UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange
Act Of 1934
For the quarterly period ended March 31, 2011
[ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act Of 1934
For the transition period from __________ to __________
Commission File Number: 000-53316
IMAGINE MEDIA, LTD.
(Exact name of registrant as specified in its charter)
Delaware 26-0731818
------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
7750 N. Union Blvd., # 201
Colorado Springs, CO 80920
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(Address of principal executive offices, including Zip Code)
719-266-4554
----------------------------
(Issuer's telephone number, including area code)
(Former name or former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ??[x] No ??
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer," "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes? [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,410,650 shares of common stock as
of May 1, 2011.
Imagine Media, Ltd. And Subsidiary
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Quarter Ended March 31, 2011
Imagine Media, Ltd. And Subsidiary
Consolidated Condensed Financial Statements
(Unaudited)
TABLE OF CONTENTS
Page
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidated condensed balance sheets 1
Consolidated condensed statements of operations 2
Consolidated condensed statement of shareholders' deficit 3
Consolidated condensed statements of cash flows 4
Notes to consolidated condensed financial statements 5-7
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Balance Sheets
March 31, December 31,
2011 2010
---------- ---------------
(unaudited) (Derived from
audited financial
statements)
Assets
Current assets:
Cash and cash equivalents $ 37 $ 83
---------- -----------
Total current assets 37 83
---------- -----------
Total assets $ 37 $ 83
========== ===========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable:
Trade creditors $ 103,359 $ 101,555
Related party 3,000 3,000
Short term advance 17,300 17,300
Indebtedness to related parties 39,440 39,440
Convertible debenture 30,000 30,000
Accrued interest payable 8,400 7,500
Other accrued expenses 9,227 3,082
---------- -----------
Total current liabilities 210,726 201,877
---------- -----------
Commitments - -
Shareholders' deficit
Common stock , $.00001 par value.
Authorized 100,000,000 shares,
1,410,650 shares issued and
outstanding 14 14
Additional paid-in capital 487,276 487,276
Retained deficit (697,979) (689,084)
---------- -----------
Total shareholders' deficit (210,689) (201,794)
---------- -----------
Total liabilities and
shareholders' deficit 37 83
========== ===========
The accompanying notes are an integral part of these financial statements
1
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statements of Operations
(unaudited)
For the Three Months Ended
March 31,
-------------------------------------
2011 2010
--------------- ---------------
Net sales and gross revenues:
Advertising sales, net of
discount of $0 and $0, respectively - -
---------- -----------
Total sales and revenues - -
---------- -----------
Operating expenses:
Editorial, production and
circulation - -
Selling, general and
administrative 7,996 10,974
---------- -----------
Total operating expenses 7,996 10,974
---------- -----------
Loss from operations (7,996) (10,974)
Other income (expense):
Interest expense (900) (900)
---------- -----------
Loss before income taxes (8,896) (11,874)
Income tax provision - -
---------- -----------
Net loss $ (8,896) $ (11,874)
========== ===========
Basic and diluted loss per share $ (0.01) $ (0.01)
========== ===========
Weighted average common shares
outstanding 1,410,650 1,400,650
========== ===========
The accompanying notes are an integral part of these financial statements
2
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statement of Changes in Shareholders' Deficit
(Unaudited)
Common Stock
-------------------------------- Additional Retained
Shares Par Value Paid-in Capital Deficit Total
---------------- -------------- --------------- ----------- -------------
Balance at December 31, 2008 1,122,650 $ 11 $ 392,779 $ (541,052) $ (148,262)
Conversions of accounts payable to
common stock (Notes 2 & 3) 104,000 1 25,999 - 26,000
Conversions of short term advances
and accrued interest to common 111,400 1 27,849 - 27,850
stock (Notes 2 & 3)
Conversions of indebtedness to
related parties to common stock (Note 2) 42,600 1 10,649 - 10,650
Net loss - - - (77,705) (77,705)
---------- --------- ---------- ---------- ----------
Balance at December 31, 2009 1,380,650 14 457,276 (618,757) (161,467)
Conversions of indebtedness to
related parties to common
stock (Note 2) 30,000 - 30,000 - 30,000
Net loss - - - (70,327) (70,327)
---------- --------- ---------- ---------- ----------
Balance at December 31, 2010 1,410,650 $ 14 $ 487,276 $ (689,084) $ (201,794)
========== ========= ========== ========== ==========
Net loss (8,896) (8,896)
---------- --------- ---------- ---------- ----------
Balance at March 31, 2011 1,410,650 $ 14 $ 487,276 $ (697,980) $ (210,690)
========== ========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements
3
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statements of Cash Flows
(unaudited)
For the Three Months Ended
March 31,
----------------------------
2011 2010
------- --------
Cash flows from operating activities:
Net loss $ (8,896) $(11,874)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock issued to Directors' in
exchange for services -
Changes in assets and liabilities:
Receivables - -
Other assets - -
Accounts payable 1,804 4,009
Accrued expenses 7,045 900
-------- --------
Net cash used in operating activities (47) (6,965)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock - -
Proceeds from related party short term
advances - 6,950
Repayments on related party short term
advances - -
Proceeds from other short term advances - -
Repayments on other short term advances - -
-------- --------
Net cash provided by financing activities - 6,950
-------- --------
Net change in cash and cash equivalents (47) (15)
Cash and equivalents:
Beginning of period 83 94
-------- --------
End of period $ 37 $ 79
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ - $ -
======== ========
Interest $ - $ -
======== ========
Supplemental disclosure of non-cash
financing activities:
Stock issued as payment of liability for
services performed during 2009 $ - $ 30,000
======== ========
The accompanying notes are an integral part of these financial statements
4
IMAGINE MEDIA, LTD.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Unaudited Financial Information
The accompanying consolidated condensed financial statements of Imagine Media,
Ltd. (the "Company") are unaudited and have been prepared in accordance with the
instructions to quarterly reports on Form 10-Q. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
financial position at March 31, 2011, and for all periods presented, have been
made. Certain information and footnote data necessary for a fair presentation of
financial position and results of operations in conformity with accounting
principles generally accepted in the United States of America have been
condensed or omitted. It is therefore suggested that these financial statements
be read in conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission (the "SEC") for the year
ended December 31, 2010. The results of operations for the period ended March
31, 2011 are not necessarily an indication of operating results for the full
year.
(2) Going Concern
As shown in the accompanying financial statements, the Company has incurred
operating losses and, at March 31, 2011, had both a working capital deficit and
a net capital deficiency of $(210,689). These factors may indicate that the
Company will be unable to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet obligations on a timely basis
and ultimately to attain profitability. To do this, the Company is seeking to
acquire another business which, as of March 31, 2011, had not occurred. However,
management plans, in the near-term, to (1) restructure debt and (2) increase
ownership equity in order to increase working capital. There is, of course, no
assurance that management will be successful in those efforts. The Company's
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
In their report on the Company's financial statements for the year ended
December 31, 2010, the Company's independent auditors expressed substantial
doubt as to the Company's ability to continue as a going concern.
(3) Related Party Transactions
On February 10, 2010 the Company's board of directors authorized the issuance of
10,000 shares to each of the Company's three directors for services to the
Company during 2009.
The shares were valued at $1.00 per share resulting in total compensation
expense of $30,000, which was recorded as stock based compensation for the year
ended December 31, 2009.
5
(3) Related Party Transactions (cont'd)
Indebtedness to related parties
During the year ended December 31, 2008, an affiliate controlled by a
shareholder advanced $16,000 to the Company for working capital purposes. As of
December 31, 2008 the Company had repaid a total of $4,000 of these cash
advances. In addition, the affiliate made a direct advance to the Company of
$650, which remained unpaid at December 31, 2008. On March 1, 2009, $10,650 of
the advances was converted to 42,600 shares of common stock at a conversion
price of $.25 per share, the fair value of the stock on the conversion date. At
March 31, 2011, $2,000 of the working capital advance was unpaid.
During the years ended December 31, 2010 and 2009, a shareholder advanced the
Company $4,740 and $7,100, respectively. At March 31, 2011, the entire $11,840
balance remained unpaid.
During the years ended December 31, 2010 and 2009, a shareholder advanced the
Company $100 and $8,000, respectively. At March 31, 2011, the entire $8,100
balance remained unpaid.
During the years ended December 31, 2010 and 2009, an affiliate controlled by a
shareholder advanced the Company $2,500 and $3,000, respectively. At March 31,
2011, the entire $5,500 balance remained unpaid.
In June 2009, an affiliate controlled by a shareholder advanced the Company a
total of $12,000, which remained unpaid at March 31, 2011.
None of the advances earn interest and are payable to the holder on demand.
(4) Convertible Debenture and Short term advances
On October 1, 2008 the Company issued an 8% Convertible Debenture to an attorney
in exchange for $30,000 owed to the attorney for prior services. The Debenture
is convertible by the holder into shares of the company's common stock at a
conversion price of $0.25.
The debenture matured April 1, 2009. Upon default of the debenture, the default
interest rate of 12% was effective. As of March 31, 2011 the debenture, together
with $8,400 of accrued interest, had neither been converted nor paid.
During the year ended December 31, 2008 the Company received $15,000 from a
non-affiliate as a short term advance. During the first quarter of 2009 an
additional $150 was advanced to the Company by the same non-affiliate. On March
1, 2009 the total of $15,150 together with accrued interest of $200 was
converted to 61,400 shares of common stock at a conversion price of $.25 per
share, the fair value of the stock on the conversion date. During the year ended
December 31, 2009, this non-affiliate advanced the Company an additional $6,000
to be used for working capital purposes. During the year ended December 31,
2010, the non-affiliate advanced another $11,300 to the
6
(4) Convertible Debenture and Short term advances (cont'd)
Company. As of March 31, 2011 the $17,300 payable to the non-affiliate was due
on demand.
(5) Equity
Common stock
Upon the effectiveness on July 14, 2008 of the Registration Statement filed with
the SEC by Imagine Media, Ltd. ("Media"), Imagine Holdings Corp. ("Holdings")
has completed the spin-off of its magazine business to its shareholders of
record as of August 23, 2007. The transaction was effected by the issuance of
992,650 shares of Media $0.00001 par value common stock to Holdings in exchange
for certain assets, subject to liabilities, of Holdings, consisting primarily of
its 60 percent of the issued and outstanding common stock of Imagine Operations,
Inc. ("Operations").
On February 10, 2010 Directors' were issued 30,000 shares of the Company's
common stock valued at $1.00 per share or $30,000.
(6) Trademark Contingency
The Company has learned that a third party in Orange County, CA publishes a
regional magazine under the name "Image Magazine." The publisher of the
California-based Image Magazine has registered the trademark "Image Magazine"
with the United States Patent and Trademark Office, which trademark registration
was issued in 2006, and also owns and uses the domain name "imagemagazine.com".
Preliminary contact with the principals of the California-based magazine has
been made in an effort to resolve our conflicting uses of the same trademark and
have agreed in principle to resolve the matter through the execution of a
trademark license; however, no assurance can be given that such a license can be
finalized. Management does not expect this potential infringement issue to have
a material impact due to the Company's discontinuation of its publishing
operations.
(7) Subsequent Event
In April 2011 the Company entered into a tentative agreement to acquire
Transbiotec, Inc. ("TBT") in exchange for 23,557,810 shares of the Company's
common stock.
TBT has developed and patented a sensor that detects blood alcohol levels
through a person's skin. The system senses ethanol excreted through
perspiration. If alcohol is detected, a signal is sent to a vehicle's ignition
control system which prevents the vehicle from starting. TBT has developed a
prototype of the sensor and has completed beta testing of the device.
7
(7) Subsequent Event (cont'd)
Initially, TBT intends to offer its sensor only for commercial vehicle
applications. Later, TBT plans to market its sensor to the public for use in
automobiles, SUV's, RV's, boats and other vehicles.
Completion of the Company's acquisition of TBT is subject to the satisfaction of
several conditions including without limitation, the execution of a definitive
agreement, the satisfactory completion of due diligence by both parties, and the
completion of an audit of TBT's financial statements. There can be no assurance
that the transaction will be consummated.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operation
The Company was formed in August 2007 to publish and distribute Image
Magazine, a monthly guide and entertainment source for the Denver, Colorado
area. The Company generated only limited revenue and essentially abandoned its
business plan in January 2009.
In October 2010 the Company entered into an agreement to acquire JAKK'D
Holdings, LLC, and a related entity, for 17,245,000 shares of the Company's
common stock. In January 2011 the Company and JAKK'd Holdings, LLC agreed to
terminate the agreement.
In April 2011 the Company entered into a tentative agreement to acquire
Transbiotec, Inc. ("TBT") in exchange for 23,557,810 share of the Company's
common stock.
TBT, headquartered in Seal Beach, California, has developed and patented a
high technology, state-of-the-art transdermal sensor, that detects blood alcohol
levels through a person's skin. Ethanol is produced as alcohol is ingested and
metabolized in the body. The system senses ethanol excreted through
perspiration. A person places their finger on the sensor, and within 5-8
seconds, the sensor will detect the ethanol level. A signal can then be sent to
output devices that control the ignition in a vehicle to prevent it from
starting. The system can also communicate with other devices such as a GPS unit,
or cell phone.
The TBT system is unobtrusive, accurate, reliable, durable, low cost,
easier to use and faster than the current breathalyzer applications. TBT has
completed its beta testing of the sensor and is currently developing its
manufacturing capability.
Initially, TBT intends to offer its sensor only for commercial vehicle
applications. Later, TBT plans to market its sensor to the public for use in
automobiles, SUV's, RV's, boats and other vehicles.
Completion of the Company's acquisition of TBT is subject to the
satisfaction of several conditions including without limitation, the execution
of a definitive agreement, the satisfactory completion of due diligence by both
parties, and the completion of an audit of TBT's financial statements. There can
be no assurance that the transaction will be consummated.
As of March 31, 2011 the Company had liabilities of approximately $210,726.
The Company plans to pay its liabilities with cash, shares of its common stock,
or a combination of both. The Company does not have any agreements or
commitments from any third party to provide the Company with any capital.
Item 4. Controls and Procedures.
(a) The Company maintains a system of controls and procedures designed to
ensure that information required to be disclosed in reports filed or submitted
under the Securities Exchange Act of 1934, as amended ("1934 Act"), is recorded,
processed, summarized and reported, within time periods specified in the SEC's
9
rules and forms and to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act, is
accumulated and communicated to the Company's management, including its
Principal Executive and Financial Officer, as appropriate to allow timely
decisions regarding required disclosure. As of March 31, 2011, the Company's
Principal Executive and Financial Officer evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Principal Executive and Financial Officer concluded that
the Company's disclosure controls and procedures were effective.
(b) Changes in Internal Controls. There were no changes in the Company's
internal control over financial reporting during the quarter ended March 31,
2011, that materially affected, or are reasonably likely to materially affect,
its internal control over financial reporting.
PART II
Item 6. Exhibits
Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMAGINE MEDIA, LTD.
May 20, 2011 By:/s/ Gregory A. Bloom
-------------------------------
Gregory A. Bloom, Principal Executive and
Financial Officer