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UOMO MEDIA INC.
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UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED JULY 31, 2009 AND 2008
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(Amounts expressed in US Dollars)
|
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|
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For the
Three
Months
Ended
30-Jul-09
|
For the
Three Months
Ended
31-Jul-08
|
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Cash Flows from Operating Activities
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|
|
|
|
Net Loss
|
|
$(77,310)
|
$(104,169)
|
|
Adjustments made to reconcile net loss to net cash
|
|
|
|
|
from Operating activities
|
|
|
|
|
Amortization
|
|
-
|
1,478
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|
Amortization of Stock Based Compensation
|
|
23,204
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14,370
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Imputed interest on Note Payable
|
|
1,171
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1,662
|
|
Changes in operating assets and liabilities
|
|
|
|
|
Decrease in other receivable
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-
|
1,646
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|
Decrease/(increase) in accounts receivable
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(52,524)
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(287,895)
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Increase in advances
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40,930
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243,493
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Increase in accounts payable and accruals
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|
36,232
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308,811
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Increase in other payables
|
|
13,337
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16,408
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Cash flows provided by (used in) operating activities
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(14,960)
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195,804
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Cash Flows from Investing Activities
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Purchase of 15% share ownership in ticketing company
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(6,961)
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-
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Purchase of publishing catalogue
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(60,554)
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(210,000)
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Cash flows used in investing activities
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(67,515)
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(210,000)
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Cash Flows from Financing Activities
|
|
|
|
|
Note Payable
|
|
210,989
|
55,000
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|
Cash flows provided by financing activities
|
|
210,989
|
55,000
|
|
Increase in cash and cash equivalents
|
|
128,514
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40,804
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Cash and cash equivalents, beginning of period
|
|
16,321
|
11,087
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Cash and cash equivalents, end of period
|
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$144,835
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$51,891
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The accompanying condensed notes form an integral part of these unaudited interim consolidated financial statements.
- 9 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 1. ORGANIZATION, DESCRIPTION OF BUSINESS, DISCONTINUED OPERATIONS
AND BASIS OF PRESENTATION
UOMO Media Inc. (the “Company”) was incorporated under the laws of the State of Nevada on June 10, 2004 as First Source Data, Inc. and its business operations are primarily in Canada.
Prior to September 25, 2007, the Company was a marketing management and consulting service provider. The Company was in the development stage with its main objective being the development and commercialization of a business-to-business software product titled the "AdMeUp Network" which it was currently designing. The AdMeUp Network included online marketing software tools to be used to manage marketing campaigns. These operations have been discontinued.
As of September 25, 2007, the Company’s line of business changed from providing online marketing management and consulting services to providing music publishing, digital music, production, and talent management services, and effective May 1, 2009 the Company is no longer considered to be in the development stage.
“First Source Data, Inc.” no longer described the business activities that the Company is now engaged in. Therefore, effective October 30, 2007, the Company changed its name to "UOMO Media Inc." Further, the Company formed new wholly-owned subsidiaries in Canada as follows: UOMO Productions Inc., The NE Inc. (which is a wholly-owned subsidiary of UOMO Productions Inc.), UOMO Music Publishing Inc., and UOMO Songs Ltd. (which is a wholly-owned subsidiary of UOMO Music Publishing Inc.).
The consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries.
Subsequent events have been evaluated through September 14, 2009, which is the date these financial statements were issued on Form 10-Q with the SEC.
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim consolidated financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2010. The financial statements should be read in conjunction with the Company’s April 30, 2009 financial statements and accompanying notes included in the Company’s 10-K Annual Report.
NOTE 2. GOING CONCERN
The accompanying consolidated interim financial statements are prepared and presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Effective May 1, 2009, the Company has exited the development stage and is now actively providing music publishing, digital music, production, and talent management services. However, the Company has reported net losses of $77,310 and $104,169 for the three months ended July 31, 2009 and 2008 respectively and has an accumulated deficit of $1,144,319 and stockholders’ deficiency of $704,250 as at July 31, 2009.
The Company’s continued existence is dependent upon its ability to obtain financing and to achieve profitable operations.
The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
- 10 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168,
The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162
(“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification (“the Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the year ending April 30, 2010. This will not have an impact on the financial statements.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events
(“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. This SFAS requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The adoption of SFAS 165 did not have a material impact on the consolidated financial statements.
NOTE 4. CASH AND CASH EQUIVALENTS
Cash equivalents usually consist of highly liquid investments, which are readily convertible into cash with maturity of three months or less when purchased. As at July 31, 2009, cash equivalents consist of $144,835 (April 30, 2009 - $16,321) as bank balance.
NOTE 5. REVENUE RECOGNITION
The Company recognizes revenue when the following four conditions are present:
·
persuasive evidence of an arrangement exists;
·
delivery has occurred or services have been rendered;
·
the seller’s price to the buyer is fixed or determinable; and
·
collection is reasonably assured.
The Company earns revenues in the form of production, management fees, and royalties from five categories of services, comprising of five divisions. These divisions are described below. The Company negotiates similar contract terms prior to performing services under any of the categories below.
i)
Music Publishing:
UOMO Music Publishing is tasked with creating a catalogue of assets in the form of copyrights. Services include:
a)
Fund advances: providing advances to individual composers
b)
Administration: registration, tracking, and collection of copyright royalties
c)
Creative: creating copyrights by writing songs
d)
Licensing: finding opportunities to monetize copyrights by placing songs on recording artists, films, television, video games, commercials
ii)
Recorded Music:
The Company earns revenue from the ownership of master recordings. UOMO Recorded Music has three core functions:
a)
Catalogue acquisition
b)
Talent acquisition for/and production activities
c)
Distribution arrangements for projects
UOMO Recorded Music is the record label division of UOMO. Production services also falls under this division.
- 11 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 5. REVENUE RECOGNITION (cont’d)
iii)
Digital Distribution:
The Company has been developing digital music and video Web 2.0 software. Digital strategy and communication services also falls under this division.
iv)
Talent Management:
The Company earns a percentage of gross revenues for all projects it manages.
v)
Marketing:
This division is tasked with finding opportunities for product placements and celebrity endorsement within entertainment properties.
For the three months ending July 31, 2009, the Company earned revenue from production activities, music publishing, and management. These revenues are recognized at the time of performance. The Company defers revenue should payments be received in advance of the above services being recorded. As of July 31, 2009, advances against royalty revenue of $48,828 had been received. Of this amount, $18,570 in royalties have been earned, leaving a net balance of $30,258 in advances against royalty revenue. The amount payable on the purchase of the publishing catalogue (Refer note 6), presented as "Advance Against Royalty Revenue", will be offset against future royalties from music publishing revenue.
NOTE 6. RELATED PARTY TRANSACTIONS
On January 1, 2006, the Company entered into an agreement with a shareholder of the Company, for a period of 12 months for the programming services to be provided on the “AdMeUp Network” which has now been discontinued. The fees for this were as follows:
a) $19,200 in cash; or
b) A number of shares in the common stock of the Company, without registration rights and incorporating such restrictive legends as are required by the Company to comply with all applicable laws, equal to $19,200 divided by the weighted average trading price of the Company’s common shares posted on any stock quotation or listing service for the 10-day period prior to the date of payment (or, if the trading price of the
Company’s common shares is not at that time posted on any quotation or listing service, the weighted
average price applied to the three most recent issuances of the Company’s common shares); or
c) Some combination of a) and b) above that will yield a market value of $19,200 based on the foregoing valuation methodology.
The choice of the form in which payment of the fees shall be made shall be solely that of the Company. On January 1, 2007, the Company renewed this agreement with the same terms for a further period of 12 months to continue providing programming services on the “AdMeUp Network”. While the “AdMeUp Network” has been discontinued, programming services were utilized until the end of this contract to develop the Company’s new digital music and video Web 2.0 software.
On April 27, 2007, a director of the Company gave an unsecured loan of $50,000, to the Company payable on demand and with no interest. Interest has been imputed and included in Stockholder’s Equity (See Note 9).
On April 30, 2007, the Company entered into a contract to pay one of its directors $10,000 to carry out services as the Company’s director for a term of one year or until removed as a director. $5,000 in cash was paid in May 2007 and the remaining $5,000 in cash was paid in November 2007.
- 12 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 6. RELATED PARTY TRANSACTIONS (cont’d)
On November 28, 2007, the Company entered into a contract to pay one of its directors 25,000 common shares to carry out services as the Company’s director for a term of one year or until removed as a director. On April 22, 2008, the Company issued 25,000 shares of its common stock to the director. On December 1, 2008, this contract was renewed under the same terms. On December 23, 2008, the Company issued 25,000 shares of its common stock to the director.
On December 11, 2007, the Company entered into a contract with a Managing Director to carry out services for a term of one year for cash and stock compensation. On April 22, 2008, the Company issued 62,500 shares of its common stock to the manager. During the three months ended July 31, 2009, $12,500 (April 30, 2009 - $50,000) has been paid by cash for professional services rendered. On December 15, 2008, the Company renewed the contract with this Managing Director contract for a term of one more year for cash and stock compensation. On December 23, 2008, the Company issued 446,429 shares of its common stock to the manager.
During the three months ended July 31, 2009, $22,500 (April 30, 2009 - $90,000) has been paid by cash to the Chief Financial Officer of the Company for professional services rendered. Prior to the appointment, on May 10, 2005, the Company issued 12,500 shares of its common stock to the Chief Financial Officer in return for cash.
During the three months ended July 31, 2009, $30,000 (April 30, 2009 - $120,000) has been paid by cash to the CEO of the Company for professional services rendered.
As of July 31, 2009, a director of the Company gave unsecured loans totaling $151,343 to the Company, payable on demand and with no interest.
The above transactions have been measured and recorded at the fair values at the time of initial measurement and at amortized cost subsequently.
NOTE 7. PUBLISHING CATALOGUE
The Company has acquired publishing catalogues from third parties in return for cash and common stock measured and recorded at total cost of $400,554. As at July 31, 2009, there was no impairment in the carrying value of the catalogues, which equates its fair value at the initial measurement.
NOTE 8. LONG TERM INVESTMENTS
On January 16, 2009, the Company acquired a 15% preferred share ownership of a ticketing service company under the following financial terms:
Cash:
$10,000 CAD cash payable by December 19, 2008 in bank draft form
$40,000 CAD payable upon execution of the agreement
$50,000 CAD cash payable June 1, 2009
$50,000 CAD cash payable October 1, 2009
UOMO Stock Units:
337,500 stock units to become free trading as of September 1, 2009
337,500 stock units to become free trading as of January 1, 2010
750,000 stock units to become free trading as of November 1, 2010
- 13 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 8. LONG TERM INVESTMENTS (cont’d)
Each stock unit consists of one share of $0.001 par value common stock valued at a total of $100,473 based on the Company’s traded stock price on the date of investment, and one redeemable 42 month warrant to purchase one share of common stock at a price per share of $0.25 which has been valued using Black-Scholes Merton and calculated as $70,527. The warrants become exercisable and separately transferable from the shares of common stock upon the issuance of the stock, as per the aforementioned dates above.
If the Company’s stock price is under $0.15 at the time of issuance, additional stock units will be issued.
As of July 31, 2009, the Company has only paid $57,500 CAD translated to $46,827 USD in cash and stock. The full amount of the June 1, 2009 cash payable has not been made; negotiations are currently in place. Management believes that there will be no consequence from this non-payment. The Board of Directors will be meeting in the upcoming quarter to discuss and decide when the aforementioned stock units are to be issued to the ticketing service company.
NOTE 9. ACCOUNTS PAYABLE AND ACCRUALS
|
|
Jul 31, 2009
|
Apr 30, 2009
|
|
Accounting Charges
|
166,166
|
163,779
|
|
Professional Fees
|
93,057
|
69,466
|
|
R & D Expenses Payable
|
35,200
|
35,200
|
|
Trade Payable – Production Costs
|
194,665
|
198,873
|
|
Others
|
58,470
|
144,008
|
|
|
547,558
|
511,326
|
NOTE 10. NOTES PAYABLE
Notes payable include:
|
|
Jul 31, 2009
|
Apr 30, 2009
|
|
Next Level Ltd.
|
421,100
|
221,100
|
|
Director (Note 4)
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151,343
|
140,354
|
|
Shareholder (Note 4)
|
50,000
|
50,000
|
|
|
622,443
|
411,454
|
On April 1, 2008, the Company issued a Note Payable to Next Level Ltd., in consideration of a draw down unsecured loan up to an aggregate of $200,000 over a term of one year. Any unpaid amount of the drawn down balance borrowed is payable, on demand by Next Level Ltd. Interest payable on the principal amount is to be accrued at a floating rate equal to the prime rate plus 2%. The Company is permitted to make partial payments against the principal amount and interest at any time without penalty. The balance payable on this Note Payable has been extended for another year under the same terms.
On June 29, 2009, the Company issued another Note Payable to Next Level Ltd., in consideration of a second draw down unsecured loan up to an aggregate of $250,000 over a term of one year. Any unpaid amount of the drawn down balance borrowed is payable, on demand by Next Level Ltd. Interest payable on the principal amount is to be accrued at a floating rate equal to the prime rate plus 2%. The Company is permitted to make partial payments against the principal amount and interest at any time without penalty. The $21,100 that the Company has already drawn over the aggregate of the first US$200,000 loan was applied against this second loan leaving a total of $228,900 available to be drawn down. Further, on June 29, 2009, the Company borrowed $50,000 against the total $228,900 available to be drawn down.
- 14 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 10. NOTES PAYABLE (cont’d)
On May 30, 2008, the Company borrowed $150,000 against the total $178,900 available to be drawn down. As of July 31, 2009, a balance of $28,900 net was available. The total interest payable on the above notes of $9,978 forms part of the selling and administrative expense in the Income statement, and accounts payable on the Balance sheet.
NOTE 11. OPERATING LEASE COMMITMENTS
On April 5, 2007, the Company entered into a lease agreement with Regus Business Centres. The lease was for a period of 12 months beginning May 1, 2007 with the option to renew. The lease payment is approximately $236 per month. This lease was automatically renewed on May 1, 2008 and May 1, 2009 on the same terms.
NOTE 12. COMMON STOCK
The stockholders' deficiency section of the Company contains the following classes of capital stock as of July 31, 2009:
Common stock, $0.001 par value; 400,000,000* shares authorized and 85,736,085* shares issued and outstanding.
On November 1, 2007, the Board of Directors resolved to return to Treasury and cancel 83,296,672 of common stock to minimize the dilution of the Company in the event that the Company issued further shares for financing and acquisition purposes. No compensation was paid for this exchange.
Since there was no change in par value of common stock, common stock amount and additional paid in capital were adjusted accordingly.
The stockholders' deficiency section of the Company contains the following classes of capital stock as of July 31, 2008:
Common stock, $0.001 par value; 400,000,000* shares authorized and 85,101,112* shares issued and outstanding.
* After giving retroactive effect of 4:1 stock split effective June 5, 2007.
NOTE 13. STOCK TRANSACTIONS
These transactions have been accounted for based on the fair value of the consideration received.
Q3 2008:
On November 1, 2007, the Board of Directors resolved to cancel and return to Treasury 83,296,672 of common stock to minimize the dilution of the Company in the event that the Company issued further shares for financing and acquisition purposes. No compensation was paid for this exchange.
Q4 2008
On April 22, 2008, the Company issued 25,000 shares of its common stock to a director in return for services. The market value of shares on the date of issuance was $0.40 per share.
On April 22, 2008, the Company issued 62,500 shares of its common stock to a manager of the Company in return for services. The value of the shares was calculated on a 10-day closing trading average valued at $0.40 per share, which was also the market value of shares on the date of issuance.
Q1 2009:
On June 20, 2008, the Company issued 13,612 shares of its common stock as part of the price to acquire a publishing catalogue. The value of the shares was calculated on a 10-day close price trading average valued at $0.551 per share; the market value of shares on the date of issuance was $0.35 per share.
- 15 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 13. STOCK TRANSACTIONS (cont’d)
Q2 2009:
On September 17, 2008, the Company issued 47,319 shares of its common stock to an independent contractor in return for services. The value of the shares was calculated on a 10-day close price trading average valued at $0.317 per share; the market value of shares on the date of issuance was $0.30 per share.
On October 20, 2008, the Company issued 20,227 shares of its common stock as part of the compensation to acquire a publishing catalogue. The value of the shares was calculated on a 10-day close price trading average valued at $0.206 per share; the market value of shares on the date of issuance was $0.17 per share.
On October 20, 2008, the Company issued 40,000 shares of its common stock to an independent contractor in return for services. The market value of shares on the date of issuance was $0.17 per share.
Q3 2009:
On November 17, 2008, the Company issued a further 45,998 shares of its common stock as part of the compensation to acquire a publishing catalogue. The value of the shares was calculated on a 10-day close price trading average valued at $0.16305 per share; the market value of shares on the date of issuance was $0.16 per share.
On November 17, 2008, the Company issued 10,000 shares of its common stock to an independent contractor in return for services. The market value of shares on the date of issuance was $0.16 per share.
On December 23, 2008, the Company issued another 25,000 shares of its common stock to a director in return for services. The market value of shares on the date of issuance was $0.11 per share.
On December 23, 2008, the Company issued 446,429 shares of its common stock to a manager of the Company in return for services. The value of the shares was calculated on a 10-day close price trading average valued at $0.112 per share; the market value of shares on the date of issuance was $0.11 per share.
Q4 2009:
No stock was issued during this quarter.
Q1 2010:
No stock was issued during this quarter.
NOTE 14. UNAMORTIZED STOCK-BASED COMPENSATION FOR STOCKHOLDERS
On November 25, 2004, the Company issued 1,600, 000 shares of its common stock to a shareholder of the Company, partly in return for services and partly for cash. The stock based compensation portion of this issue has been valued at $10,000 as the difference between the issue price ($0.000625 per share) and the grant-date fair value ($0.01250 per share) and has been amortized over the term of the contract between the Company and the shareholder as follows:
First 12 months
- $600 a month
Next 4 months
- $700 a month
The term of the agreement is 16 months effective from August 1, 2004. The unamortized portion of this is
$Nil
as at July 31, 2009.
On January 26, 2005, the Company issued 5,760,000 shares of its common stock to a shareholder of the Company, partly in return for services and partly for cash. The stock-based compensation portion of this issue has been valued at $70,920 as the difference between the issue price ($0.00019 per share) and the grant-date fair value ($0.01250 per share) and is being amortized over the term of the contract as follows:
- 16 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 14. UNAMORTIZED STOCK-BASED COMPENSATION FOR STOCKHOLDERS (cont’d)
First 36 months
- $1,600 a month
Next 8 months
- $1,665 a month
The term of the agreement is 44 months effective from January 1, 2005. The unamortized portion of this is
$Nil
as at July 31, 2009 (April 30, 2009 - $Nil).
On April 22, 2008, the Company issued 25,000 shares of its common stock to a director of the Company in return for services. The stock based compensation issued has been valued at $10,000 ($0.40 per share) which was the fair value of the stock on the date of issuance. The stock must be held for a minimum of twelve months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the director starting May 1, 2008. The unamortized portion of this is
$Nil
as at July 31, 2009 and has been deducted from stockholders’ deficiency. On December 23, 2008, the Company issued another 25,000 shares of its common stock to the director in return for services. The stock based compensation issued has been valued at $2,750 ($0.11 per share) which was the fair value of the stock on the date of issuance. The stock must be held for a minimum of twelve months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the director starting January 1, 2009. The unamortized portion of this is
$1,146
as at July 31, 2009 and has been expensed as directors’ fees.
On April 22, 2008, the Company issued 62,500 shares of its common stock to a manager of the Company in return for services. The stock based compensation issued has been valued at $25,000 ($0.40 per share) which was the fair value of the stock on the date of issuance. The stock must be held for a minimum of twelve months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the manager starting May 1, 2008. The unamortized portion of this is
$Nil
as at July 31, 2009 and has been deducted from stockholders’ deficiency. On December 23, 2008, the Company issued 446,429 shares of its common stock to the manager in return for services. The stock based compensation issued has been valued at $50,000 ($0.112 per share); the fair value of the stock on the date of issuance was $0.11. The stock must be held for a minimum of twelve months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the manager starting January 1, 2009. The unamortized portion of this is
$20,833
as at July 31, 2009 and has been expensed as consulting fees.
On June 20, 2008, the Company acquired a publishing catalogue in return for cash and common stock. The Company issued 13,612 shares of its common stock as well as $14,710 in cash as part of the compensation to acquire the publishing catalogue. The stock based compensation issued has been valued at $7,500 ($0.551 per share); the fair value of the stock on the date of issuance was $0.35 per share. The stock must be held for a minimum of six months from the date of issuance. The amount of the stock portion of this compensation is being amortized over one year starting July 1, 2008. The unamortized portion of this is
$Nil
as at July 31, 2009 and has been deducted from advances payable. On November 17, 2008, the Company issued 45,998 more shares of its common stock as part of this same compensation to acquire the publishing catalogue. The stock based compensation issued has been valued at $7,500 ($0.16305 per share); the fair value of the stock on the date of issuance was $0.16 per share. The stock must be held for a minimum of six months from the date of issuance. The amount of the stock portion of this compensation is being amortized over one year starting December 1, 2008. The unamortized portion of this is
$2,500
as at July 31, 2009 and has been deducted from advances payable.
On September 17, 2008, the Company issued 47,319 shares of its common stock to an independent contractor in return for services. The stock based compensation issued has been valued at $15,000 ($0.317 per share); the fair value of the stock on the date of issuance was $0.30 per share. The stock must be held for a minimum of six months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the independent contractor starting November 1, 2008. The unamortized portion of this is
$3,750
as at July 31, 2009 and has been deducted from advances payable.
On October 20, 2008, the Company acquired a publishing catalogue in return for cash and common stock. The Company issued 20,227 shares of its common stock as well as $6,918 in cash as part of the price to acquire the publishing catalogue. The stock based compensation issued has been valued at $4,167 ($0.206 per share); the fair
- 17 -
UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 14. UNAMORTIZED STOCK-BASED COMPENSATION FOR STOCKHOLDERS (cont’d)
value of the stock on the day of issuance was $0.17 per share. The stock must be held for a minimum of six months from date of issuance. The amount of the stock portion of this compensation is being amortized over one year starting November 1, 2008. The unamortized portion of this is
$1,042
as at July 31, 2009 and has been deducted from advances payable.
On October 20, 2008, the Company issued 40,000 shares of its common stock to a manager of the Company in return for services. The stock based compensation issued has been valued at $6,800 ($0.17 per share) which was the fair value of the stock on the date of issuance. The stock must be held for a minimum of six months from the date of issuance. The amount of this compensation is to be amortized over the term of the service contract between the Company and the manager starting November 1, 2008. The unamortized portion of this is
$2,267
as at July 31, 2009 and has been expensed as consulting fees.
On November 17, 2008, the Company issued 10,000 shares of its common stock to an independent contractor in return for services. The stock based compensation issued has been valued at $1,600 ($0.16 per share) which was the fair value of the stock on the day of issuance. The stock must be held for a minimum of six months from the date of issuance. The amount of this compensation is being amortized over the term of the service contract between the Company and the independent contractor starting December 1, 2008. The unamortized portion of this is
$533
as at April 30, 2009 and has been expensed as consulting fees.
The total unamortized portion of stock based compensation for shareholders is
$32,071
as at April 30, 2009 (April 30, 2009 - $55,275).
NOTE 15. COMMITMENTS
On April 5, 2007, the Company entered into a lease agreement with Regus Business Centres. The lease is for a period of 12 months beginning May 1, 2007 with the option to renew. The lease payment is approximately $236 per month. The lease has been automatically renewed on the same terms beginning May 1, 2008 and May 1, 2009.
On November 1, 2007, the Company entered into an Independent Contractor Agreement with the Chairman & Chief Executive Officer for managing and directing daily operations of the Company pursuant to the directives of the Board of Directors for services through to June 30, 2008, under which he would be compensated as follows:
$7,000 per month for the first two months (November and December 2007)
$10,000 per month for the remaining 6 months (January to June 2008)
On July 25, 2008, the Company renewed the Independent Contractor Agreement with the Chairman & Chief Executive Officer for $10,000 per month for a further six months beginning July 1, 2008. While there has been no formal renewal, the agreement has continued on a month-to-month basis.
On December 11, 2007, the Company entered into an Independent Contractor Agreement with the Managing Director of UOMO Publishing division, under which the Managing Director would be compensated $4,167 per month to continue performing services for a period of twelve months to December 10, 2008. On December 15, 2008, the Company renewed this contract for a term of another twelve months.
On January 31, 2008, the Company entered into an Independent Contractor Agreement with the Chief Financial Officer, under which the Chief Financial Officer would be compensated $7,500 per month to continue performing services as the Company’s Chief Financial Officer from February 1, 2008 through June 30, 2008. This agreement was renewed on July 25, 2008, under the same terms for a further six months beginning July 1, 2008. While there has been no formal renewal, the agreement has continued on a month-to-month basis.
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UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 15. COMMITMENTS (cont’d)
On October 8, 2008, the Company entered into an Independent Contractor Agreement with a sole proprietor, under which the independent contractor would be compensated an advance of $2,000 per month to perform services for a period of six months to March 31, 2009. While there has been no formal renewal, the agreement has continued on a month-to-month basis.
On January 16, 2009, the Company acquired a 15% preferred share ownership of a ticketing service company in consideration for cash, stock, and warrants. Under the terms of the agreement, the following payments will be further required:
Cash:
$50,000 CAD payable June 1, 2009
$50,000 CAD payable October 1, 2009
UOMO Stock Units:
337,500 stock units to become free trading as of September 1, 2009
337,500 stock units to become free trading as of January 1, 2010
750,000 stock units to become free trading as of November 1, 2010
Each stock unit consists of one share of $0.001 par value common stock valued at a total of $100,473 based on the Company’s traded stock price on the date of investment, and one redeemable 42 month warrant to purchase one share of common stock at a price per share of $0.25 which has been valued using Black-Scholes Merton and calculated as $70,527.
NOTE 16. SUBSEQUENT EVENTS
On August 6, 2009, the Company paid back $25,095 of a $50,000 unsecured loan lent by a shareholder of the Company.
On August 6, 2009, the Company paid Gettickets E Solutions Inc. $13,942 against the June 1, 2009 outstanding cash payment still outstanding.
On August 25, 2009, the Company issued 40,000 shares of its common stock to an independent contractor in return for services. The market value of shares on the date of issuance was $0.15 per share.
On August 25, 2009, the Company issued 29,656 shares of its common stock as part of the compensation to acquire a publishing catalogue. The value of the shares was calculated on a 10-day close price trading average valued at $0.1405 per share; the market value of shares on the date of issuance was $0.15 per share.
On August 25, 2009, the Company issued 554,583 shares of its common stock as part of the compensation for its acquisition of a ticketing service company. The value of the shares was calculated at $0.15 per share, which was also the market value of shares on the date of issuance.
On August 25, 2009, the Company issued 25,000 shares of its common stock as compensation for services under a joint venture partnership. The market value of shares on the date of issuance was $0.15 per share.
On August 25, 2009, the Company issued 25,000 shares of its common stock as compensation for services under a joint venture partnership. The market value of shares on the date of issuance was $0.15 per share.
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UOMO Media Inc.
Condensed Notes to Unaudited Interim Consolidated Financial Statements
July 31, 2009
(Amounts expressed in US dollars)
NOTE 17. GEOGRAPHIC AND SEGMENTED INFORMATION
All the Company's operations and assets are located in Canada. For the year ended April 30, 2009, total revenue from continuing operations in Canada was $858,137. Prior to September 25, 2007, the Company’s line of business was providing online marketing management and consulting services. All revenues from this different line of business have been classified as discontinued operations and as such are separately reported for all periods presented. While we are still in the development stage, we plan to evaluate performance based on gross margins (total revenues less costs of production and licensing) before operating costs. We do not manage our operating costs on a segment basis as our sales, marketing and support personnel, management team, and consultants work across all segments. Additionally, we do not track assets by segment and therefore asset disclosures by segment are not relevant and are not presented.
Financial information for the Company’s reportable segments is summarized below.
NOTE 17. GEOGRAPHIC AND SEGMENTED INFORMATION (cont’d)
|
|
|
|
|
|
|
|
For the Three
Months Ended
Jul 31, 2009
|
For the Three
Months Ended
Jul 31, 2008
|
|
Total Revenues
|
|
|
|
|
Production
|
|
240,402
|
313,732
|
|
Publishing
|
|
2,000
|
-
|
|
Other
|
|
8,748
|
1,493
|
|
Total Revenues
|
|
251,150
|
315,225
|
|
|
|
|
|
|
Cost of Revenue:
|
|
|
|
|
Production
|
|
236,443
|
309,836
|
|
Publishing
|
|
-
|
-
|
|
Other
|
|
3,884
|
1,200
|
|
Total Cost of Revenues
|
|
240,327
|
311,036
|
|
Gross Margin:
|
|
|
|
|
Production
|
|
3,959
|
3,896
|
|
Publishing
|
|
2,000
|
-
|
|
Other
|
|
4,864
|
293
|
|
Total Gross Margin
|
|
10,823
|
4,189
|
NOTE 18. COMPARATIVE FIGURES
The comparative figures have been re-classified to conform to the current period’s presentation.
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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
The following discussion and analysis compares our results of operations for the three months ended July 31, 2009 to the same period in 2008. This discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this quarterly report for the three months ended July 31, 2009. This quarterly report contains certain forward-looking statements and our future operation results could differ materially from those discussed herein.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report and other reports we file with the U.S. Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
OVERVIEW
We incorporated on June 10, 2004 as First Source Data, Inc. under the laws of the State of Nevada. As of September 25, 2007, our line of business changed from providing online marketing management and consulting services to providing music publishing, digital music and video, recorded music and production, and talent management services. We are now in the business of producing, managing, and monetizing music-based intellectual property. Effective October 30, 2007, we changed our name to UOMO Media Inc., which we believe more appropriately reflects our current business focus. Effective May 1, 2009 we are no longer considered to be in the development stage.
CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, bad debt, investments, intangible assets, income taxes, and contingencies and litigation. 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 could differ from these estimates under different assumptions or conditions. We consider the following accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.
Cash and Cash Equivalents
Cash equivalents usually consist of highly liquid investments, which are readily convertible into cash with maturity of three months or less when purchased.
Revenue Recognition
We recognize revenue when the following four conditions are present:
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·
persuasive evidence of an arrangement exists;
·
delivery has occurred or services have been rendered;
·
the seller’s price to the buyer is fixed or determinable; and
·
collection is reasonably assured.
We earn revenues in the form of production, management fees, and royalties from five categories of services, comprising of five divisions. These divisions are described below. The Company negotiates similar contract terms prior to performing services under any of the categories below.
i)
Music Publishing:
UOMO Music Publishing is tasked with creating a catalogue of assets in the form of copyrights. Services include:
a)
Fund advances: providing advances to individual composers
b)
Administration: registration, tracking, and collection of copyright royalties
c)
Creative: creating copyrights by writing songs
d)
Licensing: finding opportunities to monetize copyrights by placing songs on recording artists, films, television, video games, commercials
ii)
Recorded Music:
The Company earns revenue from the ownership of master recordings. UOMO Recorded Music has three core functions:
a)
Catalogue acquisition
b)
Talent acquisition for/and production activities
c)
Distribution arrangements for projects
UOMO Recorded Music is the record label division of UOMO. Production services also falls under this division.
iii)
Digital Distribution:
The Company has been developing digital music and video Web 2.0 software. Digital strategy and communication services also falls under this division.
iv)
Talent Management:
The Company earns a percentage of gross revenues for all projects it manages.
v)
Marketing:
This division is tasked with finding opportunities for product placements and celebrity endorsement within entertainment properties.
Foreign Currency Translations
We maintain our accounting records in U.S. dollars, which is the functional, and reporting currency. Foreign currency transactions are translated into the functional currency in the following manner.
At the transaction date, each asset, liability, revenue and expense is translated into the functional currency by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are translated into the functional currency by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations.
Stock-based compensation
We have adopted SFAS 123 (Revised), “Share Based Payment,” which requires us to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee or a non-employee is required to provide service in exchange for the award-the requisite service period. We do not recognize compensation cost for equity instruments for which employees do not render the requisite service. We will estimate the grant-date fair value of employee and non-employee share options and similar instruments using option-pricing models adjusted for the unique characteristics of those instruments.
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RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168,
The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162
(“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification (“the Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the year ending April 30, 2010. This will not have an impact on our financial statements.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events
(“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. This SFAS requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The adoption of SFAS 165 did not have a material impact on our consolidated financial statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 2009 AS COMPARED TO THE THREE MONTHS ENDED JULY 31, 2008
Revenue
For the three months ended July 31, 2009, we generated $251,150 in revenues. For the three months ended July 31, 2008, we generated $315,225.
Cost of Goods Sold
During the three months ended July 31, 2009, we incurred $240,327 in cost of goods sold expense for providing production services. For the same three month period ended July 31, 2008, we incurred $311,036 cost of goods sold expense during this period.
Expenses
During the three months ended July 31, 2009, we incurred total selling and administrative expense from operations of $88,133. For the same three month period ended July 31, 2008, we incurred total expenses from operations of $108,358 comprised of selling and administrative expense of $106,880 and amortization expense of $1,478. The largest two expenses in the three months ended July 31, 2009, besides Cost of Goods Sold expense of $240,327, were $65,753 for consulting and management services, and $26,000 for accounting fees, compared to $52,876 for consulting and management services, $22,392, the two largest expenses for the three months ended July 31, 2008. Expenses were about the same in both periods, however, total expenses were offset by a $28,073 gain in foreign exchange in the three months ended July 31, 2009 mostly due to accounts receivable.
Net Income/Loss
During the three month period ended July 31, 2009, we incurred a net loss of $77,310 compared with a net loss of $104,169 for the three month period ended July 31, 2008. While our revenue for the three month period ended July 31, 2008 were higher, our cost of goods sold expense came in much lower for the three month period ended July 31, 2009, resulting in a higher gross margin for this period. This was further offset by recognition of gain in foreign exchange in the three months ended July 31, 2009.
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LIQUIDITY AND CAPITAL RESOURCES
We do not yet have an adequate source of reliable, long-term revenue to fund operations. We may not achieve a consistent and reliable revenue stream adequate to support continued operations and development of our new line of business activities.
As of July 31, 2009, we had cash and cash equivalents of $144,835. We had total current assets of $428,838, which includes $3,199 in prepaid expenses and deposits. Our liquidity as of July 31, 2009 should be interpreted in conjunction with a recorded liability of $622,443 loan payable on demand.
Our financial statements are prepared and presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Effective May 1, 2009, we exited the development stage and we are now actively providing music publishing, digital music, production, and talent management services. However, we have reported net losses of $77,310 and $104,169 for the three months ended July 31, 2009 and 2008 respectively and have an accumulated deficit of $1,144,319 and stockholders’ deficiency of $704,250 as at July 31, 2009.
The Company’s continued existence is dependent upon its ability to obtain financing and to achieve profitable operations.
The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
SUBSEQUENT EVENTS
On August 6, 2009, the Company paid back $25,095 of a $50,000 unsecured loan lent by a shareholder of the Company.
On August 6, 2009, the Company paid Gettickets E Solutions Inc. $13,942 against the June 1, 2009 outstanding cash payment still outstanding.
On August 25, 2009, the Company issued 674,239 shares of common stock.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Smaller reporting companies are not required to provide the information required by this Item.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
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concluded that our disclosure controls and procedures cannot be relied upon to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of July 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control
—
Integrated Framework.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects a company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the company's annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing within the accounting operations of our Company. The small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Due to this material weakness, management could not conclude that its internal control over financial reporting was effective as of July 31, 2009.
Our review also indicated the existence of certain high level procedures that might or might not serve to provide compensating control over these weaknesses. These procedures consisted of analytical review of key operating results by our senior management, including preparation and review of monthly operating results, comparison of such results to budgets and to historical amounts. In addition, the board of directors received monthly updates on operations, and on a quarterly basis, reviews, investigates and discusses apparent inconsistencies and concerns with senior operating management.
Our review also revealed that although a number of controls appeared to exist, and were observed to have been in operation, documentary evidence that such controls were operating throughout the period was found to be lacking. Such evidence as signatures indicating that a certain procedure had been carried out and affixing responsibility were lacking in the internal control system.
This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.
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Changes in Internal Control Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the quarter ended July 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II
Item 1.
Legal Proceedings
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 1A.
Risk Factors
Risks Relating To Our Business
We intend to grow our Company by acquisition, and if we are not successful, our business will be harmed.
Our business strategy includes the attainment of a portion of our growth through our ability to successfully execute our acquisition model. In order to pursue a growth by acquisition strategy successfully, we must identify suitable candidates for these transactions, complete these transactions, and manage post-closing issues such as integration of the acquired business into our corporate structure. Integration issues are complex, time-consuming, and expensive and, without proper planning and implementation, could significantly disrupt our business. Potential disruptions include diversion of management's attention, loss of key business and/or personnel from the acquired company, unanticipated events, and legal liabilities. If the business becomes impaired, there could be partial or full write-offs attributed to the acquisition.
Our continued operations are contingent on our ability to raise additional capital and obtain financing and success in future operations. If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital, we may have to substantially curtail our operations and business plan. If we do not achieve sufficient revenues to meet our future obligations, we intend to seek sufficient financial resources by issuing shares of common stock, borrowing cash from a bank or one of our directors, or a combination of these activities. We may be unable to obtain additional financing using any of these methods. These conditions raise substantial doubt about our ability to continue as a going concern. However, our financial statements do not include any adjustments that might result if we are unable to continue our business.
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We have a limited operating history and may never achieve or sustain profitable operations.
We have a short operating history and have not been profitable since our incorporation in June 2004. Effective May 1, 2009, the Company has exited the development stage and is now actively providing music publishing, digital music, production, and talent management services. However, we have reported net losses and an accumulated deficit and stockholders’ deficiency at July 31, 2009. Even if we obtain future revenues sufficient to continue to expand our operations, increased operational or marketing expenses could adversely affect our liquidity. The limited extent of our assets and revenues, and our limited operating history make us subject to the risks associated with start-up companies, including potentially negative cash flows. We have no significant assets or financial resources. Our lack of operating history makes it very difficult for you to make an investment decision based upon our managerial skill. We may never become profitable and our stockholders may lose their entire investment.
We depend on our officers and directors to perform our business activities and our ability to recruit and retain the qualified individuals needed to operate and develop our business is unknown.
We depend on our officers and directors to perform many of our business activities. Currently, our Chairman and Chief Executive Officer, Camara Alford, personally carries out our management activities. Mr. Alford also liaises with external contractors who provide additional consulting services. Our Chief Financial Officer, Jueane Thiessen, personally performs most of our accounting and financial management functions. Our present management structure, although adequate for the early stage of our operations, will likely have to be significantly augmented as our operations expand. Our future success will depend in part on the services of our key personnel and, additionally, on our ability to identify, hire and retain additional qualified personnel. There is intense competition for qualified management, marketing, accounting, and sales personnel in our main area of business, online marketing consulting and management. We may not be able to continue to attract and retain the personnel needed to operate and develop our business. Because we rely on our directors and officers to perform our sales, accounting, and financial management activities, failure to attract and retain key personnel could have a material adverse effect on us.
We have limited cash so our continued existence is dependent upon our ability to obtain financing and to achieve profitable operations. If we are unable to raise additional capital, our business may fail and stockholders may lose their entire investment.
We have limited capital reserves to finance expansion or to protect us from a downturn in business. The Company’s continued existence is dependent upon its ability to obtain financing and to achieve profitable operations. Additional financing may come in the form of an offering of common shares, borrowing from a bank or one of our directors, or from revenues generated by new business. If additional shares are issued to raise capital, our existing stockholders will suffer a dilution of their stock ownership and the value of our outstanding shares may fall. If we borrow more money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. We have no commitments for additional financing and there can be no assurance that additional funds will be available when needed, or on terms acceptable to us, if at all. If adequate funds are not available we may be required to change our planned business strategies. If we are unable to obtain adequate financing, we may not be able to successfully develop and market our products and services. As a result, we would need to curtail business operations which would have a material negative effect on operating results, the value of our outstanding stock is likely to fall, and our business may fail causing our stockholders to lose their entire investment.
Two of our directors, Camara Alford and Jueane Thiessen, also serve as our officers. These interrelationships may create conflicts of interest that might be detrimental to us.
There are various interrelationships between our officers and directors that may create conflicts of interest that might be detrimental to us. One of our directors, Camara Alford, is our Chairman and Chief Executive Officer. Jueane Thiessen, also our director, is our Chief Financial Officer and Secretary. Our board of directors, which appoints our officers, currently consists of three persons, Mr. Alford, Ms. Thiessen, and J. Sean Diaz. Together, Mr. Alford and Ms. Thiessen control over sixty-six percent of the voting power of the board of directors. Because Mr. Alford and Ms. Thiessen are both directors and officers, there exists a potential future conflict of interest regarding the decision to remove our officers or appoint new officers. Our directors and officers will deal with any such conflicts of interest, should they arise, in accordance with our Corporate Code of Ethics and applicable corporate law principles.
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We may be subject to foreign currency fluctuation and such fluctuation may adversely affect our financial position and results.
We are currently located in Canada and pay most of our expenses in United States dollars. However, our target market is global. We may enter into contracts that require customers to pay us in currencies other than United States dollars. Therefore, our potential operations make us subject to foreign currency fluctuation. We do not make investments that offset the risk of adverse foreign currency fluctuations and we may suffer increased expenses and overall losses as a result.
We do not own patents on our products and, if other companies copy our products, our revenues may decline which may result in a decrease in our stock price.
We do not own patents on our products we have developed and we do not currently intend to file for patent protection on those products. Therefore, another company could recreate our products and could compete against us, which could adversely affect our revenues.
We do not carry any insurance and we may be subject to significant lawsuits which could substantially increase our expenses.
We do not carry any insurance. There are a number of occurrences that could adversely affect our financial condition. These include damage to our assets, financial records, or other property by fire or water, as well as any successful lawsuits against us involving recovery of damages arising out of our contractual, legal, or other duties. Should such an uninsured loss occur, our costs may substantially increase which would lower our overall profitability, if any.
Risks Relating To Our Stock
“Penny stock” rules may make buying or selling our securities difficult, which may make our stock less liquid and make it harder for investors to buy and sell our shares.
Trading in our securities is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the register representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
Existing and prospective stockholders may experience significant dilution if we enter into a business combination with a private concern or public company and issue securities to stockholders of such private company.
Our business plan contemplates that we may acquire other companies or assets. As a result, we may enter into a business combination with a private concern or public company that, depending on the terms of merger or acquisition, may result in us issuing securities to stockholders of any such private company. The issuance of previously authorized and unissued common shares would result in a reduction in the percentage of shares owned by our present and prospective stockholders and may result in a change in control or management of our Company.
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Douglas McClelland, one of our former directors, controls approximately 71% of our common shares, and he may not vote his shares in a manner that benefits minority stockholders.
As of July 31, 2009, Douglas McClelland, one of our former directors, owns approximately 71% of our voting stock. As a result, Mr. McClelland exercises significant control over our business affairs and policy. Mr. McClelland is able to significantly influence all matters requiring approval by stockholders, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deterring, or preventing a change in control and may make some transactions more difficult or impossible to complete without the support of Mr. McClelland. In addition, Mr. McClelland may not have an interest in fully promoting the sale of our common stock if such sales would reduce the opportunity for him to sell his own shares at any time in the future.
Our common stock has experienced in the past, and is expected to experience in the future, significant price and volume volatility, which substantially increases the risk that our stockholders may not be able to sell their shares at or above the price that they paid for the shares.
Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. From May 1, 2009 and through July 31, 2009, our common stock was sold and purchased at prices that ranged from a high of $1.06 to a low of $0.10 per share (with prices adjusted for a four-to-one forward split in our stock that occurred on June 6, 2007). An inability for our stockholders to sell their shares in a rapidly declining market as a result of the illiquidity in our stock may substantially increase their risk of loss because the price for our common stock may suffer greater declines due to its price volatility.
The price of our common stock that will prevail in the market may be higher or lower than the price that our stockholders pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following:
·
Variations in our quarterly operating results;
·
Development of a market in general for our products and services;
·
Changes in market valuations of similar companies;
·
Announcement by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
·
Loss of a major customer or failure to complete significant transactions;
·
Additions or departures of key personnel; and
·
Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and stocks quoted on the Over-The-Counter, or OTC, Bulletin Board in particular, have experienced significant price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying companies. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.
Over the past few months, there have been periods of significant increases in trading volume of our common stock during which the price of our stock has both increased and decreased. The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this annual report does not necessarily portend what the trading price of our common stock might be in the future.
Moreover, class action litigation has often been brought against companies following periods of volatility in the market price of the common stock of those companies. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on investments in our stock.
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Our directors have the right to authorize the issuance of preferred stock and additional shares of our common stock.
Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. We have no intention of issuing preferred stock at the present time. Any issuance of preferred stock could adversely affect the rights of holders of our common stock.
Should we issue additional shares of our common stock at a later time, the ownership interest of each of our current stockholders would be proportionally reduced. Our stockholders do not have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
On January 1, 2006, we entered into an agreement with Lenka Gazova, one of our stockholders, for a period of twelve months under which Ms. Gazova was required to perform programming services to develop the “AdMeUp Network” for a minimum of 20 hours per month. Under this agreement, we owned all copyright, intellectual property, and other ownership rights to the work performed by Ms. Gazova. Compensation was due when all services were complete and we had the option to determine the form and amount of compensation payable to Ms. Gazova based on one of the following options: a) $ 19,200 in cash; b) a number of our unregistered common shares equal to $19,200 divided by the weighted average trading price of the our common shares posted on any stock quotation or listing service for the 10-day period prior to the date of payment; or c) some combination of a) and b) that will yield a market value of $19,200. We have not yet paid the compensation owing to Ms. Gazova under this agreement and have not yet determined whether the fees or these services will be paid in cash, unregistered stock, or a combination of cash and unregistered stock. On January 1, 2007, we entered into a new agreement with Ms. Gazova with the same terms for an additional period of twelve months to continue providing programming services on the “AdMeUp Network.” The option for us to issue shares to Ms. Gazova under each of these agreements was pursuant to the Regulation S exemption. Ms. Gazova is not a U.S. person as defined in Rule 902(k) of Regulation S, and no sales efforts were conducted in the U.S. in accordance with Rule 903(c). Ms. Gazova acknowledged that if we compensate her in unregistered shares for her services, the shares purchased must come to rest outside the U.S. This transaction did not involve a distribution or public offering, and no commission was paid in connection with this option agreement.
On April 22, 2008, we issued 25,000 shares of our restricted common stock to J. Sean Diaz, as compensation for serving on our board of directors, valued at $10,000. On December 23, 2008, in compensation for renewing this contract for another term, we issued another 25,000 shares of our restricted common stock, valued at $2,750.
On April 22, 2008, we issued 62,500 shares of our restricted common stock to Peter Coquillard, as compensation for serving as the Managing Director of our Publishing division, valued at $25,000. On December 23, 2008, we renegotiated this contract for another term of service in exchange for compensation of 446,429 shares of our restricted common stock, valued at $50,000.
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On June 20, 2008, we issued 13,612 shares of our restricted common stock to Christopher Perry, as part of the compensation to acquire a publishing catalogue, valued at $7,500. On November 17, 2008, we issued a further 45,998 shares of our restricted common stock, valued at $7,500 as part of the compensation for this publishing catalogue.
On September 17, 2008, we issued 47,319 shares of our restricted common stock to Carolyn Cottingham in return for services, valued at $15,000.
On October 20, 2008, we issued 20,227 shares of our restricted common stock to Nicole Hughes, as part of the compensation to acquire a publishing catalogue, valued at $4,167.
On October 20, 2008, we issued 40,000 shares of our restricted common stock to Katrina Lopes, as compensation for serving as the Director of Management Services, valued at $6,800.
On November 17, 2008, we issued 10,000 shares of our restricted common stock to Sarah Thompson in return for services, valued at $1,600.
With respect to the issuance of our securities described above, we relied on the Section 4(2) exemption from securities registration under the federal securities laws for transactions not involving any public offering. No advertising or general solicitation was employed in offering the securities. The securities were issued to an accredited investor. The securities were offered for investment purposes only and not for the purpose of resale or distribution, and the transfer thereof was appropriately restricted by us.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Submission of Matters to a Vote of Security Holders
During the first quarter of our fiscal year ended April 30, 2010, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise.
Item 5. Other Information
None.
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Item 6. Exhibits
The exhibits listed below are filed as part of or incorporated by reference in this report.
Exhibit
No.
Identification of Exhibit
10.1.
Joint Venture Agreement between UOMO Media Inc. and Carl S. Erion and Bryan Wills to form Bassline dated May 18, 2009 (included as Exhibit 10.1 to the Form 8-K filed May 21, 2009 and incorporated herein by reference).
10.2.
Promissory Note between UOMO Media Inc. and Jueane Thiessen, dated June 15, 2009
(included as Exhibit 10.1 to the Form 8-K filed June 19, 2009 and incorporated herein by reference).
10.3.
Promissory Note between UOMO Media Inc. and Next Level Ltd., dated June 29, 2009
(included as Exhibit 10.1 to the Form 8-K filed July 6, 2009 and incorporated herein by reference).
10.4.
Music Agreement between UOMO Media Inc. and Colgate-Palmolive Canada Inc. dated July 16, 2009 (included as Exhibit 10.1 to the Form 8-K filed July 22, 2009 and incorporated herein by reference).
10.5.
Agreement for Promotional Appearances between UOMO Media Inc. and Colgate-Palmolive Canada Inc. dated July 16, 2009 (included as Exhibit 10.2 to the Form 8-K filed July 22, 2009 and incorporated herein by reference).
10.6.
Co-Publishing Agreement with Desman Inc. (included as Exhibit 10.17 to the Form 10-K filed August, 13, 2009 and incorporated herein by reference).
10.7.
Management Agreement with Desman Inc. (included as Exhibit 10.18 to the Form 10-K filed August, 13, 2009 and incorporated herein by reference).
10.8.
Manufacturing and Distribution Agreement with Universal Music Canada Inc.. (included as Exhibit 10.1 to the Form 8-K filed August, 21, 2009 and incorporated herein by reference).
21.1.
Subsidiaries of the Registrant (filed herewith).
31.1.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1.
Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UOMO Media Inc.
(Registrant)
By
/s/ Camara Alford
Camara Alford
President and Chief Executive Officer
Date
September 14, 2009
By
/s/ Jueane Thiessen
Jueane Thiessen
Chief Financial Officer and Principal Accounting Officer
Date
September 14, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
By
/s/ Camara Alford
Camara Alford
Chairman of the Board of Directors
Date
September 14, 2009
By
/s/ Jueane Thiessen
Jueane Thiessen
Director
Date
September 14, 2009
By
/s/ J. Sean Diaz
J. Sean Diaz
Director
Date
September 14, 2009
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Camara Alford, certify that:
1.
I have reviewed this quarterly report of UOMO Media Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 14, 2009
/s/ Camara Alford
--------------------------------------
By: Camara Alford
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Jueane Thiessen, certify that:
1.
I have reviewed this quarterly report of UOMO Media Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 14, 2009
/s/ Jueane Thiessen
--------------------------------------
By: Jueane Thiessen
Chief Financial Officer and Principal Accounting Officer
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EXHIBIT 32.1
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of UOMO Media Inc., a Nevada corporation (the "Company"), does hereby certify, to such officer's knowledge, that:
The quarterly report on Form 10-Q for the three month period ended July 31, 2009 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 14, 2009
/s/ Camara Alford
-------------------------------------
By: Camara Alford
Chief Executive Officer
Date: September 14, 2009
/s/ Jueane Thiessen
-------------------------------------
By: Jueane Thiessen
Chief Financial Officer and Principal Accounting Officer
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