fitzwilliam
|
|
|
263,158 |
|
|
$ |
0.19 |
|
9/30/2014
|
Daniel
Brauser
|
|
|
8,055,556 |
|
|
$ |
0.27 |
|
12/22/2014
|
Michael
Brachfeld
|
|
|
277,778 |
|
|
$ |
0.27 |
|
12/22/2014
|
Todd
Oretsky (4)
|
|
|
555,556 |
|
|
$ |
0.27 |
|
12/22/2014
|
Hakan
Koyuncu
|
|
|
555,556 |
|
|
$ |
0.27 |
|
12/22/2014
|
Douglas
Feirstein
|
|
|
555,556 |
|
|
$ |
0.27 |
|
12/22/2014
|
(1)
|
Of
these options 4,464 were relinquished as a result of no longer serving as
Chairman of the Audit Committee.
|
(2)
|
Of
these options, 27,686 were relinquished as a result of no longer serving
as a member of the Audit Committee.
|
(3)
|
Resigned
March 10, 2010.
|
(4)
|
Resigned
February 2, 2010.
|
The
following chart reflects the shares of common stock we awarded in 2009 to
our directors as part of their annual grants under the Plan.
Name
|
|
Number
of
Shares
|
|
|
|
|
|
Scott
Frohman (1)
|
|
|
196,429 |
|
Neil
McDermott (2)
|
|
|
147,321 |
|
Charles
Pearlman
|
|
|
263,158 |
|
Grant
Fitzwilliam
|
|
|
263,158 |
|
(1)
|
Of
these options 4,464 were relinquished as a result of no longer serving as
Chairman of the Audit Committee.
|
Michael
Brachfeld, who was appointed Chief Accounting Officer in March 2010, was granted
3,500,000 options exercisable at $0.16 per share.
Director
Compensation
We do not
pay cash compensation to our directors for service on our Board and our
employees do not receive compensation for serving as members of our Board.
Directors are reimbursed for reasonable expenses incurred in attending meetings
and carrying out duties as Board and committee members. Our non-employee
directors receive automatic grants of stock options and restricted stock as
compensation for their services as directors under our Plan as described
below. The director may elect to receive stock options in lieu of
their stock grant.
2009
Director Compensation Table
Name
(a)
|
|
Stock
Awards
($)(c)(1)
|
|
|
Option
Awards
($)(d)(1)
|
|
|
Total ($)(j)
|
|
Grant
Fitzwilliam (2)
|
|
|
47,368 |
|
|
|
45,391 |
|
|
|
92,759 |
|
Scott
Frohman (3)
|
|
|
55,000 |
|
|
|
51,432 |
|
|
|
106,432 |
|
Neil
McDermott (3)(4)
|
|
|
41,250 |
|
|
|
38,574 |
|
|
|
79,824 |
|
Charles
Pearlman (2)
|
|
|
47,368 |
|
|
|
45,294 |
|
|
|
92,662 |
|
Jason
Rubin (3)
|
|
|
- |
|
|
|
77,148 |
|
|
|
77,148 |
|
|
(1)
|
This
represents the fair value of the award as of the grant date in accordance
with FASB ASC Topic 718.
|
|
(2)
|
Represents
an award issued under the Plan as an initial grant for appointment to the
Board. These awards vest in annual installments over three
years.
|
|
(3)
|
Represents
an award issued under the Plan as an annual grant for Board or committee
service. These awards vest one year from the date of
grant.
|
|
(4) |
Mr.
McDermott resigned in 2010. In connection with his resignation, we vested
all of his options and restricted
stock.
|
The
following table sets forth the number of shares of our common stock beneficially
owned as of June 18, 2010 by (i) those persons known by us to be owners of more
than 5% of our voting securities, (ii) each director, (iii) our Named Executive
Officers and (iv) all executive officers and directors of Upstream as a
group.
Title
of Class
|
Name and Address of Beneficial Owner
|
|
Amount and
Nature of Beneficial
Owner
(1)
|
|
|
Percent of Class (1)
|
|
|
|
|
|
|
|
|
|
Directors
and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
Douglas
Feirstein
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(4)
|
|
|
59,872,256 |
|
|
|
30.5
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Hakan
Koyuncu
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(4)
|
|
|
59,872,256 |
|
|
|
30.5
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Daniel
Brauser
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(5)
|
|
|
61,281,979 |
|
|
|
31.0
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Grant
Fitzwilliam
2856
NE 26th Street
Ft.
Lauderdale, Florida 33305 (3)
|
|
|
290,936 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Scott
Frohman
123
NW 13th Street, Ste. 300
Boca
Raton, Florida 33432 (3)
(6)
|
|
|
3,453,581 |
|
|
|
1.8
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Charles
Pearlman
P.O
Box 460266
Ft.
Lauderdale, Florida 33346 (3)
|
|
|
288,158 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Jason
Rubin
12900
NW 38th Avenue
Miami,
Florida 33054 (3)(7)
|
|
|
10,322,583 |
|
|
|
5.2
|
% |
Common
Stock
|
All
directors and executive officers
as
a group (8 persons)
|
|
|
77,241,404 |
|
|
|
38.8
|
% |
|
|
|
|
|
|
|
|
|
|
5%
Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Republic
Metals Corporation
12900
NW 38th Avenue
Miami,
Florida 33054 (8)
|
|
|
10,000,000 |
|
|
|
5.1
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Michael
Brauser
595
S. Federal Highway, Ste. 600
Boca
Raton, Florida 33432 (9)
|
|
|
13,489,793 |
|
|
|
6.9
|
% |
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Barry
Honig
595
S. Federal Highway, Ste. 600
Boca
Raton, Florida 33432 (10)
|
|
|
11,353,587 |
|
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
Former
Executive Officer and Director:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
Todd
Oretsky
547
N.E. 59 th
Street
Miami,
FL 33137 (11)
|
|
|
60,358,367 |
|
|
|
30.7
|
% |
(1)
|
Applicable percentages
are based on 196,345,002 shares outstanding adjusted as required by
rules of the SEC. Including shares sold in our March – April
2010 private placement. Beneficial ownership is determined under the rules
of the SEC and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options, warrants
and convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days are deemed outstanding for computing
the percentage of the person holding such securities but are not
deemed outstanding for computing the percentage of any other person.
Unless otherwise indicated in the footnotes to this table, we
believe that each of the shareholders named in the table has sole voting
and investment power with respect to the shares of common stock indicated
as beneficially owned by them. The shares of common stock
beneficially owned by each of Messrs. Brauser, Feirstein, Koyuncu and
Oretsky include all shares of common stock subject to a Stockholders
Agreement which terminates when each member of the group beneficially owns
less than 100,000 shares. Under the Stockholders Agreement, the
group agreed to vote all of their shares of common stock together on any
action as determined by a majority of the members of the group still
owning 20,000 shares. The table includes shares of common
stock, options and warrants exercisable into shares within 60
days. The shares of common stock individually owned by them
are:
|
Mr. Brauser
|
|
|
9,715,335 |
|
|
|
|
|
|
Mr. Feirstein
|
|
|
26,508,503 |
|
|
|
|
|
|
Mr. Koyuncu
|
|
|
14,800,001 |
|
|
|
|
|
|
Mr. Oretsky
|
|
|
8,778,972 |
|
(2)
|
An
executive officer.
|
(4)
|
Includes
69,445 stock options exercisable within 60
days.
|
(5)
|
Includes
333,334 shares of common stock issuable upon the exercise of
warrants. Includes 1,145,834 stock options which are
exercisable within 60 days.
|
(6)
|
Includes
261,616 stock options which are exercisable within 60
days.
|
(7)
|
Includes
10,000,000 shares held by Republic Metals Corporation, a corporation
whereby Mr. Rubin’s father is the founder and controls.
Mr. Rubin is Vice President and General Counsel of Republic.
Also includes 322,583 stock options which are exercisable within 60
days.
|
(8)
|
These
are the same 10,000,000 shares beneficially owned by Jason
Rubin.
|
(9)
|
Mr.
Brauser is the father of Daniel Brauser, our Chief Financial
Officer. Does not include shares held in a trust created by
Mr. Brauser, of which one of his adult sons is the trustee and all of
his four adult children including Daniel Brauser are the
beneficiaries. Mr. Michael Brauser disclaims beneficial
ownership of these securities, and this disclosure shall not be deemed an
admission of beneficial ownership of these securities for Section 16
of the Securities Exchange Act of 1934 or for any other
purposes. Mr. Brauser is a selling
shareholder. See the Selling Shareholder Table
below.
|
(10) |
Includes
shares held in a 401k plan whereby Mr. Honig is the trustee. This 401k
plan is a selling
shareholder.
|
(11)
|
Mr.
Oretsky resigned as an executive officer and director on February 2, 2010.
Mr. Oretsky’s shares are held by Jack Oretsky Holdings, LLC, a
limited liability company in which Mr. Oretsky, to our knowledge, is
the sole manager. Includes 555,556 stock options, which are
exercisable within 60 days.
|
RELATED
PERSON TRANSACTIONS
On
June 1, 2008, we entered into an agreement with the Refinery, whereby we
agreed to sell all of our precious metals in the United States exclusively to
the Refinery and the Refinery agreed to refrain from entering into a
relationship with any third party that is similar to our relationship with
them. The agreement is for an initial term of five
years. As consideration for this agreement, the
Refinery received 10,000,000 fully vested shares of our common stock
valued at $1,230,000. Jason Rubin, an officer of the Refinery, is a
member of our Board.
We
purchase online marketing and lead generation services from a company in which
Hakan Koyuncu, our President, is a 50% shareholder. Our pricing is
calculated at a 10% markup to their cost, capped at $1.50 per
lead. This markup is exclusively for the unrelated 50% shareholder.
Mr. Koyuncu does not share in any profits earned by this vendor for services
rendered to us. In the fourth quarter 2009, we agreed to issue this
lead generation company 333,334 shares of our common stock and 333,334 warrants
exercisable at $0.30 per share. These securities were issued to the
lead generation company. Mr. Koyuncu has no voting power or financial
interest in any securities of Upstream held by this lead generation
company. As payment, the lead generation company cancelled $50,000 we
owed it. Other investors purchased our common stock and warrants
contemporaneously at the same price per share and warrant. Daniel
Brauser, our Chief Financial Officer invested $50,000 in that same
offering.
Douglas
Feirstein, our Chief Executive Officer invested $50,000 and Michael Brauser and
GRQ Consultants, Inc. 401k, each a 5% beneficial owner, invested $125,000 and
$200,000, respectively in our March-April 2010 private placement on the same
terms and conditions as other investors in that offering.
SELLING
SHAREHOLDERS
The
following table provides information about each selling shareholder listing how
many shares of our common stock they own on the date of this prospectus, how
many shares are offered for sale by this prospectus, and the number
and percentage of outstanding shares each selling shareholder will
beneficially own after the offering assuming all shares covered by this
prospectus are sold. The information concerning beneficial ownership
has been taken from our stock transfer records and information provided by the
selling shareholders.
We do not
know when or in what amounts a selling shareholder may offer shares for
sale. The selling shareholders may not sell any or all of the shares
offered by this prospectus. Because the selling shareholders may
offer all or some of the shares, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, we
cannot estimate the number of the shares that will be held by the selling
shareholders after completion of the offering. However, for purposes
of this table, we have assumed that, after completion of the offering, all of
the shares covered by this prospectus will be sold by the selling
shareholder.
The
table does not include 333,334 shares purchased by our Chief Executive Officer,
Mr. Douglas Feirstein in our Private Placement. Mr. Feirstein has no
intent to sell these shares and will not sell them by this
prospectus.
Name
|
|
Number of
securities
beneficially
owned before
offering
|
|
|
Number of
securities
to be
offered
|
|
|
Number of
securities
owned after
offering
|
|
|
Percentage of
securities
beneficially
owned after
offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brauser
Family Trust 2008 (1)
|
|
|
3,683,334 |
|
|
|
333,334 |
|
|
|
3,350,000 |
|
|
|
1.7
|
% |
Michael
Brauser (2)
|
|
|
13,489,793 |
|
|
|
833,334 |
|
|
|
12,656,459 |
|
|
|
6.4
|
% |
Chestnut
Ridge Partners, LP (3)
|
|
|
1,600,000 |
|
|
|
1,600,000 |
|
|
|
0 |
|
|
|
0 |
|
Robert
Colman
|
|
|
666,667 |
|
|
|
666,667 |
|
|
|
0 |
|
|
|
0 |
|
DBGJ
Irrevocable Trust (4)
|
|
|
166,667 |
|
|
|
166,667 |
|
|
|
0 |
|
|
|
0 |
|
Goldstein
Enterprises LLC
|
|
|
666,667 |
|
|
|
666,667 |
|
|
|
0 |
|
|
|
0 |
|
GRQ
Consultants, Inc. 401k (5)
|
|
|
11,353,587 |
|
|
|
1,333,334 |
|
|
|
10,020,253 |
|
|
|
5.1
|
% |
Gerald
& Jane Kesselman
|
|
|
500,000 |
|
|
|
500,000 |
|
|
|
0 |
|
|
|
0 |
|
Bruce
Moldow
|
|
|
700,000 |
|
|
|
250,000 |
|
|
|
450,000 |
|
|
|
* |
|
Michael
Moran (6)
|
|
|
6,322,110 |
|
|
|
166,667 |
|
|
|
6,165,443 |
|
|
|
3.1
|
% |
Octagon
Capital Partners
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
0 |
|
|
|
0 |
|
Plough
Penny Partners LP
|
|
|
666,667 |
|
|
|
666,667 |
|
|
|
0 |
|
|
|
0 |
|
Proximity
Fund LP
|
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
0 |
|
|
|
0 |
|
Reuben
Taub
|
|
|
716,667 |
|
|
|
666,667 |
|
|
|
50,000 |
|
|
|
* |
|
Wallygator,
LLC
|
|
|
333,334 |
|
|
|
333,334 |
|
|
|
0 |
|
|
|
0 |
|
FaceTV
|
|
|
629,396 |
|
|
|
629,396 |
|
|
|
0 |
|
|
|
0 |
|
Search
Response Agency Ltd.
|
|
|
611,079 |
|
|
|
611,079 |
|
|
|
0 |
|
|
|
0 |
|
Global
Innovations, Inc.
|
|
|
1,818,182 |
|
|
|
1,818,182 |
|
|
|
0 |
|
|
|
0 |
|
|
* |
Less
than 1% |
|
|
|
|
(1)
|
The
trustee of this trust is the brother of Daniel Brauser, our Chief
Financial Officer.
|
|
(2)
|
Michael
Brauser is the father of Daniel Brauser, our Chief Financial
Officer.
|
|
(3) |
Kenneth
Pasternack, as managing member of the general partner, holds voting and
investment power over these shares. |
|
(4)
|
The
trustee of this trust is the uncle of Daniel Brauser, our Chief Financial
Officer.
|
|
(5) |
Barry
Honig is the trustee of the 401k plan and holds voting and investment
power over these shares. |
|
(6)
|
Michael
Moran is our Vice President of
Operations.
|
DESCRIPTION
OF SECURITIES
Common
Stock
We are
authorized to issue 300,000,000 shares of common stock, par value $0.0001 per
share. The holders of common stock are entitled to one vote per share
on all matters submitted to a vote of shareholders, including the election of
directors. There is no cumulative voting in the election of
directors. The holders of common stock are entitled to any dividends
that may be declared by the Board out of funds legally available for payment of
dividends subject to the prior rights of holders of preferred stock and any
contractual restrictions we have against the payment of dividends on common
stock. In the event of our liquidation or dissolution, holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
preferred stock. Holders of common stock have no preemptive rights
and have no right to convert their common stock into any other
securities.
Preferred
Stock
We are
authorized to issue of 25,000,000 shares of $0.0001, par value preferred stock
in any series. The Board has the authority to establish and designate
a series, and to fix the number of shares included in such series and the
variations in the relative rights, preferences and limitations in the
series. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of our company without
further action by shareholders and could adversely affect the rights and powers,
including voting rights, of the holders of common stock. In certain
circumstances, the issuance of preferred stock could depress the market price of
the common stock.
Anti-takeover
Effects of Delaware Law
We are
subject to the “business combination” provisions of Section 203 of the Delaware
General Corporation Law. In general, such provisions prohibit a
publicly-held Delaware corporation from engaging in various “business
combination” transactions such as a merger with any interested shareholder which
includes, a shareholder owning 15% of a corporation’s outstanding voting
securities, for a period of three years after the date in which the person
became an interested shareholder, unless:
|
·
|
The
transaction is approved by the corporation’s Board prior to the date the
shareholder became an interested
shareholder;
|
|
·
|
Upon
closing of the transaction which resulted in the shareholder becoming an
interested shareholder, the shareholder owned at least 85% of the shares
of stock entitled to vote generally in the election of directors of the
corporation outstanding excluding those shares owned by persons who are
both directors and officers and specified types of employee stock plans;
or
|
|
·
|
On
or after such date, the business combination is approved by the Board and
at least 66 2/3% of outstanding voting stock not owned by the interested
shareholder.
|
A
Delaware corporation may opt out of Section 203 with either an express provision
in its original Certificate of Incorporation or an amendment to its Certificate
of Incorporation or Bylaws approved by its shareholders. We have not
opted out of this Statute. This Statute could prohibit, discourage or
delay mergers or other takeover attempts to acquire us.
Transfer
Agent
We have
appointed Island Stock Transfer, as our transfer agent. Their contact
information is: 100 Second Avenue South, Ste. 705S, St. Petersburg, Florida
33701, phone number (727) 289-0010, facsimile (727) 289-0069, www.islandstocktransfer.com.
PLAN
OF DISTRIBUTION
We are
registering the shares of our common stock covered by this prospectus for the
selling shareholders. The selling shareholders and any of their
respective pledgees, donees, assignees and other successors-in-interest may,
from time to time, sell any or all of their shares of common stock on the
Bulletin Board or any stock exchange, market or trading facility on which the
shares are then traded or in private transactions. These sales may be
at fixed prices which may be changed, at market prices at the time of sale, at
prices related to market prices or at negotiated prices. The selling
shareholders may use any one or more of the following methods when selling
shares:
|
·
|
Ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
Block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
Purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
Privately
negotiated transactions;
|
|
·
|
Broker-dealers
may agree with the selling shareholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
Writing
of options on the shares;
|
|
·
|
A
combination of any such methods of sale;
and
|
|
·
|
Any
other method permitted pursuant to applicable
law.
|
The
selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The
selling shareholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling shareholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
The
selling shareholders or their respective pledgees, donees, transferees or other
successors in interest may also sell the shares directly to market makers acting
as principals and/or broker-dealers acting as agents for themselves or their
customers. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling shareholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market
makers and block purchasers purchasing the shares will do so for their own
account and at their own risk. It is possible that a selling
shareholder will attempt to sell shares of common stock in block transactions to
market makers or other purchasers at a price per share, which may be below the
then market price. The selling shareholders and any brokers, dealers
or agents, upon effecting the sale of any of the shares offered in this
prospectus, may be deemed to be “underwriters” as that term is defined under the
Securities Act or the rules thereunder. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The
selling shareholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling
shareholder has entered into any agreement with a prospective underwriter and
the selling shareholders have advised us that they have no plans to enter into
any such agreement.
The
selling shareholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934 or the Exchange Act and the rules thereunder,
including Regulation M. These provisions may restrict certain
activities of, and limit the timing of purchases and sales of any of the shares
by, the selling shareholders or any other such person. Furthermore,
under Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of
the shares.
We have
agreed to indemnify the selling shareholders including liabilities under the
Securities Act or to contribute to payments the selling shareholders may be
required to make in respect of such liabilities. If the selling
shareholders notify us that they have a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required to
amend the registration statement of which this prospectus is a part, or file a
prospectus supplement to describe the agreements between the selling
shareholders and the broker-dealer.
We are
paying all fees and expenses incident to the registration of the shares,
excluding fees and disbursements of any counsel to the selling shareholders,
brokerage commissions and underwriting discounts.
We have
advised each selling shareholder that it may not use shares registered for
public sale by this prospectus to cover short sales of our common stock made
prior to the date of this prospectus. Each selling shareholder who
uses this prospectus for any sale of our common stock will be subject to the
prospectus delivery requirements of the Securities Act. The selling
shareholders are also responsible for complying with the applicable provisions
of the Exchange Act and the rules thereunder including Regulation M in
connection with their sales of shares of common stock under this
prospectus.
LEGAL
MATTERS
The
validity of the securities offered hereby will be passed upon for us by Harris
Cramer LLP, West Palm Beach, Florida. Attorneys employed by Harris
Cramer beneficially own 625,000 shares of our common
stock.
EXPERTS
The
financial statements appearing in this prospectus and registration statement for
the year ended December 31, 2009 and for the period from February 14, 2008
to December 31, 2008 have been audited by Berman & Company, P.A., an
independent registered public accounting firms, as set forth in their reports
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and
auditing.
ADDITIONAL
INFORMATION
We have
filed with the SEC a registration statement on Form S-1, including the exhibits,
schedules, and amendments to this registration statement, under the Securities
Act with respect to the shares of common stock to be sold in this
offering. This prospectus, which is part of the registration
statement, does not contain all the information set forth in the registration
statement. For further information with respect to us and the shares
of our common stock to be sold in this offering, we make reference to the
registration statement. Although this prospectus contains all
material information regarding us, statements contained in this prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete, and in each instance we make reference to the copy of such
contract, agreement, or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference. We are an Exchange Act reporting company and are required
to file periodic reports on Form 10-K and 10-Q and current reports on Form
8-K. You may read and copy all or any portion of the registration
statement or any other information, which we file at the SEC’s public reference
room at 100 F Street, N.E., Washington, DC 20549, on official business days
during the hours of 10:00 AM to 3:00 PM. We also file periodic
reports and other information with the SEC. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our SEC filings,
including the registration statement, are also available to you on the SEC’s
website, www.sec.gov.
Money4Gold
Holdings, Inc. and Subsidiaries
Condensed Consolidated
Balance Sheets
|
|
As
of March 31,
|
|
|
As
of December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
204,820 |
|
|
$ |
297,426 |
|
Accounts
receivable - related party
|
|
|
466,745 |
|
|
|
1,083,487 |
|
Inventory
|
|
|
682,278 |
|
|
|
855,763 |
|
Prepaid
asset - related party - current portion
|
|
|
187,627 |
|
|
|
187,627 |
|
Prepaid
expenses and other current assets
|
|
|
419,967 |
|
|
|
667,605 |
|
Total
Current Assets
|
|
|
1,961,437 |
|
|
|
3,091,908 |
|
|
|
|
|
|
|
|
|
|
Fixed
Assets - net
|
|
|
215,250 |
|
|
|
75,908 |
|
|
|
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
11,142,273 |
|
|
|
11,142,273 |
|
Intangible
assets - net
|
|
|
54,409 |
|
|
|
10,668 |
|
Intangible
asset - related party - net
|
|
|
184,868 |
|
|
|
199,455 |
|
Prepaid
asset - related party - net of current portion
|
|
|
406,525 |
|
|
|
453,432 |
|
Other
assets
|
|
|
90,708 |
|
|
|
113,793 |
|
Total
Other Assets
|
|
|
11,878,783 |
|
|
|
11,919,621 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
14,055,470 |
|
|
$ |
15,087,437 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
2,130,375 |
|
|
$ |
1,432,428 |
|
Accounts
payable - related party
|
|
|
73,971 |
|
|
|
45,984 |
|
Accrued
expenses
|
|
|
395,114 |
|
|
|
241,038 |
|
Deferred
revenue
|
|
|
1,480,701 |
|
|
|
1,576,462 |
|
Total
Current Liabilities
|
|
|
4,080,161 |
|
|
|
3,295,912 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Convertible
Series A preferred stock, ($0.0001 par value, 25,000,000 shares
authorized, 400,000 and
|
|
|
|
|
|
|
|
|
3,400,000
issued and outstanding)
|
|
|
40 |
|
|
|
340 |
|
Common
stock, ($0.0001 par value, 300,000,000 shares authorized, 191,536,339 and
183,208,004 shares
|
|
|
|
|
|
|
|
|
issued
and outstanding)
|
|
|
19,154 |
|
|
|
18,321 |
|
Subscriptions
receivable
|
|
|
(1,001,667
|
) |
|
|
- |
|
Additional
paid in capital
|
|
|
20,889,328 |
|
|
|
19,080,568 |
|
Accumulated
deficit
|
|
|
(9,751,996
|
) |
|
|
(7,272,073
|
) |
Accumulated
other comprehensive loss
|
|
|
(179,550
|
) |
|
|
(35,631
|
) |
Total
Stockholders' Equity
|
|
|
9,975,309 |
|
|
|
11,791,525 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
14,055,470 |
|
|
$ |
15,087,437 |
|
See
accompanying notes to unaudited interim condensed consolidated financial
statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Condensed Consolidated
Statements of Operations
(Unaudited)
|
|
For
the Three Months Ended March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Revenue
|
|
$ |
17,272,133 |
|
|
$ |
1,195,638 |
|
Cost
of revenue
|
|
|
6,335,660 |
|
|
|
549,890 |
|
Gross
Profit
|
|
|
10,936,473 |
|
|
|
645,748 |
|
Sales
and marketing expenses
|
|
|
10,723,204 |
|
|
|
872,984 |
|
General
and administrative expenses
|
|
|
2,682,395 |
|
|
|
1,100,012 |
|
Loss
from Operations
|
|
|
(2,469,126
|
) |
|
|
(1,327,248
|
) |
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
- |
|
|
|
78 |
|
Interest
expense
|
|
|
- |
|
|
|
(27,362
|
) |
Loss
on foreign exchange
|
|
|
(10,797
|
) |
|
|
- |
|
Change
in fair value of derivative liability - embedded
conversion
|
|
|
- |
|
|
|
(1,160
|
) |
Total
Other Income (Expense) - Net
|
|
|
(10,797
|
) |
|
|
(28,444
|
) |
Net
Loss
|
|
$ |
(2,479,923 |
) |
|
$ |
(1,355,692 |
) |
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding during the period - basic and
diluted
|
|
|
185,502,671 |
|
|
|
79,116,959 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss, Net of Tax:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,479,923 |
) |
|
$ |
(1,355,692 |
) |
Foreign
currency translation adjustment
|
|
|
(143,919
|
) |
|
|
- |
|
Comprehensive
Loss
|
|
$ |
(2,623,842 |
) |
|
$ |
(1,355,692 |
) |
See
accompanying notes to unaudited interim condensed consolidated financial
statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
|
|
For
the Three Months Ended March
31,
|
|
|
|
2010
|
|
|
2009
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,479,923 |
)
|
|
$ |
(1,355,692
|
) |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liability - embedded conversion
feature
|
|
|
- |
|
|
|
1,160 |
|
Stock
based compensation expense
|
|
|
807,626 |
|
|
|
122,548 |
|
Amortization
of debt discount
|
|
|
- |
|
|
|
20,829 |
|
Amortization
of debt issuance costs
|
|
|
- |
|
|
|
3,750 |
|
Amortization
of prepaid asset - related party
|
|
|
46,907 |
|
|
|
65,459 |
|
Depreciation
and amortization
|
|
|
35,231 |
|
|
|
- |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease
(increase) in:
|
|
|
|
|
|
|
|
|
Accounts
receivable - related party
|
|
|
610,323 |
|
|
|
143,782 |
|
Inventory
|
|
|
163,444 |
|
|
|
(29,368
|
) |
Prepaid
and other current assets
|
|
|
229,139 |
|
|
|
(60,541
|
) |
Other
assets
|
|
|
(3,589
|
) |
|
|
(12,831
|
) |
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
1,098,295 |
|
|
|
60,845 |
|
Accounts
payable - related party
|
|
|
(366,606
|
) |
|
|
(59,406
|
) |
Accrued
expenses
|
|
|
130,548 |
|
|
|
15,144 |
|
Deferred
Revenues
|
|
|
(77,018
|
) |
|
|
- |
|
Net
Cash Provided by (Used In) Operating Activities
|
|
|
194,377 |
|
|
|
(1,084,321
|
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash
paid to purchase fixed assets
|
|
|
(159,476
|
) |
|
|
(2,123
|
) |
Net Cash Used in Investing
Activities
|
|
|
(159,476
|
) |
|
|
(2,123
|
) |
See
accompanying notes to unaudited interim condensed consolidated financial
statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Continued)
(Unaudited)
|
|
For
the Three Months Ended March
31,
|
|
|
|
2010
|
|
|
2009
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds
from media line of credit
|
|
|
- |
|
|
|
250,000 |
|
Proceeds
from convertible note payable
|
|
|
- |
|
|
|
250,000 |
|
Cash
paid as debt issue costs
|
|
|
- |
|
|
|
(12,500
|
) |
Proceeds
from issuance of common stock and warrants in private
placement
|
|
|
- |
|
|
|
80,000 |
|
Net Cash Provided By Financing
Activities
|
|
|
- |
|
|
|
567,500 |
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
34,902 |
|
|
|
(518,944
|
) |
|
|
|
|
|
|
|
|
|
Effect
of Exchange Rates on Cash
|
|
|
(127,507
|
) |
|
|
334 |
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
297,426 |
|
|
|
778,436 |
|
|
|
|
|
|
|
|
|
|
Cash
- End of Period
|
|
$ |
204,820 |
|
|
$ |
259,826 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
- |
|
|
$ |
- |
|
Taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of stock for subscription receivable
|
|
$ |
1,001,667 |
|
|
$ |
- |
|
Accrual
of covenant not to compete
|
|
$ |
50,000 |
|
|
$ |
- |
|
Conversion
of preferred stock into common stock
|
|
$ |
300 |
|
|
$ |
220 |
|
Derivative
liability arising from Convertible Note Payable |
|
$ |
- |
|
|
$ |
69,429 |
|
See
accompanying notes to unaudited interim condensed consolidated financial
statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Note 1 – Organization and
Business
Money4Gold
Holdings, Inc. is based in Florida and, through our wholly-owned
subsidiaries (collectively, “Money4Gold,” “Company,” “we,” “us,” and/or
“our”), operates in the United States, Canada, and several countries in Europe.
Through direct response advertising and marketing campaigns, we purchase for
resale precious metals including gold, silver and platinum as well as diamonds
and other precious stones from the public.
Note 2 – Basis of
Presentation
The
accompanying unaudited interim condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and pursuant
to the instructions to Form 10-Q and Article 8 of Regulation S-X of
the United States Securities and Exchange Commission (“SEC”). Accordingly, they
do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. It is
our opinion, however, that the accompanying unaudited interim condensed
consolidated financial statements include all adjustments, consisting of a
normal recurring nature, which are necessary for a fair presentation of the
financial position, operating results and cash flows for the periods
presented.
The
accompanying unaudited interim condensed consolidated financial statements
should be read in conjunction with our Annual Report on Form 10-K for the
year ended December 31, 2009 as filed with the SEC, which contains the
audited financial statements and notes thereto, together with Management’s
Discussion and Analysis, for the year ended December 31, 2009 and the
period from February 14, 2008 (inception) to December 31, 2008. The interim
results for the three-month period ended March 31, 2010 are not necessarily
indicative of the results to be expected for the year ending December 31,
2010 or for any future interim period.
Note 3 – Liquidity and
Management’s Plans
We
incurred a $2,479,923 net loss (including $889,764 of
non-cash charges) for the three months ended March 31,
2010. As of March 31, 2010, we had a $9,751,996 accumulated
deficit and working capital deficit of $2,118,724.
We
do not yet have a sustained history of financial
stability. Historically our principal source of liquidity has been the
issuances of debt and equity securities, including preferred stock, common stock
and various debt financing transactions. We believe that the higher level
of revenue attained during the third and fourth quarters of 2009 and the first
quarter of 2010 is a result of the successful implementation of the first stages
of our business plan and that, if we can improve our returns on our media
investments and control our costs accordingly, continued implementation will
generate steadily improving results and cash flows in the
future.
Management
believes that our cash balance on May 10, 2010 of approximately $1.1 million,
current level of working capital, anticipated cash that will be received from
revenue generated from advertisements that have already aired, and additional
funds through the issuance of debt and/or equity securities will be sufficient
to sustain operations through at least March 31, 2011. However, there can be no
assurance that the plans and actions proposed by management will be successful,
that we will continue to generate revenue from advertisements that have already
aired, or that unforeseen circumstances will not require us to seek additional
funding sources in the future or effectuate plans to conserve liquidity. In
addition, there can be no assurance that our efforts to raise additional
funds through the issuance of debt and/or equity securities will be successful
or that in the event additional sources of funds are needed to continue
operations, that they will be available on acceptable terms, if at
all.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Note 4 – Significant
Accounting Policies
Principles
of Consolidation
The
accompanying unaudited interim condensed consolidated financial statements
include the accounts of Money4Gold and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use
of Estimates
The
preparation of unaudited interim condensed consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the unaudited interim condensed
consolidated financial statements and accompanying notes. Such estimates and
assumptions impact, among others, the following: the amount allocated to
goodwill and other intangible assets, the estimated useful lives for amortizable
intangible assets and property, plant and equipment, accrued expenses, deferred
revenue, the fair value of warrants granted in connection with various
financing transactions, share-based payment arrangements, and the fair value of
derivative liabilities.
Making
estimates requires management to exercise significant judgment. It is at least
reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the unaudited interim condensed
consolidated financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future confirming
events. Accordingly, the actual results could differ significantly from our
estimates.
Reclassification
We have
reclassified certain prior year amounts to conform to the current year’s
presentation. These reclassifications have no effect on the financial position
at December 31, 2009 or on the results of operations for the three months
ended March 31, 2009.
We
minimize credit risk associated with cash and cash equivalents by periodically
evaluating the credit quality of our primary financial institutions. At times,
our cash and cash equivalents may be uninsured or in deposit accounts that
exceed the Federal Deposit Insurance Corporation insurance limit. We had no
uninsured balances at March 31, 2010 or December 31, 2009.
Accounts
Receivable
Accounts
receivable represent obligations from a related party customer, the Refinery
(Note 11). As discussed below under Revenue Recognition, we are able to estimate
the total value of each batch of precious metals received. The Refinery advances
to us, up to 80% of the value of the precious metals we have received, but not
yet delivered. After completion of the melt and validation process, the final
amount due to us, net of the advance, is determined and is recorded as an
account receivable.
We
periodically evaluate the collectability of our accounts receivable and consider
the need to record an allowance for doubtful accounts based upon historical
collection experience and specific information. Actual amounts could vary from
the recorded estimates. We did not deem it necessary to record an allowance for
doubtful accounts at March 31, 2010 or December 31, 2009.
Inventory
Inventory
consists predominantly of gold and other precious metals and is carried at the
lower of cost or net realizable value. Cost is based solely on the amount paid
by us to third parties in the general public, which is generally lower than the
current market value. As such, we do not deem it necessary to record a
reserve for obsolete inventory.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is calculated on a straight-line
basis over the estimated useful lives of the related assets, which ranges from
three to seven years.
Long-Lived
Assets
We carry
long-lived assets at the lower of their carrying amount or their fair
value. We periodically review the carrying values of our long-lived assets
when events or changes in circumstances indicate that it is more likely than not
that their carrying values may exceed their fair values, and record an
impairment charge when considered necessary.
When
circumstances indicate that an impairment of value may have occurred, we test
such assets for recoverability by comparing the estimated undiscounted future
cash flows expected to result from the use of such assets and their eventual
disposition to their carrying amounts. If the undiscounted future cash flows are
less than the carrying amount of the asset, an impairment loss, measured as the
excess of the carrying value of the asset over its estimated fair value, is
recognized. Fair value, for purposes of calculating impairment, is measured
based on estimated future cash flows, discounted at a market rate of
interest.
Goodwill
Goodwill
is tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests if
an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying value. These events or
circumstances could include a significant change in the business climate, legal
factors, operating performance indicators, competition or sale or disposition of
a significant portion of a reporting unit. Application of the goodwill
impairment test requires judgment, including the identification of reporting
units, assignment of assets and liabilities to reporting units, assignment of
goodwill to reporting units, and determination of the fair value of each
reporting unit. The fair value of each reporting unit is estimated using a
discounted cash flow methodology. This requires significant judgments including
estimation of future cash flows, which is dependent on internal forecasts,
estimation of the long-term growth rate of our business, the useful life over
which cash flows will occur, and determination of our weighted average cost of
capital. Changes in these estimates and assumptions could materially affect the
determination of fair value and/or goodwill impairment charge for each reporting
unit.
During
the three months ended March 31, 2010, we did not identify any indication of
goodwill impairment.
Convertible
Instruments
We review
all of our convertible instruments for the existence of an embedded conversion
feature which may require bifurcation, if certain criteria are met. These
criteria include circumstances in which:
|
a)
|
The
economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and
risks of the host contract,
|
|
b)
|
The
hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not remeasured at fair value under otherwise
applicable GAAP with changes in fair value reported in earnings as they
occur, and
|
|
c)
|
A
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to certain
requirements (except for when the host instrument is deemed to be
conventional).
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
A
bifurcated derivative financial instrument may be required to be recorded at
fair value and adjusted to market at each reporting period end date. In
addition, we may be required to classify certain stock equivalents issued in
connection with the underlying debt instrument as derivative
liabilities.
For
convertible instruments that we have determined should not be bifurcated from
their host instruments, we record discounts to convertible notes for the
intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized
over the term of the related debt to their earliest date of
redemption. Also when necessary, we record deemed dividends for the
intrinsic value of conversion options embedded in preferred shares based upon
the differences between the fair value of the underlying common stock at the
commitment date of the financing transaction and the effective conversion price
embedded in the preferred shares.
In
addition, we review all of our convertible instruments for the existence of a
beneficial conversion feature. Upon the determination that a beneficial
conversion feature exists, the relative fair value of the beneficial conversion
feature would be recorded as a discount from the face amount of the respective
debt instrument and the discount would be amortized to interest expense over the
life of the debt.
Finally,
if necessary, we will determine the existence of liquidated damage provisions.
Liquidated damage provisions are not marked to market, but evaluated based upon
the probability that a related liability should be recorded.
Common
Stock Purchase Warrants and Derivative Financial Instruments
We review
any common stock purchase warrants and other freestanding derivative financial
instruments at each balance sheet date and classify them on our balance sheet
as:
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
We assess
classification of our common stock purchase warrants and other freestanding
derivatives at each reporting date to determine whether a change in
classification between assets and liabilities is required.
We had no
freestanding derivatives as of March 31, 2009 or December 31, 2008.
Revenue
Recognition
We
generate revenue from the sale of precious metals, including gold, silver and
platinum, and from the sale of diamonds and other precious stones. Revenue
is recognized when all of the following conditions exist: (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred, (3) the sales
price is fixed or determinable, and (4) collectability is reasonably
assured.
Precious
Metals
We grade
the quality of the precious metals purchased from the public and estimate the
total quantity of pure gold, silver and platinum received. We then
lock in the current spot rate of each metal sufficient to cover the total
quantity received in the current batch with the Refinery. After a holding
period of at least 10 days to allow for returns, the precious metals are
delivered to the Refinery to be melted. Upon melting the precious metals,
the Refinery validates the quality of pure gold, silver, and platinum and remits
payment to us based on the quantity of each precious metal at the agreed
upon spot rates, as described above. Revenue is recognized upon melting of
the precious metals and the validation of the quality and quantity of each
precious metal by the Refinery.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
No
returns are accepted from the Refinery and upon delivery of the precious metals
to the refiner, we have no further obligations.
Diamonds
and Other Precious Stones
Diamonds
and other precious stones are generally purchased from the public in connection
with the purchase of precious metals. We value diamonds and other precious
stones based on a variety of factors including size and quality and then resell
them. To date, all diamonds and other precious stones have been sold to an
affiliate of an officer of one of our wholly-owned subsidiaries. Revenue is
recognized upon the acceptance of the diamonds and other precious stones by the
purchaser.
Deferred
Revenue
Upon our
estimate of the total quantity of pure gold, silver, and platinum received and
the locking in of the current spot rate for each precious metal, we are able to
estimate the total value of the batch received. The Refinery advances to us, up
to 80% of the value of the precious metals we have received, but not yet
delivered. This amount is recorded as deferred revenue until the specific
batch is melted and processed as described above, at which time, it is recorded
as revenue.
Cost
of Revenue
Our cost
of revenue includes our cost of acquiring precious metals and stones as well as
any other direct costs and expenses required to ship, secure, grade, log and
process the metals and stones internally. In addition, fees and other costs
incurred in connection with processing at the Refinery are charged to cost of
revenue.
Advertising
Advertising
costs are expensed as they are incurred and are included in sales and
marketing expenses. Advertising expense amounted to $8,529,669
and $872,984 for the three months ended March 31, 2010 and March 31, 2009,
respectively.
Foreign
Currency Transactions
The
unaudited interim condensed consolidated financial statements are presented in
United States Dollars. The financial position and results of operations of our
foreign subsidiaries are measured using the local currency as the functional
currency. Assets and liabilities of our foreign subsidiaries have been
translated from their local currency (British pounds, Canadian dollars and
Euros) into the reporting currency, U.S. dollars, using period end exchange
rates. Equity transactions have been translated using the historical
exchange rate that was in effect when the transaction occurred. The resulting
translation adjustments are recorded as a separate component of accumulated
other comprehensive loss. Revenues and expenses have been translated using
weighted average exchange rates for the respective periods. Transaction gains
and losses resulting from foreign currency transactions are recorded as foreign
exchange gains or losses and are included in general and administrative
expense in the consolidated statement of operations. We have not entered
into any financial instruments to offset the impact of foreign currency
fluctuations.
Share-Based
Payment Arrangements
Generally,
all forms of share-based payments, including stock option grants, restricted
stock grants and stock appreciation rights are measured at their fair value on
the awards’ grant date, based on the estimated number of awards that are
ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever
is more readily determinable. The expense resulting from share-based payments
are recorded in cost of goods sold or general and administrative expense in the
consolidated statement of operations, depending on the nature of the services
provided. We have applied fair value accounting and the related provisions
of ASC 718 for all share based payment awards. The fair value of
share-based payments is recognized ratably over the stated vesting period. In
the event of termination, we will cease to recognize compensation
expense.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Net
Loss per Share
Basic
earnings per share (“EPS”) is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during
the period, excluding the effects of any potentially dilutive securities.
Diluted EPS gives effect to all dilutive potential of shares of common stock
outstanding during the period including stock options or warrants, using the
treasury stock method (by using the average stock price for the period to
determine the number of shares assumed to be purchased from the exercise of
stock options or warrants), and convertible debt or convertible preferred stock,
using the if-converted method. Diluted EPS excludes all dilutive potential of
shares of common stock if their effect is anti-dilutive.
The
computation of basic and diluted loss per share for the three months ended
March 31, 2010 and 2009 excludes the following potentially dilutive
securities because their inclusion would be anti-dilutive:
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
|
400,000 |
|
|
|
11,900,000 |
|
Common
Stock Purchase Warrants
|
|
|
21,800,003 |
|
|
|
8,400,000 |
|
Stock
Options
|
|
|
13,215,834 |
|
|
|
1,073,134 |
|
|
|
|
35,415,837 |
|
|
|
21,373,134 |
|
Comprehensive
Loss
Other
comprehensive loss includes all changes in stockholders’ equity during a period
from non-owner sources and is reported in the consolidated statement of
stockholders’ equity. To date, other comprehensive loss consists of changes in
accumulated foreign currency translation adjustments.
In
January 2010, the FASB issued updated guidance to amend the disclosure
requirements related to recurring and nonrecurring fair value measurements. This
update requires new disclosures on significant transfers of assets and
liabilities between Level 1 and Level 2 of the fair value hierarchy
(including the reasons for these transfers) and the reasons for any transfers in
or out of Level 3. This update also requires a reconciliation of recurring
Level 3 measurements about purchases, sales, issuances and settlements on a
gross basis. In addition to these new disclosure requirements, this update
clarifies certain existing disclosure requirements. For example, this update
clarifies that reporting entities are required to provide fair value measurement
disclosures for each class of assets and liabilities rather than each major
category of assets and liabilities. This update also clarifies the requirement
for entities to disclose information about both the valuation techniques and
inputs used in estimating Level 2 and Level 3 fair value measurements.
This update is effective for the interim and annual reporting periods beginning
January 1, 2010, except for the requirement to provide the Level 3
activity of purchases, sales, issuances, and settlements on a gross basis, which
will become effective for the interim and annual reporting period beginning
January 1, 2011. We will not be required to provide the amended disclosures
for any previous periods presented for comparative purposes. Other than
requiring additional disclosures, adoption of this update will not have a
material effect on our unaudited interim condensed consolidated financial
statements.
Note 5 – Fair
Value
The fair
value of our financial assets and liabilities reflects our estimate of amounts
that we would have received in connection with the sale of the assets or paid in
connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with
measuring the fair value of our assets and liabilities, we seek to maximize the
use of observable inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about how market
participants would price assets and liabilities). The following fair value
hierarchy is used to classify assets and liabilities based on the observable
inputs and unobservable inputs used in order to value the assets and
liabilities:
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active
market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing
basis.
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are
not active.
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants
would use in pricing the asset or
liability.
|
Our
investment strategy is focused on capital preservation. We intend to invest in
instruments that meet credit quality standards. The current expectation is
to maintain cash and cash equivalents, once these resources are
available.
The
following are the major categories of assets measured at fair value on a
nonrecurring basis during the three months ended March 31, 2010, using quoted
prices in active markets for identical assets (Level 1); significant other
observable inputs (Level 2); and significant unobservable inputs
(Level 3):
|
|
Level 1:
Quoted Prices
in
Active
Markets for
Identical
Assets
|
|
|
Level 2:
Quoted Prices
in
Inactive
Markets for
Identical
Assets
|
|
|
Level 3:
Significant
Unobservable
Inputs
|
|
|
Total at
December 31, 2009
|
|
|
Total
Impairment
For the Year Ended
December 31, 2009
|
|
Goodwill
|
|
$
|
-0-
|
|
|
$
|
11,142,273
|
|
|
$
|
-0-
|
|
|
$
|
11,142,273
|
|
|
$
|
-0-
|
|
Total
|
|
$
|
-0-
|
|
|
$
|
11,142,273
|
|
|
$
|
-0-
|
|
|
$
|
11,142,273
|
|
|
$
|
-0-
|
|
We have
determined the estimated fair value amounts presented in these unaudited interim
condensed Consolidated Financial Statements using available market information
and appropriate methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. The estimates
presented in the unaudited interim condensed Consolidated Financial Statements
are not necessarily indicative of the amounts that we could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts. We
have based these fair value estimates on pertinent information available as of
the respective balance sheet dates and have determined that, as of such dates,
the carrying value of all financial instruments approximates fair
value.
Note 6 –
Acquisition s
On
May 7, 2009, we acquired 100% of MGE Enterprises Corporation, a
Wyoming corporation (“MGE”). MGE operated in the United States under the
names mygoldenvelope.com and sobredeoro.com using a business model similar to
ours. In addition, their management has provided us with extensive experience in
creating and growing businesses that provide shareholder value in a broad array
of industries, including direct response, Internet marketing and national retail
distribution and sales. MGE’s ability to reach a broader number of
consumers through their experience in multi-language television advertising,
direct response, and retail distribution and sales greatly accelerated our
growth and increased our depth of management experience.
We used
the acquisition method of accounting in connection with the acquisition of MGE
and accordingly, our unaudited interim condensed consolidated financial
statements include the results of operations of MGE for the three months ended
March 31, 2010.
The
following unaudited condensed consolidated pro forma information gives effect to
the acquisition of MGE as if the transaction had occurred on January 1,
2008. The following pro-forma information is presented for illustration purposes
only and is not necessarily indicative of the results that would have been
attained had the acquisition been completed on January 1, 2008, nor are
they indicative of results that may occur in any future periods:
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
|
|
For
the Three
Months
Ended
March 31,
2009
|
|
Revenues
|
|
$
|
3,244,348
|
|
Net
Loss
|
|
|
(1,888,060
|
)
|
|
|
|
|
|
Basic
and Diluted Loss from Continuing Operations per Common
Share
|
|
$
|
(0.01
|
)
|
Weighted
Average Shares Outstanding - Basic and Diluted
|
|
|
153,993,391
|
|
Note 7 –Fixed
Assets
Fixed
assets consist of the following at March 31, 2010 and December 31,
2009:
|
|
Balance
at
March
31, 2010
|
|
|
Balance
at December 31, 2009
|
|
|
Estimated
Useful
Life
|
Leasehold
Improvements
|
|
$ |
115,281 |
|
|
$ |
39,694 |
|
|
|
* |
|
Security
Equipment
|
|
|
78,015 |
|
|
|
26,005 |
|
|
7years
|
Computers
|
|
|
18,228 |
|
|
|
6,024 |
|
|
3years
|
Furniture
and Fixtures
|
|
|
11,216 |
|
|
|
2,397 |
|
|
7years
|
Office
Equipment
|
|
|
3,386 |
|
|
|
3,386 |
|
|
3years
|
|
|
|
226,126 |
|
|
|
77,506 |
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
(10,876 |
) |
|
|
(1,598
|
) |
|
|
|
|
Fixed
Assets, Net
|
|
$ |
215,250 |
|
|
$ |
75,908 |
|
|
|
|
|
* The
shorter of three years or the life of the lease.
Depreciation
expense pertaining to fixed assets during the three months ended March 31, 2010
and 2009 was $14,385 and $-0-, respectively.
Note 8 –Debt and Other
Financing
Convertible
Note Payable
On
March 4, 2009, we issued a $250,000 Convertible Note Payable (the
“Convertible Note”) to Whalehaven Capital Fund Limited (“Whalehaven”). The
Convertible Note had a three month term, bore interest at an annual rate of 15%
compounded monthly beginning on the date of issuance and was secured by all of
our assets. All principal and accrued interest was due and payable on
June 1, 2009, but was subsequently extended to June 1, 2010, as
described below. We used the $237,500 net proceeds received from this
Convertible Note to provide working capital.
The
Convertible Note was convertible at the option of Whalehaven, in whole or in
part, into shares of our common stock at an initial conversion price equal to
the average of the three lowest closing bid prices within the prior twenty day
trading period immediately preceding the date we received notice of
conversion. The conversion price was adjustable for standard anti-dilution
provisions such as stock splits, stock dividends and similar types of
recapitalization events. In addition, the conversion was limited such that
Whalehaven could only convert on a date that the amount of the principal
and/or accrued interest in connection with that number of shares of common stock
would be in excess of the sum of:
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
|
(a)
|
The
number of shares of common stock beneficially owned by Whalehaven and its
affiliates on a conversion date, repayment date, the date notice of
redemption is given, or the date notice of mandatory conversion is given,
as the case may be;
|
|
(b)
|
Any
common stock issuable in connection with the unconverted portion of the
Convertible Note; and
|
|
(c)
|
The
number of shares of common stock issuable upon the conversion or repayment
of the Convertible Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by
Whalehaven and its affiliates of more than 4.99% of the outstanding shares
of our common stock on such date.
|
We
evaluated the conversion feature embedded in the Convertible Note to determine
whether such conversion feature should be bifurcated from its host instrument
and accounted for as a freestanding derivative. We determined that since the
exercise price of the convertible debt contained a variable conversion feature,
such conversion feature should be bifurcated from its host instrument and
accounted for as a freestanding derivative.
We
estimated the fair value of the conversion feature using the Black-Scholes
option-pricing model using the following assumptions:
Expected
dividends
|
|
|
0
|
%
|
Expected
volatility
|
|
|
133.72
|
%
|
Expected
term – embedded conversion option
|
|
0.24 years
|
|
Risk
free interest rate
|
|
|
0.26
|
%
|
We
allocated a portion of the proceeds from the Convertible Note to the conversion
feature based on the relative fair value of the principal amount and the
conversion feature. The relative fair value of the conversion feature, which
amounted to $69,429, was recorded as a discount to the Convertible Note and a
corresponding increase to a derivative liability. This discount amount was being
amortized to interest expense over the contracted term of the Convertible Note.
During the three months ended March 31, 2009, we amortized $20,829 to interest
expense. The underlying note was repaid in full during
2009.
At March
31, 2009, we recalculated the fair value of the conversion feature and
determined that the value had increased by $1,160. Accordingly, we recorded a
loss and a corresponding increase in the value of the derivative liability in
the amount of $1,160. We valued the derivative liability at March 31,
2009 using the Black-Scholes option pricing model utilizing the following
assumptions:
Expected
dividends
|
|
|
0
|
%
|
Expected
volatility
|
|
|
151.16
|
%
|
Expected
term – embedded conversion option
|
|
0.17 years
|
|
Risk
free interest rate
|
|
|
0.21
|
%
|
In
connection with the issuance of the Convertible Note, we paid debt-issuance
costs of $27,590, including a $12,500 fee to Whalehaven and $15,090 in legal and
other costs. These debt issue costs were capitalized as debt issuance costs and
were amortized to interest expense over the contracted term of the
Convertible Note. During the three months ended March 31, 2009, we amortized
$3,750 to interest expense.
Note 9 – Commitments and
Contingencies
We lease
space for our corporate headquarters and for our aggregation facilities located
around the world under operating lease agreements that expire at various dates
through October 2014. Aggregate rent expense for all operating
leases was $63,237 and $36,637, for the three months ended March 31, 2010
and 2009, respectively.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Economic
Risks and Uncertainties
The
recent global economic slowdown has caused a general tightening in the credit
markets, lower levels of liquidity, increases in the rates of default and
bankruptcy, and extreme volatility in credit, equity and fixed income markets.
These conditions not only limit our access to capital, but also make it
difficult for our customers, our vendors and us to accurately forecast and plan
future business activities. Furthermore, our operations are subject to
fluctuating prices of precious metals. A decrease in the value of gold, silver
or platinum could have an adverse effect on our business.
Foreign
Operations
Our
operations in various geographic regions expose us to risks inherent in doing
business in each of the countries in which we transact business. Operations in
countries other than the United States are subject to various risks particular
to each country. With respect to any particular country, these risks may
include, but are not limited to:
|
·
|
Currency
fluctuations, devaluations, conversion and expropriation
restrictions;
|
|
·
|
Confiscatory
taxation or other adverse tax policies;
|
|
·
|
Political
and economic instability;
|
|
·
|
Inflation;
|
|
·
|
Trade
restrictions and economic embargoes imposed by the United States and other
countries;
|
|
·
|
Expropriation
and nationalization of our assets or of our customers in that
country;
|
|
·
|
Governmental
activities that limit or disrupt markets, payments, or limit the movement
of funds;
|
|
·
|
Governmental
activities that may result in the deprivation of contract
rights;
|
|
·
|
Civil
unrest, acts of terrorism, force majeure, war or other armed conflict;
and
|
|
·
|
Natural
disasters including those related to earthquakes, hurricanes, tsunamis and
flooding.
|
Employment
Agreements
We have
entered into employment agreements with several of our current executives for
initial terms of up to three years, which can or will be renewed for additional
one-year terms thereafter, unless written notice is provided by the respective
parties. The agreements provide, among other things, for the payment of
aggregate annual base salaries of approximately $825,000, as well as such
incentive compensation and discretionary bonuses as the Board of Directors may
determine. In addition, the employment agreements provide for up to eighteen
months of severance compensation for terminations under certain circumstances.
Aggregate potential severance compensation amounted to approximately $1,237,500
at March 31, 2010.
Former
Chief Operating Officer – Todd Oretsky
On
February 2, 2010, Mr. Oretsky resigned as our Chief Operating Officer and as a
member of our Board of Directors on mutually agreeable terms with the Company to
pursue other opportunities.
Legal
Proceedings
From time
to time, we are periodically a party to or otherwise involved in legal
proceedings arising in the normal and ordinary course of business. As of the
date of this report, we are not aware of any proceeding, threatened or pending,
against us which, if determined adversely, would have a material effect on our
business, results of operations, cash flows or financial position.
Customer
and Vendor Concentrations
Our
revenues are predominantly generated from the sale of precious metals to a
related party. During each of the three month periods ended March 31, 2010 and
March 31, 2009 this related party customer accounted for approximately 100% of
our revenue. At March 31, 2010 and December 31, 2009, the amount due from
this customer was approximately 89% and 93% of our accounts receivable,
respectively.
During
the three months ended March 31, 2010, three vendors accounted for approximately
15%, 12% and 10% of our total purchases, and for the three months ended
March 31, 2009 a related party vendor accounted for approximately 31% of
our total purchases. At March 31, 2010, one vendor accounted for
approximately 12% of our accounts payable, and at December 31, 2009, a
related party vendor and one other vendor accounted for approximately 17%
and 12% of our total accounts payable, respectively.
Note 10 – Stockholders’
Equity
Convertible
Series A Preferred Stock
Our
Convertible Series A Preferred Stock (“Series A PS”) has no voting
rights, no liquidation preference, and are not entitled to receive dividends.
Each share of the Series A PS is convertible into one share of our common
stock at the election of the holder. We have determined that no beneficial
conversion feature or derivative financial instruments exist in connection with
the Series A PS as the conversion rate was fixed at an amount equal to the
market price of our common stock.
On
March 19, 2009, 2,200,000 shares of our Series A PS were converted
into 2,200,000 shares of our common stock of which, 950,000 shares were
converted by a family member of our Chief Financial Officer and 1,250,000
shares were converted by another shareholder.
On
January 25, 2010, 3,000,000 shares of our Series A PS were converted into
3,000,000 shares of our common stock by a family member of our Chief Financial
Officer.
Common
Stock
Private
Placements
During
March 2009, we closed on a private placement transaction, whereby we issued
400,000 shares of our common stock and warrants granting the right to purchase
up to 400,000 shares of our common stock to various investors. The warrants are
exercisable for three years and have an exercise price of $0.40 per share. Gross
proceeds from the sale amounted to $80,000, and were used for working capital
purposes.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
On March
31, 2010, we closed on a private placement transaction (the “March 2010 PP”)
whereby we issued 5,758,337 shares of our common stock at $0.20 per
share. Gross proceeds from the sale amounted to $1,151,667, of which
$1,001,667 was received and was being held in escrow as of March 31, 2010 and
the remaining $150,000 was received during the first week of April
2010. At March 31, 2010, we have recorded $1,001,667 as subscriptions
receivable on our unaudited condensed consolidated balance sheet representing
the sale of 5,008,335 shares of our common stock. $1,151,667 was
released to us from escrow in April 2010. The funds will be used for
working capital. There were no material offering costs associated
with this transaction.
Included
in the March 2010 PP was an investment of $50,000 by Doug Feirstein, our Chief
Executive Officer and an investment of $25,000 from Michael Moran, our Vice
President of Corporate Development.
In
connection with this private placement transaction, we are required to file a
registration statement with the SEC within 45 days of closing, or liquidated
damages will be assessed. Liquidated damages are payable at our
option in cash or in shares of our common stock at fair market value and are
calculated as 1% of the total amount invested for each 30 day period, beginning
after the 45 day requirement, for which the shares remain unregistered, up to a
maximum of six months.
Share
Grants
On
December 22, 2008, we granted an aggregate of 2,000,000 shares of common stock
to two employees. The grant had a fair value of $600,000 based upon
the quoted closing trading price of the stock on the date of the grant. Of the
2,000,000 shares, 500,000 were fully vested and the remaining 1,500,000 shares
vest over a period of 30 months. During the three months ended March
31, 2010, we identified an error in the term used for the calculation of the
periodic amortization and recorded a one-time adjustment to the expense
pertaining to this grant of $65,161, resulting in a negative expense for
the period of $20,161. During the three months ended March 31, 2009,
we recognized $60,000 as expense pertaining to this grant.
During
March 2009, we granted 750,000 shares of common stock to two
employees. The grant had a fair value of $292,500 based upon the
quoted closing trading price of the stock on the date of the grant and will vest
over a period of 36 months. During the three months ended March 31,
2010 and 2009, we recognized $24,375 and $8,125 of expense pertaining to
this grant, respectively.
During
October 2009, we issued 870,666 shares of restricted common stock, having a
fair value of $190,197, based upon the quoted closing trading price of our
common stock as of the issuance dates, to directors. The shares vest annually
over a three-year period, subject to continued service as a director on each
applicable vesting date. During the three months ended March 31,
2010, we recognized $46,853 as expense pertaining to this grant, including
$34,375 as a result of the accelerated vesting for Neil McDermott in connection
with his resignation from the Board on March 9, 2010.
On
January 4, 2010, we issued 120,000 shares of restricted common stock, having a
fair value of $36,000, based upon the quoted closing trading price of our common
stock as of the issuance dates, to a consultant for technology services. The
shares vested at the time of issuance and, as a result, during the three months
ended March 31, 2010, we recognized $36,000 of expense pertaining to this
grant.
On
October 20, 2008, we granted 300,000 shares of common stock to Neil McDermott
for his future service as a director. In connection with his
resignation, 200,000 shares of common stock that had not yet vested, were
immediately vested. During the three months ended March 31, 2010, we
recognized $110,030 as compensation expense pertaining to this grant, including
$94,780 as a result of the accelerated vesting for Mr. McDermott.
Common
Stock Purchase Warrant Grants
During
November 2009, we granted 5,000,000 warrants to a consultant for services to be
performed. The warrants have an exercise price of $0.23, are
exercisable for three years and vest ratably over a twelve month
period. The estimated fair value of these stock warrants on their
date of grant was $798,119, which we estimated using the Black-Scholes option
pricing model using the following assumptions:
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Risk-free
interest rate
|
|
|
0.37
|
%
|
Expected
dividend yield
|
|
|
0
|
%
|
Expected
volatility
|
|
|
189.44
|
%
|
Expected
life
|
|
3
years
|
|
Expected
forfeitures
|
|
|
0
|
%
|
We
recorded stock based compensation expense of $199,530 during the three months
ended March 31, 2010, related to this award.
The
following summarizes our warrant activity for the period from December 31, 2009
through March 31, 2010:
|
|
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
Outstanding
– December 31, 2009
|
|
|
21,800,003 |
|
|
$ |
0.35 |
|
|
|
2.3 |
|
Granted
|
|
|
— |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
— |
|
|
|
|
|
|
|
|
|
Forfeited
or Cancelled
|
|
|
(—
|
) |
|
|
|
|
|
|
|
|
Outstanding
– March 31, 2010
|
|
|
21,800,003 |
|
|
$ |
0.37 |
|
|
2.0
|
|
Exercisable
– March 31, 2010
|
|
|
17,633,336 |
|
|
$ |
0.41 |
|
|
1.9
|
|
Stock
Option Grants
On
October 20, 2008, we adopted the 2008 Equity Incentive Plan (the
“Plan”) covering 8,000,000 stock rights including options, restricted stock and
stock appreciation rights. Under the Plan, non-employee directors receive
initial and annual grants of options and restricted stock for their service as a
director and committee member. The initial grants will vest over a three-year
period and the annual grants vest on June 30 of each year, subject to
continued service on the applicable vesting dates.
On
October 20, 2008, we granted 573,134 non-qualified stock options to
contractors and non-employee directors for services to be rendered. The options
are exercisable over a five-year term at $0.61 per share. Of the total options
granted, 373,134 were issued to two non-employee directors under the terms of
the Plan vesting annually in equal increments over a three-year period. The
remaining 200,000 options were fully vested upon issuance. These options had an
aggregate fair value of $275,964 using the Black-Scholes option-pricing
model. For each of the three-month periods ended March 31, 2010 and
2009 we recognized $14,972 of expense related to the 373,134 options. The
200,000 fully vested options, had a fair value of $96,300, and were expensed in
full during 2008.
On
December 31, 2008, we granted 250,000 non-qualified stock options to
an employee for future services. The options are exercisable over a five-year
term, vesting quarterly in equal increments over a three-year period. These
options are exercisable at $0.36 per share. These options had a fair value of
$75,225 using the Black-Scholes option-pricing model. For each of the
three-month periods ended March 31, 2010 and 2009 we recognized $6,269 of
expense pertaining to these grants.
The total
grant date fair value of the options listed above that were granted during 2008
was $481,939, based upon the use of a Black-Scholes option-pricing model using
the following management assumptions:
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Risk-free
interest rate
|
|
|
1.55%
- 2.82
|
%
|
Expected
dividend yield
|
|
|
0
|
%
|
Expected
volatility
|
|
|
108%
- 122.7
|
%
|
Expected
term
|
|
5
years
|
Expected
forfeitures
|
|
|
0
|
%
|
During
the second quarter of 2009, we granted options to purchase 250,000 shares of our
common stock at a weighted average exercise price of $0.31 per share to an
employee. The options have a five-year contractual term and vest in equal
quarterly installments over a period of three years. The estimated fair value of
these stock options on their date of grant was $71,100, which we estimated using
the Black-Scholes option-pricing model using the following
assumptions:
Risk-free
interest rate
|
|
|
1.36
|
%
|
Expected
dividend yield
|
|
|
0
|
%
|
Expected
volatility
|
|
|
153.55
|
%
|
Expected
life
|
|
5
years
|
Expected
forfeitures
|
|
|
0
|
%
|
For the
three months ended March 31, 2010, we recognized $5,925 of expense pertaining to
this grant.
During
the fourth quarter of 2009, we granted options to purchase 1,164,709 shares of
our common stock at a weighted average exercise price of $0.23 per share to our
directors. The options have a five-year contractual term and vest in equal
quarterly installments over a period of three years. The estimated fair value of
these stock options on their date of grant was $257,837, which we estimated
using the Black-Scholes option-pricing model using the following
assumptions:
Risk-free interest rate
|
|
|
2.31-2.51
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected volatility
|
|
|
162.60-180.87
|
%
|
Expected
life
|
|
5
years
|
Expected
forfeitures
|
|
|
0
|
%
|
For the
three months ended March 31, 2010, we recognized $50,417 of expense pertaining
to these grants, including $32,145 pertaining to the accelerated vesting of
shares issued to one of our directors in connection with his resignation from
the Board.
During
December 2009, we granted options to purchase 10,977,991 shares of our common
stock at a weighted average exercise price of $0.27 per share to our employees.
The options have a five-year contractual term and vest in equal quarterly
installments over a period of four years. The estimated fair value of these
stock options on their date of grant was $2,974,821, which we estimated using
the Black-Scholes option-pricing model using the following
assumptions:
Risk-free
interest rate
|
|
|
2.49
|
%
|
Expected
dividend yield
|
|
|
0
|
%
|
Expected
volatility
|
|
|
190.48
|
%
|
Expected
life
|
|
5
years
|
Expected
forfeitures
|
|
|
0
|
%
|
For the
three months ended March 31, 2010, we recognized $333,417 of expense pertaining
to these grants, including $147,492 pertaining to the accelerated vesting of
shares issued to our former Chief Operating Officer in accordance with his
separation agreement.
On March
10, 2010, Money4Gold increased the aggregate number of shares of common stock,
which may be issued pursuant to the 2008 Equity Incentive Plan from 8,000,000 to
27,000,000.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
The
following table summarizes our stock option activity for the period from
December 31, 2009 through March 31, 2010:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Balance
at December 31, 2009
|
|
|
13,215,834 |
|
|
$ |
0.45 |
|
|
|
4.8 |
|
|
|
|
Granted
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
Forfeited
or Cancelled
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
Balance
at March 31, 2010
|
|
|
13,215,834 |
|
|
$ |
0.45 |
|
|
|
4.6 |
|
|
$ |
— |
|
Exercisable
at March 31, 2010
|
|
|
2,076,645 |
|
|
$ |
0.33 |
|
|
|
4.4 |
|
|
$ |
— |
|
The
following table summarizes our stock option activity for non-vested options for
the period from December 31, 2009 through March 31, 2010:
|
|
Number of Options
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding
– December 31, 2009
|
|
|
12,595,364 |
|
|
$ |
0.27 |
|
Granted
|
|
|
— |
|
|
$ |
— |
|
Vested
|
|
|
(1,456,175
|
) |
|
$ |
0.27 |
|
Cancelled
or Forfeited
|
|
|
(—
|
) |
|
$ |
— |
|
Outstanding
– March 31, 2010
|
|
|
11,139,189 |
|
|
$ |
0.27 |
|
There
were no options granted during the three months ended March 31, 2010. Total
unamortized compensation expense related to stock options at March 31, 2010
amounted to $3,028,987 and is expected to be recognized over a weighted average
period of 2.6 years.
Note 11 – Related Party
Transactions
Refinery
During
each of the three month periods ended March 31, 2010 and 2009, we recorded
$46,907 in cost of revenue pertaining to prepaid refining services and $14,593
of amortization expense pertaining to a non-compete agreement, both of which
pertain to our service agreement with Republic Metals Corporation.
Marketing
Services
During
the three months ended March 31, 2010 and March 31, 2009, we recorded
$1,048,656 and $499,339, respectively, of marketing expense to an online
marketing and lead generation services company in which our President is a 50%
shareholder.
Note 12 – Geographic
Information
We
currently generate revenue exclusively from the sale of precious metals,
including gold, silver and platinum, and from the sale of diamonds and other
precious stones. Our operations in each of our markets exhibit
similar financial performance metrics and have similar economic
characteristics. As such, we have aggregated our operations around
the world into a single operating segment.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Interim Condensed Consolidated Financial Statements
March
31, 2010
Below is
a summary of our revenue and total assets by geographic region as of and for the
periods indicated:
|
|
United States
|
|
|
Canada
|
|
|
Europe
|
|
|
Consolidated
|
|
Revenue
for the three months ended March 31, 2010
|
|
$
|
8,046,582
|
|
|
$
|
4,481,401
|
|
|
$
|
4,744,150
|
|
|
$
|
17,272,133
|
|
Total
Assets at March 31, 2010
|
|
|
12,856,929
|
|
|
|
433,319
|
|
|
|
765,222
|
|
|
|
14,055,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
for the three months ended March 31, 2009
|
|
$
|
1,012,389
|
|
|
|
183,249
|
|
|
|
—
|
|
|
$
|
1,195,638
|
|
Total
Assets at December 31, 2009
|
|
|
15,087,437
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,087,437
|
|
Note 13 – Subsequent
Events
We
evaluated subsequent events between the balance sheet date of March 31, 2010 and
May 14, 2010, which represents the date the unaudited interim condensed
consolidated financial statements were issued. There were no subsequent events
to report.
![](logo.jpg)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of:
Money4Gold
Holdings, Inc.
We have
audited the accompanying consolidated balance sheets of Money4Gold Holdings,
Inc. and Subsidiaries as of December 31, 2009 and 2008, and the related
consolidated statements of operations, changes in stockholders’ equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Money4Gold Holdings, Inc. and Subsidiaries as of December
31, 2009 and 2008, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally
accepted in the United States of
America.
Berman
& Company, P.A.
Boca
Raton, Florida
March 31,
2010
![](footer.jpg)
Money4Gold
Holdings, Inc. and Subsidiaries
Consolidated Balance
Sheets
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
297,426 |
|
|
$ |
778,436 |
|
Accounts
receivable - related party
|
|
|
1,083,487 |
|
|
|
285,707 |
|
Inventory
|
|
|
855,763 |
|
|
|
32,209 |
|
Prepaid
asset - related party - current portion
|
|
|
187,627 |
|
|
|
187,627 |
|
Prepaid
expenses and other current assets
|
|
|
667,605 |
|
|
|
810 |
|
Total
Current Assets
|
|
|
3,091,908 |
|
|
|
1,284,789 |
|
|
|
|
|
|
|
|
|
|
Fixed
Assets - net
|
|
|
75,908 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
11,142,273 |
|
|
|
- |
|
Intangible
assets - net
|
|
|
10,668 |
|
|
|
65,167 |
|
Intangible
asset - related party - net
|
|
|
199,455 |
|
|
|
257,814 |
|
Prepaid
asset - related party - net of current portion
|
|
|
453,432 |
|
|
|
641,059 |
|
Other
assets
|
|
|
113,793 |
|
|
|
21,234 |
|
Total
Other Assets
|
|
|
11,919,621 |
|
|
|
985,274 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
15,087,437 |
|
|
$ |
2,270,063 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
1,432,428 |
|
|
$ |
243,315 |
|
Accounts
payable - related party
|
|
|
45,984 |
|
|
|
568,198 |
|
Accrued
expenses
|
|
|
241,038 |
|
|
|
27,233 |
|
Deferred
revenue
|
|
|
1,576,462 |
|
|
|
- |
|
Total
Current Liabilities
|
|
|
3,295,912 |
|
|
|
838,746 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Convertible
Series A preferred stock, ($0.0001 par value, 25,000,000 shares
authorized, 3,400,000 and 14,100,000 issues and
outstanding)
|
|
|
340 |
|
|
|
1,410 |
|
Common
stock, ($0.0001 par value, 300,000,000 shares authorized, 183,208,004 and
78,776,432 shares issued and outstanding)
|
|
|
18,321 |
|
|
|
7,879 |
|
Additional
paid in capital
|
|
|
19,080,568 |
|
|
|
4,631,636 |
|
Accumulated
deficit
|
|
|
(7,272,073 |
) |
|
|
(3,209,608 |
) |
Accumulated
other comprehensive loss
|
|
|
(35,631 |
) |
|
|
- |
|
Total
Stockholders' Equity
|
|
|
11,791,525 |
|
|
|
1,431,317 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
15,087,437 |
|
|
$ |
2,270,063 |
|
See
accompanying notes to financial statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Consolidated Statements of
Operations
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
February 14, 2008
|
|
|
|
For the Year Ended
|
|
|
(Inception) to
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
Revenue -
related party
|
|
$ |
28,998,982 |
|
|
$ |
1,561,444 |
|
Cost
of revenue
|
|
|
10,558,198 |
|
|
|
862,582 |
|
Gross
profit
|
|
|
18,440,784 |
|
|
|
698,862 |
|
Sales
and marketing expenses
|
|
|
16,267,244 |
|
|
|
1,428,591 |
|
General
and administrative expenses
|
|
|
4,980,303 |
|
|
|
2,443,634 |
|
Depreciation
and amortization
|
|
|
70,163 |
|
|
|
38,884 |
|
Loss
from operations
|
|
|
(2,876,926 |
) |
|
|
(3,212,247 |
) |
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,419 |
|
|
|
2,639 |
|
Interest
expense
|
|
|
(237,600 |
) |
|
|
- |
|
Loss
on foreign exchange
|
|
|
(11,318 |
) |
|
|
- |
|
Registration
rights penalty
|
|
|
(218,400 |
) |
|
|
- |
|
Loss
on settlement of debt
|
|
|
(550,175 |
) |
|
|
- |
|
Impairment
of intangible assets
|
|
|
(48,500 |
) |
|
|
- |
|
Change
in fair value of derivative liability - embedded conversion
feature
|
|
|
(55,399 |
) |
|
|
- |
|
Warrant
expense arising from repricing of investor warrants
|
|
|
(58,230 |
) |
|
|
- |
|
Total
other income (expense) - net
|
|
|
(1,178,202 |
) |
|
|
2,639 |
|
Net
Loss
|
|
$ |
(4,055,129 |
) |
|
$ |
(3,209,608 |
) |
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding during the year/period - basic
and diluted
|
|
|
136,640,303 |
|
|
|
50,978,524 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss, net of tax:
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(4,055,129 |
) |
|
$ |
(3,209,608 |
) |
Foreign
currency translation adjustment
|
|
|
(35,631 |
) |
|
|
- |
|
Comprehensive
loss
|
|
$ |
(4,090,760 |
) |
|
$ |
(3,209,608 |
) |
See
accompanying notes to financial statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Consolidated Statement of
Changes in Stockholders' Equity
For the Year Ended
December 31, 2009 and For the Period from February 14, 2008 (Inception) to
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Preferred Stock, $0.0001 Par Value
|
|
|
Common Stock, $0.0001 Par Value
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid in
Capital
|
|
|
|
|
|
Loss
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of member units to founders for cash - HD Capital, LLC
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
50,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
50,000 |
|
Issuance
of shares to founders for services - Money4Gold, Inc.
|
|
|
- |
|
|
|
- |
|
|
|
967,965 |
|
|
|
97 |
|
|
|
2,940 |
|
|
|
- |
|
|
|
- |
|
|
|
3,037 |
|
Issuance
of shares in share exchange between HD Capital, LLC and Money4Gold,
Inc.
|
|
|
- |
|
|
|
- |
|
|
|
11,828,413 |
|
|
|
1,183 |
|
|
|
(1,183 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance
of shares in share exchange between M4GWY and Money4Gold,
Inc.
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Conversion
of common stock series B to series A - Money4Gold, Inc.
|
|
|
- |
|
|
|
- |
|
|
|
637,429 |
|
|
|
64 |
|
|
|
(64 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance
of shares for non-compete intangible and future services
|
|
|
- |
|
|
|
- |
|
|
|
3,187,143 |
|
|
|
319 |
|
|
|
1,229,681 |
|
|
|
- |
|
|
|
- |
|
|
|
1,230,000 |
|
Issuance
of shares in reverse acquisition treated as a
recapitalization
|
|
|
14,100,000 |
|
|
|
1,410 |
|
|
|
52,350,002 |
|
|
|
5,235 |
|
|
|
(9,375 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,730 |
) |
Issuance
of common stock and warrants in private placement
|
|
|
- |
|
|
|
- |
|
|
|
8,000,000 |
|
|
|
800 |
|
|
|
2,399,200 |
|
|
|
- |
|
|
|
- |
|
|
|
2,400,000 |
|
Cash
paid as direct offering costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(113,688 |
) |
|
|
- |
|
|
|
- |
|
|
|
(113,688 |
) |
Contributed
capital by former stockholder used to repay a liability
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,730 |
|
|
|
- |
|
|
|
- |
|
|
|
2,730 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
1,805,479 |
|
|
|
181 |
|
|
|
1,071,395 |
|
|
|
- |
|
|
|
- |
|
|
|
1,071,576 |
|
Net
loss for the period ended December 31, 2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,209,608 |
) |
|
|
- |
|
|
|
(3,209,608 |
) |
Balance,
December 31, 2008
|
|
|
14,100,000 |
|
|
|
1,410 |
|
|
|
78,776,432 |
|
|
|
7,879 |
|
|
|
4,631,636 |
|
|
|
(3,209,608 |
) |
|
|
- |
|
|
|
1,431,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock and warrants in private placement
|
|
|
- |
|
|
|
- |
|
|
|
4,425,003 |
|
|
|
442 |
|
|
|
814,558 |
|
|
|
- |
|
|
|
- |
|
|
|
815,000 |
|
Cash
paid as direct offering costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(42,804 |
) |
|
|
- |
|
|
|
- |
|
|
|
(42,804 |
) |
Shares
issued in connection with MGE acquisition
|
|
|
- |
|
|
|
- |
|
|
|
74,876,432 |
|
|
|
7,488 |
|
|
|
10,492,512 |
|
|
|
- |
|
|
|
- |
|
|
|
10,500,000 |
|
Conversion
of preferred stock to common
|
|
|
(10,700,000 |
) |
|
|
(1,070 |
) |
|
|
10,700,000 |
|
|
|
1,070 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
issued in connection with repricing
|
|
|
- |
|
|
|
- |
|
|
|
3,258,337 |
|
|
|
326 |
|
|
|
(326 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Warrant
expense arising from repricing of investor warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
58,230 |
|
|
|
- |
|
|
|
- |
|
|
|
58,230 |
|
Accrued
dividends on series B convertible redeemable preferred
stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,336 |
) |
|
|
- |
|
|
|
(7,336 |
) |
Shares
issued to settle accounts payable
|
|
|
- |
|
|
|
- |
|
|
|
639,256 |
|
|
|
64 |
|
|
|
128,874 |
|
|
|
- |
|
|
|
- |
|
|
|
128,938 |
|
Reclassification of
derivative liability from repayment of convertible note
payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
124,827 |
|
|
|
- |
|
|
|
- |
|
|
|
124,827 |
|
Conversion
of series B convertible redeemable preferred stock and accrued
dividends
|
|
|
- |
|
|
|
- |
|
|
|
1,695,754 |
|
|
|
170 |
|
|
|
257,166 |
|
|
|
- |
|
|
|
- |
|
|
|
257,336 |
|
Conversion
of media line of credit for shares of common stock
|
|
|
- |
|
|
|
- |
|
|
|
5,834,306 |
|
|
|
583 |
|
|
|
1,049,593 |
|
|
|
- |
|
|
|
- |
|
|
|
1,050,176 |
|
PPM
shares issued for related party accounts payable
|
|
|
- |
|
|
|
- |
|
|
|
333,333 |
|
|
|
33 |
|
|
|
49,967 |
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
Expense
arising from issuance of 2008 private placement penalty
shares
|
|
|
- |
|
|
|
- |
|
|
|
720,000 |
|
|
|
72 |
|
|
|
218,328 |
|
|
|
- |
|
|
|
- |
|
|
|
218,400 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
1,949,151 |
|
|
|
194 |
|
|
|
1,298,007 |
|
|
|
- |
|
|
|
- |
|
|
|
1,298,201 |
|
Foreign
currency translation expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(35,631 |
) |
|
|
(35,631 |
) |
Net
loss for the year ended December 31, 2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,055,129 |
) |
|
|
- |
|
|
|
(4,055,129 |
) |
Balance,
December 31, 2009
|
|
|
3,400,000 |
|
|
$ |
340 |
|
|
|
183,208,004 |
|
|
$ |
18,321 |
|
|
$ |
19,080,568 |
|
|
$ |
(7,272,073 |
) |
|
$ |
(35,631 |
) |
|
$ |
11,791,525 |
|
See
accompanying notes to financial statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Consolidated Statements of
Cash Flows
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
February 14, 2008
|
|
|
|
For the Year Ended
|
|
|
(Inception) to
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(4,055,129 |
) |
|
$ |
(3,209,608 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Registration
rights penalty
|
|
|
218,400 |
|
|
|
- |
|
Loss
on settlement of debt
|
|
|
550,175 |
|
|
|
- |
|
Impairment
of intangible assets
|
|
|
48,500 |
|
|
|
- |
|
Change
in fair value of derivative liability - embedded conversion
feature
|
|
|
55,399 |
|
|
|
- |
|
Warrant
expense arising from repricing of investor warrants
|
|
|
58,230 |
|
|
|
- |
|
Gain
on settlement of accounts payable
|
|
|
(21,561 |
) |
|
|
- |
|
Stock
based compensation expense
|
|
|
1,298,201 |
|
|
|
1,074,613 |
|
Amortization
of debt discount
|
|
|
69,429 |
|
|
|
- |
|
Amortization
debt issuance costs
|
|
|
27,591 |
|
|
|
- |
|
Amortization
of prepaid asset - related party
|
|
|
187,627 |
|
|
|
109,449 |
|
Depreciation
and amortization
|
|
|
70,163 |
|
|
|
38,884 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
in:
|
|
|
|
|
|
|
|
|
Accounts
receivable - related party
|
|
|
(803,514 |
) |
|
|
(285,707 |
) |
Inventory
|
|
|
(825,902 |
) |
|
|
(32,209 |
) |
Prepaid
expenses and other current assets
|
|
|
(677,503 |
) |
|
|
(810 |
) |
Other
assets
|
|
|
(93,697 |
) |
|
|
(21,234 |
) |
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
697,525 |
|
|
|
243,315 |
|
Accounts
payable - related party
|
|
|
(275,563 |
) |
|
|
568,198 |
|
Accrued
expenses
|
|
|
(31,560 |
) |
|
|
27,233 |
|
Deferred
revenue
|
|
|
1,580,634 |
|
|
|
- |
|
Net
Cash Used In Operating Activities
|
|
|
(1,922,555 |
) |
|
|
(1,487,876 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash
paid to acquire intangible assets
|
|
|
(4,207 |
) |
|
|
(70,000 |
) |
Cash
paid to purchase fixed assets
|
|
|
(78,787 |
) |
|
|
- |
|
Net
Cash Used in Investing Activities
|
|
|
(82,994 |
) |
|
|
(70,000 |
) |
See
accompanying notes to financial statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Consolidated Statements of
Cash Flows
(Continued)
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
February 14, 2008
|
|
|
|
For the Year Ended
|
|
|
(Inception) to
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds
from line of credit
|
|
|
296,044 |
|
|
|
- |
|
Repayment
of line of credit
|
|
|
(290,203 |
) |
|
|
- |
|
Proceeds
from media line of credit
|
|
|
500,000 |
|
|
|
- |
|
Proceeds
from convertible note payable
|
|
|
250,000 |
|
|
|
- |
|
Repayment
of other notes payable
|
|
|
(194,785 |
) |
|
|
- |
|
Cash
paid as debt issue costs
|
|
|
(27,591 |
) |
|
|
- |
|
Proceeds
from stock issued to founders
|
|
|
- |
|
|
|
50,000 |
|
Proceeds
from sale of Series B Preferred Stock
|
|
|
250,000 |
|
|
|
- |
|
Proceeds
from issuance of common stock and warrants in private
placement
|
|
|
815,000 |
|
|
|
2,400,000 |
|
Cash
paid for direct offering costs
|
|
|
(42,804 |
) |
|
|
(113,688 |
) |
Net
Cash Provided By Financing Activities
|
|
|
1,555,661 |
|
|
|
2,336,312 |
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
|
|
(449,888 |
) |
|
|
778,436 |
|
Effect
of Exchange Rates on Cash and Cash Equivalents
|
|
|
(31,122 |
) |
|
|
- |
|
Cash
and Cash Equivalents - Beginning of Period
|
|
|
778,436 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents - End of Period
|
|
$ |
297,426 |
|
|
$ |
778,436 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
140,580 |
|
|
$ |
- |
|
Taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Stock
issued for prepaid refinery services and non compete intangible asset -
related party
|
|
$ |
- |
|
|
$ |
1,230,000 |
|
Derivative
liability arising from convertible note payable debt
discount
|
|
$ |
69,429 |
|
|
$ |
- |
|
Conversion
of preferred stock into common stock
|
|
$ |
1,070 |
|
|
$ |
- |
|
Satisfaction
of accounts payable with common stock
|
|
$ |
128,938 |
|
|
$ |
- |
|
Accrual
of dividends on series B preferred stock
|
|
$ |
7,336 |
|
|
$ |
- |
|
Common
shares issued in connection with repricing
|
|
$ |
326 |
|
|
$ |
- |
|
Related
party accounts payable converted into private placement
shares
|
|
$ |
50,000 |
|
|
$ |
- |
|
Conversion
of media line of credit to common stock
|
|
$ |
500,000 |
|
|
$ |
- |
|
Conversion
of series B preferred stock and accrued dividends to common
stock
|
|
$ |
257,336 |
|
|
$ |
- |
|
Reclassification
of derivative liability from payment of convertible note
payable
|
|
$ |
124,827 |
|
|
$ |
- |
|
See
accompanying notes to financial statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note 1 – Organization and
Business
Money4Gold
Holdings, Inc. is based in Florida and, through our wholly-owned
subsidiaries (collectively, “Money4Gold,” “Company,” “we,” “us,” and/or
“our”), operates in the United States, Canada, the United Kingdom and Germany.
Through direct response advertising and marketing campaigns, we purchase for
resale precious metals including gold, silver and platinum as well as diamonds
and other precious stones from the public.
We were
incorporated in Delaware on November 18, 2003 as Effective Profitable
Software, Inc. (“EPS, Inc.”) and, in connection with a reverse merger on
July 23, 2008, changed our name to Money4Gold Holdings, Inc. Prior to
July 23, 2008, we were in the development stage and did not have material
assets or activities however, on February 14, 2008, a predecessor company
of Money4Gold Holdings, Inc., HD Capital Holdings, LLC (“HD”), began incurring
start up expenses. As a result, we refer to February 14, 2008 as our date
of inception and July 23, 2008 and the date operations
commenced.
Note 2 –
Liquidity and
Management’s Plans
We
incurred a $4,055,129 net loss (including $2,562,154 of
non-cash charges) and used $1,922,555 of cash in operations for the
year ended December 31, 2009. As of December 31, 2009, we have a
$7,272,073 accumulated deficit and working capital deficit of
$204,004.
We
do not yet have a sustained history of financial
stability. Historically our principal source of liquidity has been the
issuances of debt and equity securities, including preferred stock, common stock
and various debt financing transactions. We believe that the higher level
of revenue attained during the third and fourth quarters of 2009 is a result of
the successful implementation of the first stages of our business plan and that
continued implementation will generate steadily improving results and cash
flows in the future. In addition, we are currently attempting to raise
additional funds through the issuance of debt and/or equity
securities.
Management
believes that our cash balance on March 25, 2010 of approximately $1.0 million,
current level of working capital, anticipated cash that will be received from
revenue generated from advertisements that have already aired, and additional
funds through the issuance of debt and/or equity securities will be sufficient
to sustain operations through at least December 31, 2010. However, there can be
no assurance that the plans and actions proposed by management will be
successful, that we will continue to generate revenue from advertisements that
have already aired, or that unforeseen circumstances will not require us to seek
additional funding sources in the future or effectuate plans to conserve
liquidity. In addition, there can be no assurance that our efforts to
raise additional funds through the issuance of debt and/or equity
securities will be successful or that in the event additional sources of funds
are needed to continue operations, that they will be available on acceptable
terms, if at all.
Note 3 – Significant Accounting
Policies
Principles
of Consolidation
The
accompanying Consolidated Financial Statements include the accounts of
Money4Gold and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of Consolidated Financial Statements in conformity
with accounting principles generally accepted in the United States
(“GAAP”) requires management to make estimates and assumptions that affect
the amounts reported in the Consolidated Financial Statements and accompanying
notes. Such estimates and assumptions impact, among others, the
following: the amount allocated to goodwill and other intangible assets,
the estimated useful lives for amortizable intangible assets and property, plant
and equipment, accrued expenses, deferred revenue, the fair value of
warrants granted in connection with various financing transactions, share-based
payment arrangements, and the fair value of derivative liabilities.
Making
estimates requires management to exercise significant judgment. It is at least
reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the Consolidated Financial
Statements, which management considered in formulating its estimate could change
in the near term due to one or more future confirming events. Accordingly, the
actual results could differ significantly from our estimates.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Reclassification
We have
reclassified certain prior year amounts to conform to the current year’s
presentation. These reclassifications have no effect on the financial position
at December 31, 2008 or on the results of operations for the year ended
December 31, 2008.
Cash
and Cash Equivalents
All
highly liquid investments with an original maturity of 90 days or less when
purchased are considered to be cash equivalents. Cash equivalents are stated at
cost, which approximates market value.
We
minimize credit risk associated with cash and cash equivalents by periodically
evaluating the credit quality of our primary financial institutions. At times,
our cash and cash equivalents may be uninsured or in deposit accounts that
exceed the Federal Deposit Insurance Corporation insurance limit. We had no
uninsured balances at December 31, 2009 or 2008.
Accounts
Receivable
Accounts
receivable represent obligations from a related party customer, the Refinery
(Note 12). As discussed below under Revenue Recognition, we are able to estimate
the total value of each batch of precious metals received. The Refinery advances
to us, up to 80% of the value of the precious metals we have received, but not
yet delivered. After completion of the melt and validation process, the final
amount due to us, net of the advance, is determined and is recorded as an
account receivable.
We
periodically evaluate the collectability of our accounts receivable and consider
the need to record an allowance for doubtful accounts based upon historical
collection experience and specific information. Actual amounts could vary from
the recorded estimates. We did not deem it necessary to record an allowance for
doubtful accounts at December 31, 2009 or 2008.
Inventory
Inventory
consists predominantly of gold and other precious metals and is carried at the
lower of cost or net realizable value. Cost is based solely on the amount paid
by us to third parties in the general public, which is generally lower than the
current market value. As such, we do not deem it necessary to record a
reserve for obsolete inventory.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is calculated on a straight-line
basis over the estimated useful lives of the related assets, which ranges from
three to seven years.
Long-Lived
Assets
We carry
long-lived assets at the lower of their carrying amount or their fair
value. We periodically review the carrying values of our long-lived assets
when events or changes in circumstances indicate that it is more likely than not
that their carrying values may exceed their fair values, and record an
impairment charge when considered necessary.
When
circumstances indicate that an impairment of value may have occurred, we test
such assets for recoverability by comparing the estimated undiscounted future
cash flows expected to result from the use of such assets and their eventual
disposition to their carrying amounts. If the undiscounted future cash flows are
less than the carrying amount of the asset, an impairment loss, measured as the
excess of the carrying value of the asset over its estimated fair value, is
recognized. Fair value, for purposes of calculating impairment, is measured
based on estimated future cash flows, discounted at a market rate of
interest.
Goodwill
Goodwill
is tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests if
an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying value. These events or
circumstances could include a significant change in the business climate, legal
factors, operating performance indicators, competition or sale or disposition of
a significant portion of a reporting unit. Application of the goodwill
impairment test requires judgment, including the identification of reporting
units, assignment of assets and liabilities to reporting units, assignment of
goodwill to reporting units, and determination of the fair value of each
reporting unit. The fair value of each reporting unit is estimated using a
discounted cash flow methodology. This requires significant judgments including
estimation of future cash flows, which is dependent on internal forecasts,
estimation of the long-term growth rate of our business, the useful life over
which cash flows will occur, and determination of our weighted average cost of
capital. Changes in these estimates and assumptions could materially affect the
determination of fair value and/or goodwill impairment charge for each reporting
unit.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
During
the year ended December 31, 2009, we did not identify any indication of goodwill
impairment.
Debt
Issue Costs
Direct
costs incurred in connection with issuing debt securities or obtaining debt or
other credit arrangements are recorded as deferred financing costs and are
amortized as interest expense over the term of the related debt.
Convertible
Instruments
We review
all of our convertible instruments for the existence of an embedded conversion
feature which may require bifurcation, if certain criteria are met. These
criteria include circumstances in which:
|
a)
|
The
economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and
risks of the host contract,
|
|
b)
|
The
hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not remeasured at fair value under otherwise
applicable GAAP with changes in fair value reported in earnings as they
occur, and
|
|
c)
|
A
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to certain
requirements (except for when the host instrument is deemed to be
conventional).
|
A
bifurcated derivative financial instrument may be required to be recorded at
fair value and adjusted to market at each reporting period end date. In
addition, we may be required to classify certain stock equivalents issued in
connection with the underlying debt instrument as derivative
liabilities.
For
convertible instruments that we have determined should not be bifurcated from
their host instruments, we record discounts to convertible notes for the
intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized
over the term of the related debt to their earliest date of
redemption. Also when necessary, we record deemed dividends for the
intrinsic value of conversion options embedded in preferred shares based upon
the differences between the fair value of the underlying common stock at the
commitment date of the financing transaction and the effective conversion price
embedded in the preferred shares.
In
addition, we review all of our convertible instruments for the existence of a
beneficial conversion feature. Upon the determination that a beneficial
conversion feature exists, the relative fair value of the beneficial conversion
feature would be recorded as a discount from the face amount of the respective
debt instrument and the discount would be amortized to interest expense over the
life of the debt.
Finally,
if necessary, we will determine the existence of liquidated damage provisions.
Liquidated damage provisions are not marked to market, but evaluated based upon
the probability that a related liability should be recorded.
Common
Stock Purchase Warrants and Derivative Financial Instruments
We review
any common stock purchase warrants and other freestanding derivative financial
instruments at each balance sheet date and classify them on our balance sheet
as:
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
We assess
classification of our common stock purchase warrants and other freestanding
derivatives at each reporting date to determine whether a change in
classification between assets and liabilities is required.
We have
no freestanding derivatives as of December 31, 2009 or 2008.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Revenue
Recognition
We
generate revenue from the sale of precious metals, including gold, silver and
platinum, and from the sale of diamonds and other precious stones. Revenue
is recognized when all of the following conditions exist: (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred, (3) the sales
price is fixed or determinable, and (4) collectability is reasonably
assured.
Precious
Metals
We grade
the quality of the precious metals purchased from the public and estimate the
total quantity of pure gold, silver and platinum received. We then
lock in the current spot rate of each metal sufficient to cover the total
quantity received in the current batch with the Refinery. After a holding
period of at least 10 days to allow for returns, the precious metals are
delivered to the Refinery to be melted. Upon melting the precious metals,
the Refinery validates the quality of pure gold, silver, and platinum and remits
payment to us based on the quantity of each precious metal at the agreed upon
spot rates, as described above. Revenue is recognized upon melting of the
precious metals and the validation of the quality and quantity of each precious
metal by the Refinery.
No
returns are accepted from the Refinery and upon delivery of the precious metals
to the refiner, we have no further obligations.
Diamonds
and Other Precious Stones
Diamonds
and other precious stones are generally purchased from the public in connection
with the purchase of precious metals. We value diamonds and other precious
stones based on a variety of factors including size and quality and then resell
them. To date, all diamonds and other precious stones have been sold to an
affiliate of an officer of one of our wholly-owned subsidiaries. Revenue is
recognized upon the acceptance of the diamonds and other precious stones by the
purchaser.
Deferred
Revenue
Upon our
estimate of the total quantity of pure gold, silver, and platinum received and
the locking in of the current spot rate for each precious metal, we are able to
estimate the total value of the batch received. The Refinery advances to us, up
to 80% of the value of the precious metals we have received, but not yet
delivered. This amount is recorded as deferred revenue until the specific
batch is melted and processed as described above, at which time, it is recorded
as revenue.
Cost
of Revenue
Our cost
of revenue includes our cost of acquiring precious metals and stones as well as
any other direct costs and expenses required to ship, secure, grade, log and
process the metals and stones internally. In addition, fees and other costs
incurred in connection with processing at the Refinery are charged to cost of
revenue.
Advertising
Advertising
costs are expensed as they are incurred and are included in sales and marketing
expenses. Advertising expense amounted to $12,834,432 and $1,428,591 for
the year ended December 31, 2009 and the period from February 14, 2008
(inception) to December 31, 2008, respectively.
Foreign
Currency Transactions
The
Consolidated Financial Statements are presented in United States Dollars. The
financial position and results of operations of our foreign subsidiaries are
measured using the local currency as the functional currency. Assets and
liabilities of our foreign subsidiaries have been translated from their local
currency (British pounds, Canadian dollars and Euros) into the reporting
currency, U.S. dollars, using period end exchange rates. Equity
transactions have been translated using the historical exchange rate that was in
effect when the transaction occurred. The resulting translation adjustments are
recorded as a separate component of accumulated other comprehensive
loss. Revenues and expenses have been translated using weighted average
exchange rates for the respective periods. Transaction gains and losses
resulting from foreign currency transactions are recorded as foreign exchange
gains or losses and are included in general and administrative expense in
the consolidated statement of operations. We have not entered into any
financial instruments to offset the impact of foreign currency
fluctuations.
Share-Based
Payment Arrangements
Generally,
all forms of share-based payments, including stock option grants, restricted
stock grants and stock appreciation rights are measured at their fair value on
the awards’ grant date, based on the estimated number of awards that are
ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The expense resulting from share-based payments are
recorded in cost of goods sold or general and administrative expense in the
consolidated statement of operations, depending on the nature of the services
provided.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Income
Taxes
We
account for income taxes in accordance with accounting guidance now codified as
FASB ASC Topic 740, “Income
Taxes,” which requires that we recognize deferred tax liabilities and
assets based on the differences between the financial statement carrying amounts
and the tax bases of assets and liabilities, using enacted tax rates in effect
in the years the differences are expected to reverse. Deferred income tax
benefit (expense) results from the change in net deferred tax assets or deferred
tax liabilities. A valuation allowance is recorded when it is more likely than
not that some or all deferred tax assets will not be realized.
Accounting
guidance now codified as FASB ASC Topic 740-20, “Income Taxes – Intraperiod Tax
Allocation,” clarifies the accounting for uncertainties in income taxes
recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for
the recognition, de-recognition and measurement in financial statements of
income tax positions taken in previously filed tax returns or tax positions
expected to be taken in tax returns, including a decision whether to file or not
to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any
liability created for unrecognized tax benefits is disclosed. The application of
FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities
and therefore may change or create deferred tax liabilities or assets. We would
recognize interest and penalties related to unrecognized tax benefits in income
tax expense. At December 31, 2009, we did not record any liabilities for
uncertain tax positions.
Net
Loss per Share
Basic
earnings per share (“EPS”) is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during
the period, excluding the effects of any potentially dilutive securities.
Diluted EPS gives effect to all dilutive potential of shares of common stock
outstanding during the period including stock options or warrants, using the
treasury stock method (by using the average stock price for the period to
determine the number of shares assumed to be purchased from the exercise of
stock options or warrants), and convertible debt or convertible preferred stock,
using the if-converted method. Diluted EPS excludes all dilutive potential of
shares of common stock if their effect is anti-dilutive.
The
computation of basic and diluted loss per share for the year ended December 31,
2009 and the period from February 14, 2008 (inception) to December 31,
2008, respectively excludes the following potentially dilutive securities
because their inclusion would be anti-dilutive:
|
|
For the Year Ended
December 31, 2009
|
|
|
For the Period from
February 14, 2008
(inception) to
December 31, 2008
|
|
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
|
3,400,000 |
|
|
|
1,410,000 |
|
Common
Stock Purchase Warrants
|
|
|
17,816,670 |
|
|
|
8,000,000 |
|
Stock
Options – Vested
|
|
|
442,270 |
|
|
|
— |
|
|
|
|
21,658,940 |
|
|
|
9,410,000 |
|
Comprehensive
Loss
Other
comprehensive loss includes all changes in stockholders’ equity during a period
from non-owner sources and is reported in the consolidated statement of
stockholders’ equity. To date, other comprehensive loss consists of changes in
accumulated foreign currency translation adjustments.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Recent
Accounting Pronouncements
In
April 2009, the Financial Accounting Standards Board
(“FASB”) issued guidance now codified as FASB ASC Topic 820, “Fair Value Measurements and
Disclosures,” which amends previous guidance to require disclosures about
fair value of financial instruments in interim as well as annual financial
statements in the current economic environment. This pronouncement was effective
for periods ending after June 15, 2009. The adoption of this pronouncement
did not have a material impact on our business, financial condition or results
of operations; however, these provisions of FASB ASC Topic 820 resulted in
additional disclosures with respect to the fair value of our financial
instruments.
In
May 2009, the FASB issued guidance now codified as FASB ASC Topic 855,
“Subsequent Events,”
which establishes general standards of accounting for, and disclosures of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This pronouncement was effective for
interim or fiscal periods ending after June 15, 2009. The adoption of this
pronouncement did not have a material impact on our business, results of
operations or financial position; however, the provisions of FASB ASC Topic 855
resulted in additional disclosures with respect to subsequent
events.
In
June 2009, the Financial Accounting Standards Board (FASB) issued guidance
now codified as FASB Accounting Standards Codification (ASC) Topic 105, “Generally Accepted Accounting
Principles,” as the single source of authoritative non-governmental U.S.
GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to
simplify user access to all authoritative U.S. GAAP by providing all
authoritative literature related to a particular topic in one place. All
existing accounting standard documents will be superseded and all other
accounting literature not included in the FASB Codification will be considered
non-authoritative. These provisions of FASB ASC Topic 105 were effective for
interim and annual periods ending after September 15, 2009 and,
accordingly, were effective for the current fiscal reporting period. The
adoption of this pronouncement did not have an impact on our business, financial
condition or results of operations, but will impact our financial reporting
process by eliminating all references to pre-codification standards. On the
effective date of FASB ASC Topic 105, the Codification superseded all
then-existing non-SEC accounting and reporting standards, and all other
non-grandfathered non-SEC accounting literature not included in the Codification
became non-authoritative.
In
January 2010, the FASB issued updated guidance to amend the disclosure
requirements related to recurring and nonrecurring fair value measurements. This
update requires new disclosures on significant transfers of assets and
liabilities between Level 1 and Level 2 of the fair value hierarchy
(including the reasons for these transfers) and the reasons for any transfers in
or out of Level 3. This update also requires a reconciliation of recurring
Level 3 measurements about purchases, sales, issuances and settlements on a
gross basis. In addition to these new disclosure requirements, this update
clarifies certain existing disclosure requirements. For example, this update
clarifies that reporting entities are required to provide fair value measurement
disclosures for each class of assets and liabilities rather than each major
category of assets and liabilities. This update also clarifies the requirement
for entities to disclose information about both the valuation techniques and
inputs used in estimating Level 2 and Level 3 fair value measurements.
This update will become effective for the interim and annual reporting period
beginning January 1, 2010, except for the requirement to provide the
Level 3 activity of purchases, sales, issuances, and settlements on a gross
basis, which will become effective for the interim and annual reporting period
beginning January 1, 2011. We will not be required to provide the amended
disclosures for any previous periods presented for comparative purposes. Other
than requiring additional disclosures, adoption of this update will not have a
material effect on our Consolidated Financial Statements.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The fair
value of our financial assets and liabilities reflects our estimate of amounts
that we would have received in connection with the sale of the assets or paid in
connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with
measuring the fair value of our assets and liabilities, we seek to maximize the
use of observable inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about how market
participants would price assets and liabilities). The following fair value
hierarchy is used to classify assets and liabilities based on the observable
inputs and unobservable inputs used in order to value the assets and
liabilities:
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active
market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing
basis.
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are
not active.
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants
would use in pricing the asset or
liability.
|
Our
investment strategy is focused on capital preservation. We intend to invest in
instruments that meet credit quality standards. The current expectation is
to maintain cash and cash equivalents, once these resources are
available.
The
following are the major categories of assets measured at fair value on a
nonrecurring basis during the year ended December 31, 2009, using quoted prices
in active markets for identical assets (Level 1); significant other
observable inputs (Level 2); and significant unobservable inputs
(Level 3):
|
|
Level 1:
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Level 2:
Quoted Prices
in Inactive
Markets for
Identical
Assets
|
|
|
Level 3:
Significant
Unobservable
Inputs
|
|
|
Total at
December 31, 2009
|
|
|
Total
Impairment
For the Year Ended
December 31, 2009
|
|
Goodwill
|
|
$ |
-0- |
|
|
$ |
11,142,273 |
|
|
$ |
-0- |
|
|
$ |
11,142,273 |
|
|
$ |
-0- |
|
Total
|
|
$ |
-0- |
|
|
$ |
11,142,273 |
|
|
$ |
-0- |
|
|
$ |
11,142,273 |
|
|
$ |
-0- |
|
We have
determined the estimated fair value amounts presented in these Consolidated
Financial Statements using available market information and appropriate
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. The estimates presented in the
Consolidated Financial Statements are not necessarily indicative of the amounts
that we could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. We have based these fair value estimates on
pertinent information available as of the respective balance sheet dates and
have determined that, as of such dates, the carrying value of all financial
instruments approximates fair value.
Note 5 –
Acquisitions
On
May 7, 2009, we acquired 100% of MGE Enterprises Corporation, a
Wyoming corporation (“MGE”). MGE operated in the United States under the
names mygoldenvelope.com and sobredeoro.com using a business model similar to
ours. In addition, their management has provided us with extensive experience in
creating and growing businesses that provide shareholder value in a broad array
of industries, including direct response, Internet marketing and national retail
distribution and sales. MGE’s ability to reach a broader number of
consumers through their experience in multi-language television advertising,
direct response, and retail distribution and sales greatly accelerated our
growth and increased our depth of management experience.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
aggregate purchase price was comprised of 74,876,432 shares of our common stock,
which was valued by management on a
preliminary basis at the date of the acquisition. After
more detailed analyses were completed including, but not limited to, evaluation
of the restrictions placed on the common stock issued and separating the
valuation of the shares issued to affiliates and the shares issued to
non-affiliates, we finalized our valuation at $10,500,000 and allocated the
purchase price as follows:
Consideration
transferred at fair value:
|
|
|
|
Common
stock
|
|
$ |
10,500,000 |
|
|
|
|
|
|
Net
liabilities assumed:
|
|
|
|
|
Current
liabilities
|
|
|
(642,273
|
) |
Goodwill
– at fair value
|
|
$ |
11,142,273 |
|
Direct costs of acquisition totaling $63,053 were recorded in general
and administrative expense during the year ended December 31, 2009. None of the
amount allocated to goodwill is deductible for tax purposes.
In
connection with the acquisition, two of our principal shareholders (prior to the
closing) and two principal shareholders of MGE, (collectively, the
“Shareholders”) agreed to vote all of their shares of common stock either in
favor of or against any action in question, as determined by a position of the
majority of the Shareholders. In addition, the two principal
shareholders of MGE appointed two designees to the Board of
Directors.
We used
the acquisition method of accounting in connection with the acquisition of MGE
and accordingly, our Consolidated Financial Statements include the results of
operations of MGE from May 7, 2009, the date of acquisition, onward. Since
the date of acquisition, we have fully combined and integrated MGE with our own
operations. As such, we are unable to present separately the revenue or earnings
from MGE.
The
following unaudited condensed consolidated pro forma information gives effect to
the acquisition of MGE as if the transaction had occurred on January 1,
2008. The following pro-forma information is presented for illustration purposes
only and is not necessarily indicative of the results that would have been
attained had the acquisition been completed on January 1, 2008, nor are
they indicative of results that may occur in any future periods:
|
|
For the
Year Ended
December 31, 2009
|
|
|
For the
Year Ended
December 31, 2008
|
|
Revenues
|
|
$
|
31,730,595
|
|
|
$
|
2,722,369
|
|
Net
Loss
|
|
$
|
(4,764,953)
|
|
|
$
|
(3,647,704)
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per
Common
Share - Basic and Diluted
|
|
$
|
(0.03)
|
|
|
$
|
(0.03)
|
|
Weighted
Average Common Shares Outstanding - Basic and
Diluted
|
|
|
162,488,057
|
|
|
|
125,854,956
|
|
Note 6 – Fixed
Assets
Fixed
assets consist of the following at December 31, 2009:
|
|
Balance at Balance at
December 31, 2009
|
|
|
Estimated
Useful Life
|
|
Leasehold
Improvements
|
|
$ |
39,694 |
|
|
*
|
|
Security
Equipment
|
|
|
26,005 |
|
|
7years
|
|
Computers
|
|
|
6,024 |
|
|
3years
|
|
Furniture
and Fixtures
|
|
|
2,397 |
|
|
7years
|
|
Office
Equipment
|
|
|
3,386 |
|
|
3years
|
|
|
|
|
77,506 |
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
(1,598 |
) |
|
|
|
|
Fixed
Assets, Net
|
|
$ |
75,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* The
shorter of three years or the life of the lease.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
At
December 31, 2008, we did not have any fixed assets.
Note 7 – Intangible
Assets
Our
intangible assets are comprised of a non-compete agreement with the Refinery
(Note 12) and other intangibles including certain prepaid production costs,
website and software development costs. Intangible asset values and the
related accumulated amortization are as follows:
|
|
Non-Compete
|
|
|
Other
|
|
|
Total
|
|
Gross
value at December 31, 2008
|
|
$
|
291,865
|
|
|
$
|
70,000
|
|
|
$
|
361,865
|
|
Accumulated
amortization at December 31, 2008
|
|
|
(34,051
|
)
|
|
|
(4,833
|
)
|
|
|
(38,884
|
)
|
Net
value at December 31, 2008
|
|
$
|
257,814
|
|
|
$
|
65,167
|
|
|
$
|
322,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
value at December 31, 2009
|
|
$
|
291,865
|
|
|
$
|
74,207
|
|
|
$
|
366,072
|
|
Accumulated
amortization at December 31, 2009
|
|
|
(92,410
|
)
|
|
|
(15,039
|
)
|
|
|
(107,449
|
)
|
Less:
Impairment charge
|
|
|
—
|
|
|
|
(48,500
|
)
|
|
|
(48,500
|
)
|
Net
value at December 31, 2009
|
|
$
|
199,455
|
|
|
$
|
10,668
|
|
|
$
|
210,123
|
|
Our
intangible assets all have a definite life and are amortized on a straight-line
basis over their estimated useful lives of between three and five years.
Amortization expense amounted to $68,565 and $38,884 for the year ended December
31, 2009 and the period from February 14, 2008 (inception) to December
31, 2008, respectively.
During
the year ended December 31, 2009, we identified certain intangible assets that
were no longer providing an economic benefit. As a result, we
recorded an impairment charge of $48,500. We did not record any
impairment charges during the period from February 14, 2008 (inception)
to December 31, 2008.
The
following table outlines the estimated future amortization expense related to
intangible assets as of December 31, 2009:
|
|
Future
Amortization
Expense
|
|
2010
|
|
$ |
64,359 |
|
2011
|
|
|
62,588 |
|
2012
|
|
|
58,854 |
|
2013
|
|
|
24,322 |
|
Total
|
|
$ |
210,123 |
|
Note 8 –Debt and Other
Financing
Convertible
Note Payable
On
March 4, 2009, we issued a $250,000 Convertible Note Payable (the
“Convertible Note”) to Whalehaven Capital Fund Limited (“Whalehaven”). The
Convertible Note had a three-month term, bore interest at an annual rate of 15%
compounded monthly beginning on the date of issuance and was secured by all of
our assets. All principal and accrued interest was due and payable on
June 1, 2009, but was subsequently extended to June 1, 2010, as
described below. We used the $237,500 net proceeds received from this
Convertible Note to provide working capital.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
Convertible Note was convertible at the option of Whalehaven, in whole or in
part, into shares of our common stock at an initial conversion price equal to
the average of the three lowest closing bid prices within the prior twenty day
trading period immediately preceding the date we received notice of
conversion. The conversion price was adjustable for standard anti-dilution
provisions such as stock splits, stock dividends and similar types of
recapitalization events. In addition, the conversion was limited such that
Whalehaven could only convert on a date that the amount of the principal
and/or accrued interest in connection with that number of shares of common stock
would be in excess of the sum of:
|
(a)
|
The
number of shares of common stock beneficially owned by Whalehaven and its
affiliates on a conversion date, repayment date, the date notice of
redemption is given, or the date notice of mandatory conversion is given,
as the case may be;
|
|
(b)
|
Any
common stock issuable in connection with the unconverted portion of the
Convertible Note; and
|
|
(c)
|
The
number of shares of common stock issuable upon the conversion or repayment
of the Convertible Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by
Whalehaven and its affiliates of more than 4.99% of the outstanding shares
of our common stock on such date.
|
We
evaluated the conversion feature embedded in the Convertible Note to determine
whether such conversion feature should be bifurcated from its host instrument
and accounted for as a freestanding derivative. We determined that since the
exercise price of the convertible debt contained a variable conversion feature,
such conversion feature should be bifurcated from its host instrument and
accounted for as a freestanding derivative.
We
estimated the fair value of the conversion feature using the Black-Scholes
option-pricing model using the following assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
133.72 |
% |
Expected
term – embedded conversion option
|
|
0.24 years
|
|
Risk
free interest rate
|
|
|
0.26 |
% |
We
allocated a portion of the proceeds from the Convertible Note to the conversion
feature based on the relative fair value of the principal amount and the
conversion feature. The relative fair value of the conversion feature, which
amounted to $69,429, was recorded as a discount to the Convertible Note and a
corresponding increase to a derivative liability. This discount amount was being
amortized to interest expense over the contracted term of the Convertible Note.
During the year ended December 31, 2009, we amortized the full discount of
$69,429 to interest expense, as the underlying note was repaid during the
year.
At March
31, 2009, we recalculated the fair value of the conversion feature and
determined that the value had increased by $1,160. Accordingly, we recorded a
loss and a corresponding increase in the value of the derivative liability in
the amount of $1,160. We valued the derivative liability at March 31,
2009 using the Black-Scholes option-pricing model utilizing the following
assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
151.16 |
% |
Expected
term – embedded conversion option
|
|
0.17 years
|
|
Risk
free interest rate
|
|
|
0.21 |
% |
In
connection with the issuance of the Convertible Note, we paid debt-issuance
costs of $27,590, including a $12,500 fee to Whalehaven and $15,090 in legal and
other costs. These debt issue costs were capitalized as debt issuance costs and
were amortized to interest expense over the contracted term of the
Convertible Note. During the year ended December 31, 2009, we amortized the full
debt issue costs of $27,590 to interest expense, as the underlying note was
repaid during the year.
Convertible
Note – Extension of Maturity Date
On
April 10, 2009, the maturity date of the Convertible Note was extended
until June 1, 2010. In connection with this extension, we agreed to
the following terms:
|
(a)
|
We
issued 1,000,000 warrants to Whalehaven to purchase our common stock,
exercisable at $0.01 per share, with cashless exercise provisions. These
warrants had a five-year life and vested only if the Convertible Note had
not been repaid by September 4,
2009;
|
|
(b)
|
The
principal value of the Convertible Note would be increased to $275,000 if
it was not repaid by September 4,
2009;
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
(c)
|
We
agreed to repay the Convertible Note in full upon raising $500,000 through
the sale of equity securities.
|
We valued
the warrants issued to Whalehaven under the terms of the extension using the
Black-Scholes option-pricing model utilizing the following
assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
154.10 |
% |
Expected
term – embedded conversion option
|
|
5 years
|
|
Risk
free interest rate
|
|
|
1.9 |
% |
Expected
forfeitures
|
|
|
100 |
% |
We
determined that the probability of repayment of the obligations under the
Convertible Note by the maturity date was highly probable and, therefore we did
not expect these warrants to vest or become exercisable. As a result, we
calculated the fair value of the 1,000,000 warrants to be
$-0-. Additionally, we did not include the 1,000,000 warrants as common
stock equivalents for purposes of computing earnings per share, as they were
contingently issuable.
In
connection with the extension, on April 10, 2009 we recalculated the fair
value of the conversion feature and determined that the value had increased by
$95,692. Accordingly, we recorded an expense and a corresponding increase
in the value of the derivative liability in the amount of $95,692. We
valued the derivative liability at April 10, 2009 using the Black-Scholes
option pricing model utilizing the following assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
153.55 |
% |
Expected
term – embedded conversion option
|
|
1.14 years
|
|
Risk
free interest rate
|
|
|
0.60 |
% |
At
June 30, 2009, we recalculated the fair value of the conversion feature and
determined that the value had decreased by $9,667. Accordingly, we recorded
a gain and a corresponding decrease in the value of the derivative liability in
the amount of $9,667. We valued the derivative liability at June 30, 2009
using the Black-Scholes option pricing model utilizing the following
assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
162.57 |
|
Expected
term – embedded conversion option
|
|
0.92 years
|
|
Risk
free interest rate
|
|
|
0.60 |
% |
At
September 1, 2009, we recalculated the fair value of the conversion feature
and determined that the value had decreased by $31,787. Accordingly, we
recorded a gain and a corresponding decrease in the value of the derivative
liability to the amount of $31,787. We valued the derivative liability at
September 1, 2009 using the Black-Scholes option-pricing model utilizing
the following assumptions:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
171.28 |
% |
Expected
term – embedded conversion option
|
|
0.75 years
|
|
Risk
free interest rate
|
|
|
0.43 |
% |
Convertible
Note – Purchase and Payoff
On
September 1, 2009, the Convertible Note was purchased from Whalehaven by
Barry Honig and GRQ Consultants, Inc. 401K (collectively, “GRQ”) for a total
purchase price of $269,072, including $19,072 of accrued interest. In connection
with this purchase, 1,000,000 contingently issuable common stock purchase
warrants were cancelled. On October 5, 2009, we paid $269,072 to GRQ, which
represented the entire principal balance and all accrued interest under the
Convertible Note. In connection with the purchase of the note, we reclassified
the value of the derivative liability, which amounted to $124,827, to additional
paid in capital. For the year ended December 31, 2009, we recorded interest
expense of $19,072 pertaining to the Convertible Note.
Media
Line of Credit
We
obtained a line of credit of up to $300,000 from GRQ in May 2009 to be used
to finance our media and advertising campaigns, as most of our vendors require
payment in advance. In July 2009, the total amount available under the line
of credit was increased to $500,000. This facility was due on demand, accrued
interest based on a percentage of revenue generated from the media
purchased with this money capped at 1.5% of the principal amount outstanding per
week and was secured by our accounts receivable and inventory. On
September 30, 2009, we converted the $500,000 outstanding principal balance
into 5,834,306 shares of our common stock resulting in a loss from conversion of
$550,175 based upon the fair value of the stock on the date of conversion of
$1,050,175. For the year ended December 31, 2009, we recorded interest expense
of $109,500 pertaining to this line of credit.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Notes
Payable - Other
In
connection with the acquisition of MGE, we assumed certain notes payable
totaling $194,785 at the time of the acquisition. The notes bore interest at 12%
per annum and were due on December 31, 2009. On October 19, 2009, we
paid $153,322, which represented the entire remaining principal balance and all
accrued interest pertaining to these notes on that date. For the year ended
December 31, 2009, we recorded interest expense of $9,065 pertaining to these
notes.
Note 9 – Commitments and
Contingencies
We lease
space for our corporate headquarters and for our aggregation facilities located
around the world under operating lease agreements that expire at various dates
through October 2014. Aggregate
rent expense for all operating leases was $167,373
and $56,236, for
the year ended December 31, 2009 and the period from February 14, 2008
(Inception) to December 31, 2008, respectively. Future minimum commitments on
the above agreements are as follows:
For the Year Ending December 31,
|
|
Total
|
|
2010
|
|
$ |
241,963 |
|
2011
|
|
|
274,030 |
|
2012
|
|
|
200,019 |
|
2013
|
|
|
81,312 |
|
2014
|
|
|
68,641 |
|
Total
|
|
$ |
865,965 |
|
Economic
Risks and Uncertainties
The
recent global economic slowdown has caused a general tightening in the credit
markets, lower levels of liquidity, increases in the rates of default and
bankruptcy, and extreme volatility in credit, equity and fixed income markets.
These conditions not only limit our access to capital, but also make it
difficult for our customers, our vendors and us to accurately forecast and plan
future business activities. Furthermore, our operations are subject to
fluctuating prices of precious metals. A decrease in the value of gold, silver
or platinum could have an adverse effect on our business.
Foreign
Operations
Our
operations in various geographic regions expose us to risks inherent in doing
business in each of the countries in which we transact business. Operations in
countries other than the United States are subject to various risks particular
to each country. With respect to any particular country, these risks may
include, but are not limited to:
|
·
|
Currency
fluctuations, devaluations, conversion and expropriation
restrictions;
|
|
·
|
Confiscatory
taxation or other adverse tax
policies;
|
|
·
|
Political
and economic instability;
|
|
·
|
Trade
restrictions and economic embargoes imposed by the United States and other
countries;
|
|
·
|
Expropriation
and nationalization of our assets or of our customers in that
country;
|
|
·
|
Governmental
activities that limit or disrupt markets, payments, or limit the movement
of funds;
|
|
·
|
Governmental
activities that may result in the deprivation of contract
rights;
|
|
·
|
Civil
unrest, acts of terrorism, force majeure, war or other armed conflict;
and
|
|
·
|
Natural
disasters including those related to earthquakes, hurricanes, tsunamis and
flooding.
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Employment
Agreements
We have
entered into employment agreements with several of our executives for initial
terms of up to three years, which can or will be renewed for additional one-year
terms thereafter, unless written notice is provided by the respective parties.
The agreements provide, among other things, for the payment of aggregate annual
base salaries of approximately $1,100,000, as well as such incentive
compensation and discretionary bonuses as the Board of Directors may determine.
In addition, the employment agreements provide for up to eighteen months of
severance compensation for terminations under certain circumstances. Aggregate
potential severance compensation amounted to approximately $1,650,000 at
December 31, 2009.
Chief
Executive Officer – Douglas Feirstein
On
May 5, 2009, we signed an executive employment agreement with Douglas
Feirstein, pursuant to which Mr. Feirstein serves as our Chief Executive
Officer. The employment agreement is for a three-year term, unless terminated
sooner, and will automatically renew for successive one-year terms, unless
notice of non-renewal is provided by either party at least 60 days prior to the
end of the current term. Under the terms of the employment agreement,
Mr. Feirstein received an initial annual base salary of $200,000, which
increased to $225,000 on November 7, 2009. In addition, Mr. Feirstein shall
be entitled to such bonus compensation (in cash, capital stock or other
property) as a majority of our Board of Directors may determine from time to
time in their sole discretion. On November 23, 2009, we entered into an
amendment to the executive employment agreement with Mr. Feirstein,
pursuant to which Mr. Feirstein’s base salary was increased to $275,000
effective December 1, 2009 and will increase to $300,000 effective June 1,
2010.
In the
event the employment agreement is terminated by us without Cause (as defined in
the employment agreement), or if we provide non-renewal notice to
Mr. Feirstein as discussed above, then we shall be required to pay to
Mr. Feirstein:
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Feirstein was a participant as of
the date of termination.
|
In
addition, until termination of employment, and for a period of one year
commencing on the date of termination, except if termination is without Cause or
with Good Reason (as defined in the employment agreement), Mr. Feirstein
shall not, directly or indirectly, compete with us by acting as an officer (or
comparable position) of, owning an interest in, or providing services to any
entity within any metropolitan area in the United States.
President
– Hakan Koyuncu
On
July 23, 2008, we signed an executive employment agreement with Hakan
Koyuncu, pursuant to which Mr. Koyuncu serves as our Chief Executive
Officer. The employment agreement is for a two-year term, unless terminated
sooner, and will automatically renew for successive one-year terms, unless
notice of non-renewal is provided by either party at least 60 days prior to the
end of the current term. Under the terms of the employment agreement,
Mr. Koyuncu will received an initial annual base salary of $175,000, which
increased to $200,000 commencing on January 23, 2009, and to $225,000 on July
23, 2009. In addition, Mr. Koyuncu shall be entitled to such bonus
compensation (in cash, capital stock or other property) as a majority of our
Board of Directors may determine from time to time in their sole discretion.
Mr. Koyuncu has elected not to accept any bonuses under the 2008/2009
Management Bonus Plan dated October 20, 2008. On November 23, 2009, we
entered into an amendment to the executive employment agreement with
Mr. Koyuncu, pursuant to which Mr. Koyuncu’s base salary was increased
to $275,000 effective December 1, 2009 and will increase to $300,000 effective
June 1, 2010.
In the
event the employment agreement is terminated by us without Cause (as defined in
the employment agreement), or if we provide non-renewal notice to
Mr. Koyuncu as discussed above, then we shall be required to pay to
Mr. Koyuncu:
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Koyuncu was a participant as of the
date of termination.
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
In
addition, until termination of employment, and for a period of one year
commencing on the date of termination, except if termination is without Cause or
with Good Reason (as defined in the employment agreement), Mr. Koyuncu
shall not, directly or indirectly, compete with us by acting as an officer (or
comparable position) of, owning an interest in, or providing services to any
entity within any metropolitan area in the United States.
On
May 5, 2009, we entered into an amendment to the executive employment
agreement with Mr. Koyuncu, pursuant to which Mr. Koyuncu surrendered
the position of Chief Executive Officer and was appointed as our President. In
addition, the term of the employment agreement was extended until May 5,
2012.
Chief
Financial Officer – Daniel Brauser
On
July 23, 2008, we signed an executive employment agreement with Daniel
Brauser, pursuant to which Mr. Brauser serves as our President, Chief
Operating Officer and Chief Financial Officer. The employment agreement is for a
two-year term, unless terminated sooner, and will automatically renew for
successive one-year terms, unless notice of non-renewal is provided by either
party at least 60 days prior to the end of the current term. Under the terms of
the employment agreement, Mr. Brauser received an initial annual base
salary of $175,000, which increased to $200,000 on January 23, 2009, and to
$225,000 on July 23, 2009. In addition, Mr. Brauser shall be entitled to
such bonus compensation (in cash, capital stock or other property) as a majority
of our Board of Directors may determine from time to time in their sole
discretion. Mr. Brauser has elected not to accept any bonuses under the
2008/2009 Management Bonus Plan dated October 20, 2008. On November
23, 2009, we entered into an amendment to the executive employment agreement
with Mr. Brauser, pursuant to which Mr. Brauser’s base salary was
increased to $275,000 effective December 1, 2009 and will increase to $300,000
effective June 1, 2010.
In the
event the employment agreement is terminated by us without Cause (as defined in
the employment agreement), or if we provide non-renewal notice to
Mr. Brauser as discussed above, then we shall be required to pay to
Mr. Brauser:
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Brauser was a participant as of the
date of termination.
|
In
addition, until termination of employment, and for a period of one year
commencing on the date of termination, except if termination is without Cause or
with Good Reason (as defined in the employment agreement), Mr. Brauser
shall not, directly or indirectly, compete with us by acting as an officer (or
comparable position) of, owning an interest in, or providing services to any
entity within any metropolitan area in the United States.
On
May 5, 2009, we entered into an amendment to the executive employment
agreement with Mr. Brauser, pursuant to which Mr. Brauser surrendered
the positions of President and Chief Operating Officer, but retained the
position of Chief Financial Officer. In addition, the term of the employment
agreement was extended until May 5, 2012.
Former Chief Operating Officer – Todd
Oretsky
On
May 5, 2009, we signed an executive employment agreement with Todd Oretsky,
pursuant to which Mr. Oretsky served as our Chief Operating Officer. The
employment agreement was for a three-year term, unless terminated
sooner
On
November 23, 2009, we entered into an amendment to the executive employment
agreement with Mr. Oretsky, pursuant to which Mr. Oretsky’s base
salary was increased to $275,000 effective December 1, 2009.
On
February 2, 2010, Mr. Oretsky resigned as our Chief Operating Officer and as a
member of our Board of Directors on mutually agreeable terms with the Company to
pursue other opportunities.
Under a
Severance, Consulting and Release Agreement, we have agreed:
|
·
|
To
pay $32,500 per month for a period of six months for the consulting
services of Mr. Oretsky to assist us with our continued international
expansion,
|
|
·
|
To
pay $50,000 over a three-month period as consideration for a covenant
not-to-compete for a 21 month
period,
|
|
·
|
To
pay $46,667 over a three month period representing severance,
and
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
·
|
To
immediately vest Mr. Oretsky’s options to purchase 555,556 shares of our
common stock (such options shall remain exercisable through February 1,
2011).
|
The total
payments to be made pursuant to the Severance, Consulting and Release Agreement
will be made over approximately nine months. Mr. Oretsky remains
subject to the restrictions under a Stockholders Agreement which was previously
reported on a Form 8-K on May 13, 2009. Among other things, the Stockholders
Agreement limits Mr. Oretsky’s ability to sell his shares of our common
stock.
Legal
Proceedings
From time
to time, we are periodically a party to or otherwise involved in legal
proceedings arising in the normal and ordinary course of business. As of the
date of this Annual Report, we are not aware of any proceeding, threatened or
pending, against us which, if determined adversely, would have a material effect
on our business, results of operations, cash flows or financial
position.
Customer
and Vendor Concentrations
Our
revenues are primarily generated from the sale of precious metals to a related
party. During the year ended December 31, 2009 and the period from
February 14, 2008 (inception) to December 31, 2008, this related party
customer represented approximately 98% and 100%, respectively, of our revenue.
At December 31, 2009 and 2008, the amount due from this customer was
approximately 93% and 100%, respectively, of our accounts
receivable.
As more
fully described in Note 11, we purchase certain leads from a related party.
During the year ended December 31, 2009, this vendor represented
approximately 11% of total purchases, and for the period from February 14,
2008 (inception) to December 31, 2008, the related party vendor represented
42% of total purchases. In addition, one other vendor represented 10% of
our total purchases during the year ended December 31, 2009. At
December 31, 2009, our accounts payable to the related
party vendor and one other vendor comprised 17% and 12%, of our accounts
payable, respectively, and at December 31, 2008, two vendors, other
than the related party, comprised 16% and 17% of our total accounts
payable.
Note 10 – Stockholders’
Equity
Convertible
Series A Preferred Stock
Our
Convertible Series A Preferred Stock (“Series A PS”) has no voting
rights, no liquidation preference, and are not entitled to receive dividends.
Each share of the Series A PS is convertible into one share of our common
stock at the election of the holder. We have determined that no beneficial
conversion feature or derivative financial instruments exist in connection with
the Series A PS as the conversion rate was fixed at an amount equal to the
market price of our common stock.
On
March 19, 2009, 2,200,000 shares of our Series A PS were converted
into 2,200,000 shares of our common stock of which (i) 950,000 shares were
converted by a family member of our Chief Financial Officer and (ii) 1,250,000
shares were converted by GRQ.
During
October 2009, 8,500,000 shares of our Series A PS were converted into
8,500,000 shares of our common stock of which (i) 3,900,000 shares were
converted by a family member of our Chief Financial Officer and (ii) 4,600,000
shares were converted by a shareholder.
Convertible
Redeemable Series B Preferred Stock
Our
Convertible Redeemable Series B Preferred Stock (“Series B PS”) was
non-voting, had a liquidation preference equal to $250,000, was entitled to a 7%
annual dividend that accrued quarterly and was redeemable, at the option of the
holder, 90 days after the date of issuance. In addition, the accrued dividend
could be converted into shares of our common stock, at the option of the holder,
90 days after the date of issuance at a conversion price equal to the quoted
closing price of our common stock on the date the dividend is
declared.
In
assessing these redeemable shares, we determined that these securities were not
solely under our control and are therefore required to be presented outside of
permanent equity. We have determined that no beneficial conversion feature or
derivative financial instruments exist in connection with the Series B
PS.
On
April 30, 2009, a relative of our Chief Financial Officer invested $250,000
and received 25,000 shares of our convertible redeemable Series B PS
(stated value of $10/share).
We
declared and accrued dividends of $7,336 during the year ended December 31,
2009.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
On
September 30, 2009, the 25,000 shares of the Series B PS ($250,000)
plus accrued dividends totaling $7,336 were converted into 1,695,754 shares of
our common stock having a fair value of $305,236, based upon the quoted closing
price of our common stock. Since this was a related party transaction, no loss
on conversion was recognized, however, we recorded a charge to additional paid
in capital totaling $48,000.
Common
Stock
The
following summarizes our common stock and preferred stock activity during 2008
and 2009.
2008
Common Stock Transactions
Pre-Reverse
Merger on July 23, 2008
Prior to
the reverse merger on July 23, 2008, we completed several equity
transactions. The following share amounts have been retroactively restated to
take into account the effects of the recapitalization.
On
March 26, 2008, we issued 967,965 shares of our common stock, with a fair
value of $3,037, to our then current Chairman of the Board, Chief Executive
Officer and President/Chief Financial Officer in exchange for services provided
to assist in the founding of the Company.
On
April 1, 2008, in connection with an exchange of shares between two private
predecessor companies to effectively change our tax status from a pass-through
entity to a “C” corporation, we issued 11,828,413 shares of our common stock and
16,100,000 shares of class B common stock of a predecessor company that, as
described below, that was ultimately converted into common and/or preferred
stock during the subsequent reverse merger with EPS, Inc. (ultimately Money4Gold
Holdings, Inc.). There was no financial accounting impact for this transaction
and upon completing the exchange of shares, there was no material change in
control.
On
June 1, 2008, we issued 3,187,143 (as retroactively restarted to take into
account the effects of the recapitalization) shares of our common stock, with a
fair value of $1,230,000, to the Refinery (as defined in Note 11) in exchange
for future refining services and an agreement whereby the Refinery agreed to
refrain from entering into a relationship with any third party that is similar
to our relationship with them.
On
June 17, 2008, 2,000,000 shares of the class B common stock discussed above
were converted into 637,429 shares of our common stock.
On
July 16, 2008, in connection with an exchange of shares between two private
predecessor companies to reorganize and consolidate them, we issued 1 share of
our common stock. There was no financial accounting impact for this transaction
and upon completing the exchange of shares, there was no material change in
control.
Reverse
Merger on July 23, 2008
On
July 23, 2008, we entered into a reverse merger transaction and
recapitalization. In connection with the reverse merger transaction, EPS, Inc.
(ultimately Money4Gold Holdings, Inc.) issued 52,350,002 shares of our common
stock to the stockholders of Money4Gold, Inc. (a privately held predecessor
company to Money4Gold Holdings, Inc., “M4G”) in exchange for their ownership
shares in such private predecessor companies. In addition, we issued 14,100,000
shares of our preferred stock in exchange for 14,100,000 shares of class B
common stock of a predecessor company.
Post
Reverse Merger on July 23, 2008
During
the period July 23, 2008 through August 21, 2008, Money4Gold Holdings,
Inc. sold 40 units at $60,000 per unit. Each unit consisted of 200,000 shares of
common stock and three-year warrants to purchase 200,000 shares of common stock
at an exercise price of $0.50 per share. Gross proceeds were $2,400,000, and we
paid direct offering costs of $113,688. As a result of the offering,
we issued an aggregate 8,000,000 shares of common stock and 8,000,000 warrants.
The warrants are exercisable for three years and have an exercise price of $0.50
per share.
On
October 1, 2008, we granted 50,000 shares of restricted common stock to a
consultant for services rendered. The shares are fully vested, and had a fair
value of $44,500 based upon the quoted closing trading price of the stock as of
the issuance date. Furthermore, in accordance with a consulting agreement, we
were to grant an additional 50,000 shares of stock for future services at the
end of six months. As of December 31, 2008, the stock was valued at $18,000
based upon the quoted closing trading price of the stock. The value of the stock
is adjusted on a monthly basis over the six-month term of the agreement so that
the requisite portion of the expense corresponding to the service period is
being recognized. During the year ended December 31 2009 and the period ended
December 31 2008, we recognized $9,000 and $9,000, respectively in consulting
expense.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
On
October 8, 2008, we granted 1,250,000 shares of restricted common stock to
a consultant for service rendered. The shares are fully vested and were valued
at $737,500 ($0.59/share) based upon the quoted closing trading price of the
stock as of the issuance date.
On
October 20, 2008, under the Plan, we issued 300,000 shares of restricted
common stock, having a fair value of $183,000 ($0.61/share), based upon the
quoted closing trading price of the stock as of the issuance date, to a director
upon appointment to the Board. The shares vest annually over a three-year
period, subject to continued service as a director on each applicable vesting
date. For the year ended December 31, 2009 and the period ended
December 31, 2008, we recognized $61,000 and $11,969, respectively, as
compensation expense.
On
November 1, 2008, we entered into a consulting agreement with a third party
for $3,000 per month. Additionally, the consultant will receive shares of common
stock having a fair value of $1,000 at the end of each month under the
agreement. During November and December 2008, the consultant received
an aggregate 5,480 shares having an aggregate fair value of $2,000 based upon
the fair value of the services rendered.
On
December 22, 2008, we approved the issuance of an aggregate of 2,000,000 shares
of restricted common stock to two officers of M4GPM in accordance with their
employment contracts (see Note 6). Of the total shares authorized, 500,000
were issued, fully vested, and had a fair value of $150,000 ($0.30/share), based
upon the quoted closing trading price of the stock on the issuance date. For the
year ended December 31, 2009 and the period ended December 31, 2008, we
recognized $245,161 and $150,000, respectively, as compensation
expense.
Furthermore,
the remaining 1,500,000 shares have a fair value of $450,000 ($0.30/share),
based upon the closing price of the stock at the date of issuance the expense
will be amortized over the remaining three-year term.
The
1,500,000 shares will vest as follows:
250,000 shares
|
|
June 30,
2009
|
250,000 shares
|
|
December 31,
2009
|
250,000 shares
|
|
March 31,
2010
|
250,000 shares
|
|
June 30,
2010
|
250,000 shares
|
|
December 31,
2010
|
250,000 shares
|
|
June 30,
2010
|
2009
Common Stock Transactions
Private
Placements
We did
not file a registration statement with the SEC for the securities
underlying the September 2008 PP. As such, and in connection with certain
registration rights offered to the investors under the September 2008 PP,
we issued 720,000 shares of our common stock, with a fair value of $218,400, to
the investors under the September 2008 PP.
In
connection with a private placement during February 2009
(“February 2009 PP”), we issued 3,050,000 shares of our common stock and
warrants granting the right to purchase up to 3,050,000 shares of our common
stock to various investors. The warrants are exercisable for three years and
have an exercise price of $0.40 per share. Gross proceeds from the sale amounted
to $610,000, and were used for working capital purposes.
Subsequently,
but still in connection with the February 2009 PP, we issued 1,375,000
shares of our common stock and warrants granting the right to purchase up to
1,375,000 shares of our common. The warrants are exercisable for
three years and have an exercise price of $0.30 per share. Gross proceeds from
the sale amounted to $205,000, and were used for working capital
purposes.
In
connection with the February 2009 PP, we incurred direct offering costs of
$42,804.
Re-Pricing
In
connection with the February 2009 PP, we agreed that if an investor in the
February 2009 PP had also invested in the September 2008 PP, and such
investment in the February 2009 PP exceeded the lesser of:
|
(a)
|
20%
of the amount they invested in the September 2008 PP;
or
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
we
would:
|
(a)
|
Issue
additional shares such that the per share price paid in the
September 2008 PP would equal the per share price paid in the
February 2009 PP;
|
|
(b)
|
Exchange
the related common stock purchase warrants with an exercise price of $0.50
per share for common stock purchase warrants with an exercise price of
$0.40 per share; and
|
|
(c)
|
Issue
additional common stock purchase warrants with an exercise price of $0.40
per share such that the aggregate number of common stock purchase warrants
equals the aggregate number of shares of common stock purchased by the
investor under the September 2008
PP.
|
As a
result of this re-pricing (“Initial Re-Pricing”), we issued an additional
2,250,000 shares of our common stock. In addition, we agreed to cancel 4,500,000
common stock purchase warrants from the September 2008 PP with an exercise
price of $0.50 per share and reissue 6,750,000 common stock purchase warrants
with an exercise price of $0.40 per share. The exchange of the common stock
purchase warrants resulted in an expense of $41,837, which was calculated as the
excess of the fair value of the replacement award over the fair value of the
cancelled award at the cancellation date.
Following
the Initial Re-Pricing, our Board approved a second re-pricing (“Second
Re-Pricing”) whereby the initial 3,050,000 shares issued under the
February 2009 PP would be valued at an amount equal to the 1,375,000 shares
discussed above.
As a
result of the Second Re-Pricing, we issued an additional 1,008,337 shares of our
common stock. In addition, we agreed to cancel 3,075,000 common stock purchase
warrants from the February 2009 PP with an exercise price of $0.40 per
share and reissue 4,066,670 common stock purchase warrants with an exercise
price of $0.30 per share. The exchange of the common stock purchase warrants
resulted in an expense of $16,393, which was calculated as the excess of the
fair value of the replacement award over the fair value of the cancelled award
at the cancellation date.
We used
the following weighted average assumptions for the fair value of the cancelled
award at the cancellation date:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
153.55 |
% |
Expected
term – embedded conversion option
|
|
2.29
years
|
|
Risk
free interest rate
|
|
|
0.60 |
% |
We used
the following weighted average assumptions for the fair value of the replacement
award:
Expected
dividends
|
|
|
0 |
% |
Expected
volatility
|
|
|
153.55 |
% |
Expected
term – embedded conversion option
|
|
2.29
years
|
|
Risk
free interest rate
|
|
|
0.60 |
% |
We have
considered the re-pricings in terms of a ratchet down provision as discussed
in ASC 815 and have determined that, since these were isolated events,
and there are no outstanding equity holders who have ratchet down rights, there
are no potential derivative liabilities.
Conversion
of Media Line of Credit and Preferred Stock
As
discussed above, in connection with an agreement with GRQ and two additional
investors, on September 30, 2009, we issued 5,834,306 shares of our common
stock in settlement of the total outstanding balance of $500,000, plus accrued
interest, on our media line of credit and converted 25,000 shares of our
Series B PS into 1,695,754 shares of our common stock.
Shares
Granted to Consultants and Employees
During
April, 2009, we issued 3,223 shares of our common stock, with a fair value of
$1,000 based on the quoted closing price, to an employee for services rendered.
This amount was recorded as expense in the period it was granted.
During
June 2009, we issued 265,000 shares of our common stock, with a fair value
of $71,700 based on the quoted closing price, to consultants for services
rendered. This amount was recorded as expense in the period it was
granted.
During
June 2009, we issued 46,500 shares of our common stock, with a fair value
of $13,600 based upon the quoted closing price, to vendors as payment on
outstanding liabilities. We recognized a gain on settlement of accounts payable
of $12,426 as a result of these transactions.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
During
the third quarter, we
issued 101,525 shares of our common stock, with a fair value of $24,900 based on
the quoted closing price, to consultants for services rendered. This amount was
recorded as expense in the period it was granted.
During
September 2009, we issued 593,006 shares of our common stock, with a fair
value of $115,338 based upon the quoted closing price, to vendors as payment on
outstanding liabilities. We recognized a loss on settlement of accounts payable
of $9,136 as a result of these transactions. On September 30, 2009, a
related party vendor participated in the our private placement by converting
$50,000 of outstanding accounts payable into 333,333 shares of our common stock
and 333,333 warrants to purchase our common stock at $0.30 per share.
During
October 2009, we issued 28,150 shares of our common stock, with a fair value of
$6,750 based on the quoted closing price, to a consultant for services rendered.
This amount was recorded as expense in the period it was granted.
During
October 2009, we issued 870,666 shares of restricted common stock,
having a fair value of $190,197, based upon the quoted closing trading price of
our common stock as of the issuance dates, to directors. The shares vest
annually over a three-year period, subject to continued service as a director on
each applicable vesting date. For the period ended December 31, 2009, we
recognized $24,243 as compensation expense.
During
November 2009, we issued 448,750 shares of our common stock, with a fair value
of $81,750 based on the quoted closing prices, to consultants for services
rendered. This amount was recorded as expense in the period it was
granted.
During
December 2009, we issued 550,000 shares of our common stock, with a fair value
of $114,050 based on the quoted closing prices, to consultants for services
rendered. This amount was recorded as expense in the period it was
granted.
During
November 2009, we granted 5,000,000 warrants to a consultant for services to be
performed. The warrants have an exercise price of $0.23, are
exercisable for three years and vest ratably over a twelve-month
period. The estimated fair value of these stock warrants on their
date of grant was $798,119, which we estimated using the Black-Scholes
option-pricing model using the following assumptions:
Risk-free
interest rate
|
|
|
0.37 |
% |
Expected
dividend yield
|
|
|
0 |
% |
Expected
volatility
|
|
|
189.44 |
% |
Expected
life
|
|
3
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
We
recorded stock based compensation expense of $133,020 during 2009, related to
this award.
During
December 2009, we granted 800,000 fully vested warrants to a consultant for
services. The warrants have an exercise price of $0.50 and are
exercisable for three years. The estimated fair value of these stock
warrants on their date of grant was $236,601, which we estimated using the
Black-Scholes option-pricing model using the following assumptions:
Risk-free
interest rate
|
|
|
1.38 |
% |
Expected
dividend yield
|
|
|
0 |
% |
Expected
volatility
|
|
|
155.99 |
% |
Expected
life
|
|
3
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
We
recorded stock based compensation expense during the period incurred related to
this award.
The
following summarizes our warrant activity for the period from February 14, 2008
through December 31, 2009:
|
Warrants
|
|
Weighted
Average Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Outstanding
– February 14, 2008
(inception)
|
|
|
|
|
|
|
|
Granted
|
8,000,000
|
|
|
|
0.50
|
|
|
Exercised
|
––
|
|
|
|
––
|
|
|
Forfeited
|
––
|
|
|
|
––
|
|
|
Outstanding
– December 31, 2008
|
8,000,000
|
|
|
$
|
0.50
|
|
2.67
|
Granted
|
22,375,003
|
|
|
|
0.32
|
|
|
Exercised
|
—
|
|
|
|
—
|
|
|
Forfeited
or Cancelled
|
(8,575,000
|
)
|
|
|
0.41
|
|
|
Outstanding
– December 31, 2009
|
21,800,003
|
|
|
$
|
0.35
|
|
2.3
|
Exercisable
– December 31, 2009
|
17,816,670
|
|
|
$
|
0..35
|
|
2.3
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
At
December 31, 2009, the total intrinsic value of all warrants outstanding and
exercisable was $-0-.
Stock
Option Grants
On
October 20, 2008, we adopted the 2008 Equity Incentive Plan (the
“Plan”) covering 8,000,000 stock rights including options, restricted stock and
stock appreciation rights. Under the Plan, non-employee directors receive
initial and annual grants of options and restricted stock for their service as a
director and committee member. The initial grants will vest over a three-year
period and the annual grants vest on June 30 of each year, subject to
continued service on the applicable vesting dates.
We
have applied fair value accounting and the related provisions of ASC
718 for all share based payment awards. Fair value of share-based payments
are recognized ratably over the stated vesting period. In the event of
termination, we will cease to recognize compensation expense.
We granted
573,134 non-qualified stock options to contractors and non-employee directors
for services to be rendered. The options are exercisable over a five-year term
at $0.61 per share. Of the total options granted, 373,134 were issued to two
non-employee directors under the terms of the Plan vesting annually in equal
increments over a three-year period. The remaining 200,000 options are fully
vested. These options had an aggregate fair value of $275,964 using the
Black-Scholes option-pricing model. For the year ended December 31,
2009 and the period ended December 31, 2008, we recognized $59,888 and
$11,752, respectively, in expense related to the 373,134 options. The 200,000
fully vested options, had a fair value of $96,300, and were expensed in full
during 2008.
On
October 20, 2008, we granted 250,000 non-qualified stock options to
two non–employee contractors for future services. The options are exercisable
over a five-year term, vesting quarterly in equal installments. These options
are exercisable at $0.30 per share. These options had a fair value of $130,750
using the Black-Scholes option-pricing model. During 2009, all 250,000 options
were cancelled. For the year ended December 31, 2009 and
the period ended December 31, 2008, we recognized $37,046 and $8,553,
respectively, in expense.
On
December 31, 2008, we granted 250,000 non-qualified stock options to
an employee for future services. The options are exercisable over a five-year
term, vesting annually in equal increments over a three-year period. These
options are exercisable at $0.36 per share. These options had a fair value of
$75,225 using the Black-Scholes option-pricing model. For the year
ended December 31, 2009 and the period ended December 31, 2008, we
recognized $25,075 and $0, respectively, in expense.
The total
grant date fair value of the options was $481,939, based upon the use of a
Black-Scholes option-pricing model using the following management
assumptions:
Risk-free
interest rate
|
|
|
1.55%
- 2.82 |
% |
Expected
dividend yield
|
|
|
0 |
% |
Expected
volatility
|
|
|
108%
- 122.7 |
% |
Expected
term
|
|
5
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
During
the second quarter of 2009, we granted options to purchase 250,000 shares of our
common stock at a weighted average exercise price of $0.31 per share to an
employee. The options have a five-year contractual term and vest in equal
quarterly installments over a period of three years. The estimated fair value of
these stock options on their date of grant was $71,100, which we estimated using
the Black-Scholes option-pricing model using the following
assumptions:
Risk-free
interest rate
|
|
|
1.36 |
% |
Expected
dividend yield
|
|
|
0 |
% |
|
|
|
153.55 |
% |
Expected
life
|
|
5
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
For the
year ended December 31, 2009, we recognized $17,117of expense.
During
the fourth quarter of 2009, we granted options to purchase 1,164,709 shares of
our common stock at a weighted average exercise price of $0.28 per share to our
directors. The options have a five-year contractual term and vest in equal
quarterly installments over a period of three years. The estimated fair value of
these stock options on their date of grant was $257,837, which we estimated
using the Black-Scholes option pricing model using the following
assumptions:
Risk-free interest rate
|
|
|
2.31-2.51 |
% |
Expected dividend yield
|
|
|
0 |
% |
Expected volatility
|
|
|
162.60-180.87 |
% |
Expected
life
|
|
5
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
For the
year ended December 31, 2009, we recognized $35,709 of expense.
During
December 2009, we granted options to purchase 10,977,991 shares of our common
stock at a weighted average exercise price of $0.28 per share to our employees.
The options have a five-year contractual term and vest in equal quarterly
installments over a period of four years. The estimated fair value of these
stock options on their date of grant was $2,974,821, which we estimated using
the Black-Scholes option-pricing model using the following
assumptions:
Risk-free
interest rate
|
|
|
2.49 |
% |
Expected
dividend yield
|
|
|
0 |
% |
Expected
volatility
|
|
|
190.48 |
% |
Expected
life
|
|
5
years
|
|
Expected
forfeitures
|
|
|
0 |
% |
For the
year ended December 31, 2009, we recognized $17,993of expense.
The
following table summarizes our stock option activity for the period from
February 14, 2008 through December 31, 2009:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
– February 14, 2008 (inception)
|
|
––
|
|
|
––
|
|
|
|
|
|
|
|
Granted
|
|
|
1,073,134 |
|
|
$ |
0.48 |
|
|
|
|
|
|
|
Exercised
|
|
|
–– |
|
|
$ |
–– |
|
|
|
|
|
|
|
Forfeited
|
|
|
–– |
|
|
$ |
–– |
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
1,073,134 |
|
|
$ |
0.48 |
|
|
|
4.8 |
|
|
|
— |
|
Granted
|
|
|
12,392,700 |
|
|
|
0.28 |
|
|
|
|
|
|
|
|
|
Forfeited
or Cancelled
|
|
|
(250,000
|
) |
|
|
0.30 |
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2009
|
|
|
13,215,834 |
|
|
$ |
0.45 |
|
|
|
4.8 |
|
|
$ |
— |
|
Exercisable
at December 31, 2009
|
|
|
483,937 |
|
|
$ |
0.40 |
|
|
|
4.0 |
|
|
$ |
— |
|
The
following table summarizes our stock option activity for non-vested options for
the period from February 14, 2008 through December 31, 2009:
|
Number of Options
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding
– February 14, 2008 (inception)
|
—
|
|
|
|
—
|
|
Granted
|
1,073,134
|
|
|
|
0.45
|
|
Vested
|
(200,000
|
)
|
|
|
0.48
|
|
Cancelled
or Forfeited
|
—
|
|
|
|
—
|
|
Outstanding
– December 31,
2008
|
873,134
|
|
|
$
|
0.44
|
|
Granted
|
12,392,700
|
|
|
$
|
0.27
|
|
Vested
|
(283,937
|
)
|
|
$
|
0.35
|
|
Cancelled
or Forfeited
|
(250,000
|
)
|
|
$
|
0.52
|
|
Outstanding
– December 31, 2009
|
12,731,897
|
|
|
$
|
0.28
|
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
weighted-average grant date fair value of options granted during year ended
December 31, 2009 was $0.27. Total unamortized compensation expense related to
stock options at December 31, 2009 amounted to $3,474,589 and is expected to be
recognized over a weighted average period of 2.9 years.
On March
10, 2010, Money4Gold increased the aggregate number of shares of common stock,
which may be issued pursuant to the 2008 Equity Incentive Plan from 8,000,000 to
27,000,000.
Note 11 – Income
Taxes
We
recognized deferred tax assets and liabilities for both the expected impact of
differences between the financial statements and the tax basis of assets and
liabilities, and for the expected future tax benefit to be derived from tax
losses and tax credit carry forwards. We have established a valuation allowance
to reflect the likelihood of realization of deferred tax
assets.
The
domestic and foreign components of our consolidated net loss are as
follows:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Domestic
loss
|
|
$ |
(4,142,930 |
) |
|
$ |
(3,059,608 |
) |
Foreign
income (loss)
|
|
|
87,801 |
|
|
|
(150,000 |
) |
Consolidated
Net loss
|
|
$ |
(4,055,129 |
) |
|
$ |
(3,209,608 |
) |
The
valuation allowance at December 31, 2008 was approximately $748,000. The net
change in valuation allowance during the year ended December 31, 2009 was an
increase of approximately $735,000. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that, some
portion or all of the deferred income tax assets will not be realized. The
ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based on consideration of these
items, management has determined that enough uncertainty exists relative to the
realization of the deferred income tax asset balances to warrant the application
of a full valuation allowance as of December 31, 2009.
We have a
net operating loss carry forward for tax purposes totaling approximately
$3,900,000 at December 31, 2009, expiring through 2029. There is a limitation on
the amount of taxable income that can be offset by carry forwards after a change
in control (generally greater than a 50% change in
ownership). Temporary differences, which give rise to a net deferred
tax asset, are as follows:
Significant
deferred tax assets are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
Non-current
deferred tax assets:
|
|
|
|
|
|
|
Tax
loss carryover
|
|
$ |
1,483,000 |
|
|
$ |
748,000 |
|
Valuation
allowance
|
|
|
(1,483,000 |
) |
|
|
(748,000 |
) |
Net
deferred tax assets
|
|
$ |
- |
|
|
$ |
- |
|
The
actual tax benefit differs from the expected tax benefit for the year ended
December 31, 2009 and the period ended December 2008 (computed by applying the
U.S. Federal Corporate tax rate of 34% to income before taxes and 5.5% for State
income taxes, a blended rate of 37.63%) as follows:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Expected
tax expense (benefit) - federal
|
|
|
(1,303,000 |
) |
|
|
(1,031,000 |
) |
Expected
tax expense (benefit) - state
|
|
|
(224,000 |
) |
|
|
(176,000 |
) |
Registration
rights penalty
|
|
|
82,000 |
|
|
|
— |
|
Loss
on settlement of debt
|
|
|
207,000 |
|
|
|
— |
|
Change
in fair value of derivative liability - embedded conversion
feature
|
|
|
21,000 |
|
|
|
— |
|
Warrant
expense arising from repricing of investor warrants
|
|
|
22,000 |
|
|
|
— |
|
Gain
on settlement of accounts payable
|
|
|
(8,000 |
) |
|
|
— |
|
Stock
based compensation
|
|
|
341,000 |
|
|
|
404,000 |
|
Amortization
of debt discount
|
|
|
26,000 |
|
|
|
— |
|
Amortization
of stock issued for prepaid asset - related party
|
|
|
71,000 |
|
|
|
54,000 |
|
Meals
and entertainment
|
|
|
30,000 |
|
|
|
1,000 |
|
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
Change
in Valuation Allowance
|
|
|
735,000 |
|
|
|
748,000 |
|
Actual
tax expense (benefit)
|
|
$ |
- |
|
|
$ |
- |
|
There was
no provision on the foreign income as the expense was
nominal.
Note 12 – Related Party
Transactions
Refinery
On
June 1, 2008, we entered into an agreement (“Service Agreement”) with
Republic Metals Corporation, (the “Refinery”), whereby we agreed to sell all of
our precious metals in the United States exclusively to the Refinery and the
Refinery agreed to refrain from entering into a relationship with any third
party that is similar to our relationship with them. The agreement is for an
initial term of 5 years. As consideration for this agreement, we issued to the
Refinery 3,187,143 (as retroactively restated to take into account the effects
of the recapitalization) fully vested shares of our common stock valued at
$1,230,000. In
determining the fair value of the stock issuance, we considered factors such as
our status as a private entity at the time of the share issuance, we used
various valuation techniques incorporating elements of: (i) enterprise value,
(ii) present value of discounted cash flows, (iii) forecasts and projections
based upon then limited current and actual historical data, (iv) valuation of
our private placement occurring at the same time as the reverse acquisition
closing with EPS, (v) as well as consideration of discounts to market for lack
of marketability, SEC Rule 144 restrictions subject to registration rights
agreements and other reasonable market factors and (vi) financial measures for
an entity that was non-operational at the time of the share
issuance. Of the total $1,230,000, we ascribed $938,135 to
prepaid refining services, which is being amortized into cost of revenue on a
straight line basis over the term of the agreement, and we ascribed $291,865 to
an intangible asset, representing the value of the non-compete agreement, which
is being amortized into depreciation and amortization on a straight
line basis over the term of the agreement. In addition, we lease space for our
United States processing center on a month-to-month basis from the
Refinery. An officer of the Refinery is a member of our Board of
Directors.
During
the year ended December 31, 2009 and the period from February 14, 2008
(inception) to December 31, 2008, we recorded $187,627 and $109,449,
respectively, for the amortization of prepaid refining services; and $58,359 and
$34,051, respectively, for the amortization of the non-compete
agreement.
Marketing
Services
We
purchase online marketing and lead generation services from a company in which
our President is a 50% shareholder. Our pricing is calculated at a 10%
markup to their cost, capped at $1.50 per lead. This markup is exclusively
for the unrelated 50% shareholders. Our President does not share in any
profits earned by this vendor for services rendered to us.
During
the year ended December 31, 2009 and the period from February 14, 2008
(inception) to December 31, 2008, we recorded $2,395,874 and $1,368,488,
respectively, of marketing expense pertaining to this vendor.
Note 13 – Geographic
Information
We
currently generate revenue exclusively from the sale of precious metals,
including gold, silver and platinum, and from the sale of diamonds and other
precious stones. Our operations in each of our markets exhibit
similar financial performance metrics and have similar economic
characteristics. As such, we have aggregated our operations around
the world into a single operating segment.
Below is
a summary of our revenue and total assets by geographic region as of and for the
periods indicated:
|
|
United States
|
|
|
Canada
|
|
|
Europe
|
|
|
Consolidated
|
|
Revenue
for the year ended December 31, 2009
|
|
$ |
9,959,648 |
|
|
$ |
5,749,353 |
|
|
$ |
13,289,981 |
|
|
$ |
28,998,982 |
|
Total
Assets at December 31, 2009
|
|
|
13,143,253 |
|
|
|
558,884 |
|
|
|
1,385,300 |
|
|
|
15,087,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
for the period from February 14, 2008 (Inception) to December 31,
2008
|
|
$ |
1,561,444 |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,561,444 |
|
Total
Assets at December 31, 2008
|
|
|
2,270,063 |
|
|
|
— |
|
|
|
— |
|
|
|
2,270,063 |
|
Note 14 – Subsequent
Events
We
evaluated subsequent events between the balance sheet date of December 31, 2009
through March 31, 2010, which represents the date the Consolidated Financial
Statements were issued.
Money4Gold
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
In
January 2010, a relative of our Chief Financial Officer converted 3,000,000
shares of our Convertible Series A Preferred Stock into 3,000,000 shares of our
common stock.
On March
31, 2010, we closed on a private placement transaction whereby we raised
$1,118,333 from the sale of 5,591,665 shares of our common stock at $0.20 per
share. Of this amount, we have received $668,333 as of March 31, 2010 and the
balance is expected to be received in full by April 9, 2010. Included in this
private placement was an investment of $50,000 by Doug Feirstein, our Chief
Executive Officer and an investment of $25,000 from Michael Moran, our Vice
President of Corporate Development. In addition, as part of this
offering, Todd Oretsky, our former Chief Operating Officer, sold a number of
shares equal to the number of shares sold by us at $0.10 per share.
In
connection with this private placement transaction, we are required to file a
registration statement with the SEC within 45 days of closing, or liquidated
damages will be assessed. Liquidated damages are payable at our
option in cash or in shares of our common stock at fair market value and are
calculated as 1% of the total amount invested for each 30 day period, beginning
after the 45 day requirement, for which the shares remain unregistered, up to a
maximum of six months.
INFORMATION
NOT REQUIRED IN PROSPECTUS
Other
Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses payable by us in connection
with the issuance and distribution of the securities being registered
hereunder. No expenses shall be borne by the selling
shareholders. All of the amounts shown are estimates, except for the
SEC Registration Fees.
SEC
registration fees
|
|
$ |
113 |
|
Printing
expenses
|
|
$ |
1,000 |
|
Accounting
fees and expenses
|
|
$ |
3,000 |
|
Legal
fees and expenses
|
|
$ |
30,000 |
|
Blue
sky fees
|
|
$ |
1,000 |
|
Miscellaneous
|
|
$ |
500 |
|
Total
|
|
$ |
35,613 |
|
Indemnification
of Directors and Officers.
Section
145 of the Delaware General Corporation Law provides a corporation with the
power to indemnify any officer or director acting in his capacity as our
representative who is or is threatened to be made a party to any lawsuit or
other proceeding for expenses, judgment and amounts paid in settlement in
connection with such lawsuit or proceeding. The indemnity provisions apply
whether the action was instituted by a third party or was filed by one of our
shareholders. The Delaware General Corporation Law provides that Section 145 is
not exclusive of other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise. We have entered into
Indemnification Agreements with our officers and directors providing for
indemnification and containing an advancement of expenses
provision. Delaware law generally provides that a corporation shall
have such power to indemnify such persons to the extent they acted in good faith
in a manner they reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was
unlawful. In the event any such person shall be judged liable such
indemnification shall apply only if approved by the court in which the action
was brought. Any other indemnification shall be made by a majority
vote of the Board (excluding any directors who were party to such action), or by
a committee of directors designated by majority vote of the Board or by
independent legal counsel in a written opinion, or by a majority vote of
shareholders (excluding any shareholders who were parties to such
action).
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Upstream pursuant to the
foregoing provisions, we have been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Recent
Sales of Unregistered Securities.
In
addition to those unregistered securities previously disclosed in reports filed
with the SEC, we have sold securities without registration under the Securities
Act, as described below.
Name
or Class
of
Investor
|
|
Date
Sold
|
|
No. of
Securities
|
|
Consideration
|
Vendor
(1)
|
|
May
26, 2010
|
|
629,396
shares of common stock
|
|
Settlement
of outstanding payable
|
Vendor
(1)
|
|
May
26, 2010
|
|
611,079
shares of common stock
|
|
Settlement
of outstanding payable
|
Vendor
(1)
|
|
June
15, 2010
|
|
1,818,182
shares of common stock
|
|
Settlement
of outstanding
payable
|
(1)
Exemption under Section 4(2) of the Securities Act.
Exhibits
and Financial Statement Schedules.
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed or
Furnished
|
No.
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Share
Exchange Agreement dated July 23, 2008 **
|
|
8-K
|
|
7/29/08
|
|
2.1
|
|
|
2.2
|
|
Share
Exchange Agreement dated May 5, 2009 **
|
|
10-Q
|
|
8/19/09
|
|
2.2
|
|
|
3.1
|
|
Certificate
of Incorporation
|
|
10-QSB
|
|
6/7/06
|
|
3.I
|
|
|
3.2
|
|
Certificate
of Amendment – Increase in Capital
|
|
10-QSB
|
|
6/7/06
|
|
3.1
|
|
|
3.3
|
|
Certificate
of Amendment – Effective Profitable Software
|
|
10-QSB
|
|
6/7/06
|
|
3.1
|
|
|
3.4
|
|
Certificate
of Amendment – Money4Gold Holdings, Inc.
|
|
8-K
|
|
7/29/08
|
|
3.1
|
|
|
3.5
|
|
Certificate
of Amendment – Increase in Capital
|
|
10-K
|
|
3/31/10
|
|
3.5
|
|
|
3.6
|
|
Certificate
of Correction
|
|
10-Q
|
|
11/19/08
|
|
3.2
|
|
|
3.7
|
|
Certificate
of Amendment – Increase in Capital
|
|
10-Q
|
|
8/19/09
|
|
3.3
|
|
|
3.8
|
|
Certificate
of Amendment – Upstream Worldwide, Inc.
|
|
|
|
|
|
|
|
Filed
|
3.9
|
|
Amended
and Restated Bylaws
|
|
10-Q
|
|
5/20/09
|
|
3.3
|
|
|
5.1
|
|
Legal
Opinion of Harris Cramer LLP
|
|
|
|
|
|
|
|
Filed
|
10.1
|
|
Agreement
with Republic Metals Corporation
|
|
10-K
|
|
4/15/09
|
|
10.1
|
|
|
10.2
|
|
Services
Agreement with LeadCreations.com, LLC
|
|
10-K
|
|
4/15/09
|
|
10.5
|
|
|
10.3
|
|
Letter
Agreement with LeadCreations.com, LLC
|
|
10-Q
|
|
11/16/09
|
|
10.3
|
|
|
10.4
|
|
Employment
Agreement with Douglas Feirstein *
|
|
10-Q
|
|
8/19/09
|
|
10.4
|
|
|
10.5
|
|
Amendment
to Douglas Feirstein Employment Agreement dated December 1,
2009*
|
|
10-K
|
|
3/31/10
|
|
10.5
|
|
|
10.6
|
|
Employment
Agreement with Daniel Brauser *
|
|
8-K
|
|
7/29/08
|
|
10.2
|
|
|
10.7
|
|
Amendment
to Daniel Brauser Employment Agreement dated May 5, 2009*
|
|
10-Q
|
|
8/19/09
|
|
10.7
|
|
|
10.8
|
|
Amendment
to Daniel Brauser Employment Agreement dated December 1,
2009*
|
|
10-K
|
|
3/31/10
|
|
10.8
|
|
|
10.9
|
|
Employment
Agreement with Hakan Koyuncu *
|
|
8-K
|
|
7/29/08
|
|
10.1
|
|
|
10.10
|
|
Amendment
to Hakan Koyuncu Employment Agreement dated May 5, 2009*
|
|
10-Q
|
|
8/19/09
|
|
10.6
|
|
|
10.11
|
|
Amendment
to Hakan Koyuncu Employment Agreement dated December 1, 2009
*
|
|
10-K
|
|
3/31/10
|
|
10.11
|
|
|
10.12
|
|
Employment
Agreement with Todd Oretsky *
|
|
10-Q
|
|
8/19/09
|
|
10.5
|
|
|
10.13
|
|
Amendment
to Todd Oretsky Employment Agreement dated December 1, 2009
*
|
|
10-K
|
|
3/31/10
|
|
10.13
|
|
|
10.14
|
|
Oretsky
Severance, Consulting and Release Agreement*
|
|
10-K
|
|
3/31/10
|
|
10.14
|
|
|
10.15
|
|
2008
Equity Incentive Plan*
|
|
10-Q
|
|
5/20/09
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4.1
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10.16
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Amendment
to the 2008 Equity Incentive Plan |
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10-Q
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5/14/10
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10.2
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10.17
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Stockholders
Agreement
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10-Q
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8/19/09
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10.3
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10.18
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Accounts
Payable Credit Agreement – LeadCreations
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10-K
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3/31/10
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10.20
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10.19
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Form
of Securities Purchase Agreement – 2010 Private Placement
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10-Q
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5/14/10
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10.3
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10.20
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Form
of Registration Rights Agreement – 2010 Private Placement
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10-Q
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5/14/10
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10.4
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21.1
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List
of Subsidiaries
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10-K
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3/31/10
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21.1
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23.1
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Consent
of Berman & Company, P.A.
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Filed
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23.2
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Consent
of Harris Cramer LLP
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Filed***
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*Management compensatory agreement.
**The
confidential disclosure schedules are not filed in accordance with SEC Staff
policy, but will be provided to the Staff upon request. Certain
material agreements contain representations and warranties, which are qualified
by the following factors:
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(i)
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the
representations and warranties contained in any agreements filed with this
prospectus were made for the purposes of allocating contractual risk
between the parties and not as a means of establishing
facts;
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(ii)
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the
agreement may have different standards of materiality than standards of
materiality under applicable securities
laws;
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(iii)
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the
representations are qualified by a confidential disclosure schedule that
contains nonpublic information that is not material under applicable
securities laws;
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(iv)
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facts
may have changed since the date of the agreements;
and
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(v)
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only
parties to the agreements and specified third-party beneficiaries have a
right to enforce the agreements.
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Notwithstanding
the above, any information contained in a schedule that would cause a reasonable
investor (or that a reasonable investor would consider important in making a
decision) to buy or sell our common stock has been included. We have
been further advised by our counsel that in all instances the standard of
materiality under the federal securities laws will determine whether or not
information has been omitted; in other words, any information that is not
material under the federal securities laws may be
omitted. Furthermore, information which may have a different standard
of materiality will nonetheless be disclosed if material under the federal
securities laws.
*** Contained
in Exhibit 5.1.
Undertakings.
(a)
The undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
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(i)
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To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
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(ii)
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To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee table in
the effective registration
statement.
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(iii)
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To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
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(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
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(i)
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If
the registrant is relying on Rule
430B:
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(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5),
or (b)(7) as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose
of providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for
liability purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement
to which that prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof. Provided,
however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such effective date; or
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(ii)
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If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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(b)
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Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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(c)
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The
undersigned registrant hereby
undertakes:
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(1) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, has duly caused
this registration statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Ft. Lauderdale, State of Florida, on
June 22, 2010.
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|
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By:
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/s/ Douglas
Feirstein
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Douglas
Feirstein
|
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Chief
Executive Officer
(Principal
Executive Officer)
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In
accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
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/s/ Daniel Brauser
|
|
|
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Daniel
Brauser
|
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Chief
Financial Officer (Principal Financial Officer) and
Director
|
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June
22, 2010
|
|
|
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/s/ Michael
Brachfeld
|
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Michael
Brachfeld
|
|
Chief Accounting
Officer (Principal Accounting Officer)
|
|
June
22, 2010
|
|
|
|
|
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/s/ Scott Frohman
|
|
|
|
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Scott
Frohman
|
|
Director
|
|
June
22, 2010
|
|
|
|
|
|
/s/
Douglas Feirstein
|
|
|
|
|
Douglas
Feirstein
|
|
Director
|
|
June
22, 2010
|
|
|
|
|
|
|
|
|
|
|
Grant
Fitzwilliam
|
|
Director
|
|
|
|
|
|
|
|
|
|
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|
|
Hakan
Koyuncu
|
|
Director
|
|
|
/s/ Charles Pearlman
|
|
|
|
|
Charles
Pearlman
|
|
Director
|
|
June
22, 2010
|
|
|
|
|
|
|
|
|
|
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Jason
Rubin
|
|
Director
|
|
|
EXHIBIT
INDEX
3.8
|
Certification
of Amendment - Upstream Worldwide,
Inc.
|
5.1
|
Legal
Opinion of Harris Cramer
LLP
|
23.1
|
Consent
of Berman & Company,
P.A.
|
23.2
|
Consent
of Harris Cramer LLP
|