þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
95-4439334
|
|
(State or other jurisdiction of incorporation | (I.R.S. Employer Identification | |
or organization) | No.) | |
4505 Emperor Blvd., Ste. 320
Durham, North Carolina
|
27703
|
|
(Address of principal executive offices) | (Zip Code) |
Title of each class
|
Name of each exchange on which registered
|
|
N/A
|
N/A
|
Large accelerated filer
|
o |
Accelerated filer
|
o |
Non-accelerated filer
(Do not check if a smaller reporting company)
|
o |
Smaller reporting company
|
þ |
PART I | |||||
Item 1.
|
Business
|
3
|
|||
Item 1A.
|
Risk Factors
|
8
|
|||
Item 1B.
|
Unresolved Staff Comments
|
13
|
|||
Item 2.
|
Properties
|
13
|
|||
Item 3.
|
Legal Proceedings
|
13
|
|||
Item 4.
|
Mine Safety Disclosures
|
13
|
|||
PART II
|
|||||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
14 | |||
Item 6.
|
Selected Financial Data
|
15
|
|||
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
15
|
|||
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
32
|
|||
Item 8.
|
Financial Statements and Supplementary Data
|
33
|
|||
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
34
|
|||
Item 9A.
|
Controls and Procedures
|
34
|
|||
Item 9B.
|
Other Information
|
35
|
|||
PART III | |||||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
36
|
|||
Item 11.
|
Executive Compensation
|
36
|
|||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related
|
36 | |||
Stockholder Matters
|
36
|
||||
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
36
|
|||
Item 14.
|
Principal Accounting Fees and Services
|
36
|
|||
PART IV | |||||
Item 15.
|
Exhibits, Financial Statement Schedules
|
37
|
|||
SIGNATURES
|
40
|
||||
EXHIBIT INDEX
|
41
|
-
|
SaaS applications for business management, web marketing, and e-commerce;
|
|
-
|
Software business tools that assist customers in developing written content;
|
|
-
|
Services that are designed to complement our product offerings and allow us to create custom business solutions that fit our end users’ and channel partners’ needs;
|
|
-
|
Services that assist not-for-profit organizations in their fundraising efforts; and
|
|
-
|
Mobile phone applications used to provide specialized communications and e-commerce opportunities for businesses and not-for-profit organizations.
|
Mobile applications: Kony, Simplicate, Appcelerator, BiznessApps, EachScape, Verivo
.
|
|
e-Commerce solutions: Register.com, GoDaddy.com, 1and1 Internet, eBay’s Storefront, Yahoo! Store, Microsoft, NetSuite, Intuit, and others
|
ITEM 1A.
RISK FACTORS
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
High
|
Low
|
|||||||
Year Ended December 31, 2010:
|
||||||||
First Quarter
|
$
|
1.14
|
$
|
1.14
|
||||
Second Quarter
|
$
|
1.20
|
$
|
.76
|
||||
Third Quarter
|
$
|
1.18
|
$
|
.60
|
||||
Fourth Quarter
|
$
|
1.25
|
$
|
.55
|
||||
Year Ended December 31, 2011:
|
||||||||
First Quarter
|
$
|
1.45
|
$
|
1.01
|
||||
Second Quarter
|
$
|
1.38
|
$
|
0.51
|
||||
Third Quarter
|
$
|
1.40
|
$
|
0.80
|
||||
Fourth Quarter
|
$
|
1.4
0
|
$
|
0.55
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
●
|
Subscription fees – monthly fees charged to customers for access to our SaaS applications
|
●
|
Professional service fees – fees related to consulting services, some of which complement our other products and applications
|
●
|
License fees – fees charged for perpetual or term licensing of platforms or applications
|
●
|
Hosting fees – fees charged for providing network accessibility for our customers using our customized platforms
|
●
|
Other revenues – revenues generated from non-core activities such as merchant processing fees; original equipment manufacturer, or OEM, contracts; and miscellaneous other revenues
|
●
|
Our total revenues for the year were $467,000, a decrease from 2010 of $562,000, or 55%. This overall decrease in revenues was primarily attributable to decreases in license fees, hosting fees, and professional and subscription fees.
|
●
|
Our gross loss for the year was $223
,000
, a decrease from 2010 of $54
,000
or 20%. This decrease was primarily attributable to reduction in costs of revenues that exceeded the reduction in revenues for 2011 since our revenues were reduced for 2011
.
|
●
|
Operating expenses for the year were $1.9 million, a decrease from 2010 of $0.9 million, or 31%. A significant portion of this decrease was a reduction in the amount of legal expenses and the settlement cost associated with the Class Action and Nouri lawsuits recognized in 2010 and the fact that we had no write-off of intangible assets in 2011.
|
●
|
Our loss from operations for the year was $2.1 million, a decrease from 2010 of $0.9 million, or 30%. Net loss per basic and fully diluted share was $0.19 in 2011 compared to $0.22 in 2010.
|
●
|
Cash and cash equivalents at December 31, 2011 were $236
,000
compared to $1,100,
000
at December 31, 2010. The primary reason for this decrease is that in 2011, we borrowed less from our bondholders to minimize interest expense.
|
●
|
Investment in technology, product development, and infrastructure
.
We have shifted our focus toward the rapid growth of our SmartOn Mobile platform and how smartphones can be utilized in business and non-profit organizations. Specifically, our SmartOn Mobile platform is modular and multi-tenant (where a single instance of the software runs on a server, providing service to multiple organizations) with popular pre-built mobile functionality modules that allows us the flexibility too quickly and efficiently package unique and innovative branded solutions for each client and deploy to each of the smartphone’s application stores for easy distribution to the client’s constituents.
|
●
|
Investment in marketing
.
In 2011 and 2010, we began to shift our focus from development to sales and marketing of our products. We expect to increase this effort in 2012 through public relations, attendance at trade shows, print and electronic advertisements, e-mail marketing, white-paper placement, webcasts, blogging, and paid search, among other tactics.
|
●
|
Expansion of our sales channels
.
We intend to expand our sales force and channel partner relationships to reach more end users.
|
●
|
Continuation of operating improvements
.
We continue to streamline our operations in an effort to reduce cash burn, reach profitability, and improve efficiencies. We will continue to focus on this critical area in 2012 by questioning current practices, closely scrutinizing actual-to-budget variances to identify deviations early, and realigning the business as required to meet the needs of our operations.
|
2011
|
2010
|
|||||||||||||||
Dollars
|
% of
Revenue
|
Dollars
|
% of
Revenue
|
|||||||||||||
Total revenues
|
$
|
467,308
|
100.00
|
%
|
$
|
1,028,879
|
100.00
|
%
|
||||||||
Cost of revenues
|
690,438
|
147.75
|
1,305,922
|
126.93
|
||||||||||||
Gross loss
|
(223,13
0
|
)
|
(47.75
|
)
|
(277,043
|
)
|
(26.93
|
)
|
||||||||
Operating expenses
|
1,860,808
|
398.20
|
2,716,266
|
264.0
|
||||||||||||
Loss from operations
|
(2,083,938
|
)
|
(445.95
|
)
|
(2,993,309
|
)
|
(290.93
|
)
|
||||||||
Other expense, net
|
(1,455,872
|
)
|
(311.54
|
)
|
(955,633
|
)
|
(92.88
|
)
|
||||||||
Net loss
|
$
|
(3,539,810
|
)
|
(757.49
|
)%
|
$
|
(3,948,942
|
)
|
(383.81
|
)%
|
||||||
Net loss per common share
|
$
|
(.19
|
)
|
$
|
(.22
|
)
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Subscription fees
|
$
|
363,040
|
$
|
482,219
|
$
|
(119,179
|
)
|
(24.71
|
)%
|
|||||||
Professional service fees
|
1,067
|
82,425
|
(81,358
|
)
|
(98.71
|
)%
|
||||||||||
License fees
|
0
|
224,500
|
(224
,
500
|
)
|
(100.00
|
)%
|
||||||||||
Hosting fees
|
216
|
137,788
|
(137,572
|
)
|
(99.84
|
)%
|
||||||||||
Other revenue
|
102,985
|
101,947
|
1,038
|
1.02
|
%
|
|||||||||||
Total revenues
|
$
|
467,308
|
$
|
1,028,879
|
$
|
(561,571
|
)
|
(54.85
|
)%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Subscription fees
|
$
|
363,040
|
$
|
482,219
|
$
|
(119,179
|
)
|
(24.7
|
)%
|
|||||||
Percent of total revenues
|
77.69
|
%
|
46.87
|
%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Professional service fees
|
$
|
1,067
|
$
|
82,425
|
$
|
(81,358
|
)
|
(98.7
|
)%
|
|||||||
Percent of total revenues
|
0.23
|
%
|
8.01
|
%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
License fees
|
$ | 0 | $ | 224,500 | $ | (224,500 | ) | (100.0 | )% | |||||||
Percent of total revenues
|
0.00 | % | 21.82 | % |
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Hosting fees
|
$
|
216
|
$
|
137,788
|
$
|
(137,572
|
)
|
(99.8
|
)%
|
|||||||
Percent of total revenues
|
0.05
|
%
|
13.39
|
%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Other revenue
|
$
|
102,985
|
$
|
101,947
|
$
|
1,038
|
1.02
|
%
|
||||||||
Percent of total revenues
|
22.04
|
%
|
9.9
|
%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Cost of revenues
|
$
|
690,438
|
$
|
1,305,922
|
$
|
(615,484
|
)
|
(47.1
|
)%
|
|||||||
Percent of total revenues
|
147.75
|
%
|
126.93
|
%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
General and administrative
|
$ | 1,093,215 | $ | 1,914,164 | $ | (820,949 | ) | (42.9 | )% | |||||||
Sales and marketing
|
564,053 | 721,912 | (157,859 | ) | (21.9 | )% | ||||||||||
Research and development
|
375,124 | 145,820 | 229,304 | 157.3 | % | |||||||||||
Loss on impairment of intangible assets
|
- | 548,962 | (548,962 | ) | (100.0 | )% | ||||||||||
(Gain) loss on legal settlements
|
(177,169 | ) | (614,592 | ) | 437,423 | (71.2 | )% | |||||||||
(Gain) on disposal of assets, net
|
5,585 | 5,585 | 100.0 | % | ||||||||||||
Total operating expenses
|
$ | 1,860,808 | $ | 2,716,266 | $ | (855,458 | ) | (31.5 | )% |
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
General and administrative
|
$
|
1,093,215
|
$
|
1,914,164
|
$
|
(820,949
|
)
|
(42.9
|
)%
|
|||||||
Percent of total revenues
|
233.94
|
%
|
186.0
|
%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Sales and marketing
|
$
|
564,053
|
$
|
721,912
|
$
|
(157,859
|
)
|
(21.9
|
)%
|
|||||||
Percent of total revenues
|
120.7
|
%
|
70.2
|
%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Research and development
|
$
|
375,124
|
$
|
145,820
|
$
|
229,304
|
157.3
|
%
|
||||||||
Percent of total revenues
|
80.3
|
%
|
14.2
|
%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Loss on impairment of intangible assets
|
$
|
-
|
$
|
548,962
|
$
|
(548,962
|
)
|
(100.0
|
)%
|
|||||||
Percent of total revenues
|
-
|
%
|
44.1
|
%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
(Gain) on legal settlements
|
$
|
(177,169
|
)
|
$
|
(614,592
|
)
|
$
|
(437,423
|
)
|
(71.2
|
)%
|
|||||
Percent of total revenues
|
(37.9
|
)%
|
(59.7
|
)%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||
Loss on disposal of assets
|
$
|
5,585
|
-
|
$
|
5,585
|
100.0
|
%
|
|||||
Percent of total revenues
|
1.2
|
%
|
-
|
%
|
Years Ended December 31,
|
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Interest expense, net
|
$
|
(1,308,372
|
)
|
$
|
(955,633
|
)
|
$
|
(352,739
|
)
|
(36.9
|
)%
|
|||||
Change in market value of settlement related financial instruments
|
(147,500
|
)
|
-
|
(147,500
|
)
|
(100.0
|
)
|
|||||||||
Total other (expense) income
|
$
|
(1,455,872
|
)
|
$
|
(955,633
|
)
|
$
|
(500,239
|
)
|
(52.4
|
)%
|
Years Ended December 31,
|
Year-Over-Year Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Net cash used in operating activities
|
$
|
4,603,845
|
$
|
3,959,212
|
$
|
644,633
|
16.3
|
%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Net cash used in investing activities
|
$
|
226,633
|
$
|
257,872
|
$
|
(31,239
|
)
|
(12.1
|
)%
|
Years Ended
December 31,
|
Year-Over-Year
Change
|
|||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||
Net cash provided by financing activities
|
$
|
4,135,408
|
$
|
4,957,497
|
$
|
(822,089
|
)
|
(16.6
|
)%
|
Through the Year ended
December 31, 2011
|
|||||||||||||
Note Buyer
|
Date of Purchase
|
Amount of
Convertible
Note
|
Interest
Rate
|
Original
Due Date
|
Restated
due Date
|
||||||||
Atlas Capital
|
November 14, 2007
|
$
|
2,050,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Crystal Management
|
November 14, 2007
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
William Furr
|
November 14, 2007
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Blueline Fund
|
November 14, 2007
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
August 12, 2008
|
$
|
1,250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Crystal Management
|
August 12, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
UBP, Union Bancaire Privee
|
November 21, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
HSBC Private Bank (Suisse), SA
|
November 21, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
January 6, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
February 24, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
April 3, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
June 2, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
July 16, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
August 26, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
September 8, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
October 5, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
UBP, Union Bancaire Privee
|
October 9, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
November 6, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
December 23, 2009
|
$
|
750,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
February 11, 2010
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
April 1, 2010
|
$
|
350,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
June 2, 2010
|
$
|
600,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
July 1, 2010
|
$
|
250,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
August 13, 2010
|
$
|
100,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
August 30, 2010
|
$
|
200,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 14, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 30, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
November 9, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
February 7, 2011
|
$
|
250,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
March 4, 2011
|
$
|
325,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
April 6, 2011
|
$
|
400,000
|
8
|
%
|
11/14/2013
|
|||||||
UBP, Union Bancaire Privee
|
May 4, 2011
|
$
|
400,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 6, 2011
|
$
|
500,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
October 11, 2011
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
November 7, 2011
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
UBP, Union Bancaire Privee
|
December 14,2011
|
$
|
500,000
|
8
|
%
|
11/14/2013
|
|||||||
Less – lease conversion
|
September 4, 2009
|
$
|
(200,000
|
)
|
●
|
convert the principal then outstanding on its Notes into shares of our common stock, or
|
●
|
receive immediate repayment in cash of the Notes, including any accrued and unpaid interest.
|
●
|
the average of the high and low prices of the Company’s common stock on the OTCBB averaged over the five trading days prior to the closing date of the issuance of such Note,
|
●
|
if the Company’s common stock is not traded on the Over-The-Counter market, the closing price of the common stock reported on the Nasdaq National Market or the principal exchange on which the common stock is listed, averaged over the five trading days prior to the closing date of the issuance of such Note, or
|
●
|
the closing price of the Company’s common stock on the OTCBB, the Nasdaq National Market, or the principal exchange on which the common stock is listed, as applicable, on the trading day immediately preceding the date such Note is converted.
|
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Page
|
||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|||
BALANCE SHEETS
|
F-2
|
|||
STATEMENTS OF OPERATIONS
|
F-3
|
|||
STATEMENTS OF CASH FLOWS
|
F-4
|
|||
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
F-5
|
|||
NOTES TO FINANCIAL STATEMENTS
|
F-6
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
|||||||
REVENUES:
|
||||||||
Subscription fees
|
$
|
363,040
|
$
|
482,219
|
||||
Professional service fees
|
1,067
|
82,425
|
||||||
License fees
|
-
|
224,500
|
||||||
Hosting fees
|
216
|
137,788
|
||||||
Other revenue
|
102,985
|
101,947
|
||||||
Total revenues
|
467,308
|
1,028,879
|
||||||
COST OF REVENUES
|
690,438
|
1,305,922
|
||||||
GROSS PROFIT (LOSS)
|
(223,130
|
)
|
(277,043
|
)
|
||||
OPERATING EXPENSES:
|
||||||||
General and administrative
|
1,093,215
|
1,914,164
|
||||||
Sales and marketing
|
564,053
|
721,912
|
||||||
Research and development
|
375,124
|
145,820
|
||||||
Loss on impairment of intangible assets and capitalized software
|
-
|
548,962
|
||||||
(Gain) on legal settlements
|
(177,169
|
)
|
(614,592
|
)
|
||||
Loss on disposal of assets, net
|
5,585
|
-
|
||||||
Total operating expenses
|
1,860,808
|
2,716,266
|
||||||
LOSS FROM OPERATIONS
|
(2,083,938
|
)
|
(2,993,309
|
)
|
||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest expense, net
|
(1,308,372
|
)
|
(955,633
|
)
|
||||
Change in market value of settlement related financial instrument (See note 3)
|
(147,500
|
)
|
-
|
|||||
Total other expense
|
(1,455,872
|
)
|
(955,633
|
)
|
||||
NET LOSS
|
$
|
(3,539,810
|
)
|
$
|
(3,948,942
|
)
|
||
NET LOSS PER COMMON SHARE:
|
||||||||
Basic and fully diluted
|
$
|
(0.19
|
)
|
$
|
(0.22
|
)
|
||
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:
|
||||||||
Basic and fully diluted
|
18,352,542
|
18,342,542
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(3,539,810
|
)
|
$
|
(3,948,942
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
44,119
|
115,229
|
||||||
Bad debt expense
|
-
|
519,956
|
||||||
Stock-based compensation
|
47,894
|
33,730
|
||||||
Loss on disposal of assets
|
5,585
|
-
|
||||||
Loss on impairment of intangible assets
|
-
|
548,962
|
||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
2,301
|
(458,536
|
)
|
|||||
Notes receivable
|
-
|
(57,295
|
)
|
|||||
Prepaid expenses
|
111,619
|
186,848
|
||||||
Other assets
|
(11,836
|
)
|
(2,501
|
)
|
||||
Accounts payable
|
(45,909
|
)
|
33,450
|
|||||
Deferred revenue
|
10,597
|
(24,934
|
)
|
|||||
Accrued and other expenses
|
(1,228,405
|
)
|
(905,179
|
)
|
||||
Net cash used in operating activities
|
(4,603,845
|
)
|
(3,959,212
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Restricted cash placed at IDB Bank
|
(250,000)
|
|||||||
Purchases of property and equipment
|
(11,438
|
)
|
(7,872
|
)
|
||||
Patent development costs
|
(9,151
|
)
|
-
|
|||||
Purchase of software license
|
(33,534
|
)
|
-
|
|||||
Capitalized software
|
(172,510
|
)
|
-
|
|||||
Net cash used in investing activities
|
(226,633
|
)
|
(257,872
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Restricted cash used to pay IDB interest and fees
|
179,553
|
-
|
||||||
Proceeds from debt borrowings
|
3,975,000
|
11,840,519
|
||||||
Repayments of debt borrowings
|
(19,145
|
)
|
(6,883,022
|
)
|
||||
Net cash provided by financing activities
|
4,135,408
|
4,957,497
|
||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(695,070
|
)
|
740,413
|
|||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
860,209
|
119,796
|
||||||
CASH AND CASH EQUIVALENTS, END OF YEAR
|
$
|
165,139
|
$
|
860,209
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the year for:
|
||||||||
Interest
|
$
|
1,271,286
|
$
|
1,014,521
|
Common Stock
|
Additional
|
|||||||||||||||||||
Shares
|
$0.001
Par
Value
|
Paid-In
Capital
|
Accumulated
Deficit
|
Totals
|
||||||||||||||||
BALANCES, DECEMBER 31, 2009
|
18,332,542
|
18,333
|
$
|
67,036,836
|
$
|
(82,448,948
|
)
|
$
|
(15,393,779
|
)
|
||||||||||
Equity-based compensation
|
10,000
|
10
|
33,732
|
-
|
33,742
|
|||||||||||||||
Net loss
|
(3,948,942
|
)
|
(3,948,942
|
)
|
||||||||||||||||
BALANCES, DECEMBER 31, 2010
|
18,342,542
|
18,343
|
$
|
67,070,568
|
$
|
(86,397,890
|
)
|
$
|
(19,308,979
|
)
|
||||||||||
Equity-based compensation
|
10,00
0
|
10
|
47,884
|
-
|
47,894
|
|||||||||||||||
Net loss
|
(3,539,810
|
)
|
(3,539,810
|
)
|
||||||||||||||||
BALANCES, DECEMBER 31, 2011
|
18,352,542
|
18,353
|
$
|
67,118,452
|
$
|
(89,937,700
|
)
|
$
|
(22,800,895
|
)
|
1.
|
SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN
|
-
|
SaaS applications for business management, web marketing, and e-commerce;
|
|
-
|
Software business tools that assist customers in developing written content;
|
|
-
|
Services that are designed to complement our product offerings and allow us to create custom business solutions that fit our end users’ and channel partners’ needs;
|
|
-
|
Services that assist not-for-profit organizations in their fundraising efforts; and
|
|
-
|
Mobile phone applications used to provide specialized communications and e-commerce opportunities for businesses and not-for-profit organizations.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Computer hardware
|
10 years
|
|
Computer software
|
10 years
|
|
Furniture and fixtures
|
10 years
|
|
Office equipment
|
10 years
|
|
Leasehold improvements
|
Shorter of the estimated useful life or the lease term
|
Year Ended December 31,
|
||||||||
2011
|
2010
|
|||||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
Expected volatility
|
73.27
|
%
|
96.1
|
%
|
||||
Risk-free interest rate
|
2.04
|
%
|
2.65
|
%
|
||||
Expected lives (years)
|
4
.0
|
4.0
|
3.
|
BALANCE SHEET ACCOUNTS
|
December 31
|
||||||||
2011
|
2010
|
|||||||
Accounts receivable
|
$
|
682,019
|
$
|
744,320
|
||||
Allowance for doubtful accounts
|
(675,389
|
)
|
(735,389
|
)
|
||||
$
|
6,630
|
$
|
8,931
|
|
December 31, 2011
|
|
December 31, 2010
|
|||||
Shares into which financial instrument liability can be settled:
|
|
|
||||||
Unrestricted shares of common stock, when issued
|
|
1,475,000
|
-
|
|
Settlement related Financial Instrument liability at fair value:
|
|
|
||||||
Fair value of unrestricted shares of common stock
|
|
$
|
1,770,000
|
|
|
$
|
-
|
|
|
Year ended December 31, 2011
|
|
Year ended December 31, 2010
|
|||||
Change in market value of settlement related financial instruments in the accompanying statement of operations is related to the Class Action settlement approved by the District Court on July 1, 2011
|
|
|
||||||
Unrestricted shares of common stock
|
|
$
|
(147,500
|
)
|
|
$
|
-
|
|
Year ended December 31, 2011
|
Year ended December 31, 2010
|
|||||||
Accrued liability - development of the Company’s custom accounting application
|
$ | 75,436 | $ | 75,436 | ||||
Legal reserves for settlement of legal fees on behalf of former officers and employees, Michael Nouri and Eric Reza Nouri
|
217,227 | 1,400,000 | ||||||
Estimated Class Action settlement costs
|
1,874,500 | |||||||
Interest due on Convertible Notes
|
179,569 | 141,985 | ||||||
Accrued legal fees - other
|
152,657 | |||||||
Accrued Payroll
|
3,406 | |||||||
Other accrued items
|
48,735 | 24,139 | ||||||
$ | 520,967 | $ | 3,672,123 |
·
|
Subscription fees
–
Short-term and long-term portions of cash received related to one- or two-year subscriptions for domain names and/or e-mail accounts.
|
·
|
Professional service
fees
–
Customers purchased licenses and paid professional service fees during 2011 and 2010 to develop a customized mobile application. The applications were in process at December 31, 2011 and not delivered. This deferred revenue represents the difference between earned fees and professional service fees that were recognized as professional service fees revenue in 2011 and 2010
.
|
December 31,
2011
|
December 31,
2010
|
|||||||
Subscription fees
|
$
|
13,326
|
$
|
22,565
|
||||
Professional service fees
|
19,837
|
-
|
||||||
Totals
|
$
|
33,163
|
$
|
22,565
|
||||
Current portion
|
$
|
31,658
|
$
|
22,271
|
||||
Non-current portion
|
1,505
|
294
|
||||||
Totals
|
$
|
33,163
|
$
|
22,565
|
4.
|
PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE
|
December 31,
2011
|
December 31,
2010
|
|||||||
Computer hardware
|
$
|
151,450
|
$
|
145,829
|
||||
Computer software
|
40,967
|
291,436
|
||||||
Furniture and fixtures
|
88,946
|
88,946
|
||||||
Office equipment
|
14,218
|
17,006
|
||||||
Leasehold improvements
|
53,279
|
53,279
|
||||||
348,860
|
596,496
|
|||||||
Less accumulated depreciation
|
(184,203
|
)
|
(393,574
|
)
|
||||
Property and equipment, net
|
$
|
164,657
|
$
|
202,922
|
December 31,
2011
|
December 31,
2010
|
|||||||
Capitalized software
|
$
|
172,510
|
$
|
-
|
||||
Less accumulated amortization
|
-
|
-
|
||||||
Capitalized software, net
|
$
|
172,510
|
$
|
-
|
5.
|
INTANGIBLE ASSETS
|
Asset Category
|
Value
Assigned
|
Weighted
Average
Amortization
Period
(in Years)
|
Impairments
|
Accumulated
Amortization
|
Carrying
Value (Net of
Impairments)
|
||||||||||||
Customer base
|
$
|
1,944,347
|
6.2
|
$
|
(626,685
|
)
|
$
|
1,317,662
|
$
|
-
|
|||||||
Acquired technology
|
501,264
|
3
|
-
|
501,264
|
-
|
||||||||||||
Totals
|
$
|
2,445,611
|
$
|
(626,685
|
)
|
$
|
1,818,926
|
$
|
-
|
6.
|
NOTES PAYABLE
|
Note Description
|
Short-Term
Portion
|
Long-Term
Portion
|
Total
|
Maturity
|
Rate
|
||||||||||||
IDB Bank
|
$ | 5,000,000 | $ | - | 5 ,000,000 |
May 2012
|
4 | % | |||||||||
Insurance premium note
|
21,421 | - | 21,421 |
June 2012
|
6.1 | % | |||||||||||
Various capital leases
|
16,394 | 150,075 | 166,469 |
Various
|
8.0-18.9 | % | |||||||||||
Convertible notes
|
- | 15,475,000 | 15,475,000 |
Nov 2013
|
8.0 | % | |||||||||||
Totals
|
$ | 5,037,815 | $ | 15,625,075 | $ | 20,662,890 |
Short-Term
Portion
|
Long-Term
Portion
|
Total
|
Maturity
|
Rate
|
|||||||||||||
IDB Bank
|
$ | - | $ | 4,000,000 | $ | 4,000,000 |
May 2012
|
4 | % | ||||||||
Insurance premium note
|
21,778 | - | 21,778 |
Jun 2011
|
7 | % | |||||||||||
Various capital leases
|
18,786 | 166,469 | 185,255 |
Various
|
8.0-18.9 | % | |||||||||||
Convertible notes
|
- | 12,500,000 | 12,500,000 |
Nov 2013
|
8.0 | % | |||||||||||
Totals
|
$ | 40,564 | $ | 16,666,469 | $ | 16,707,033 |
As of December 31, 2011
|
|||||||||||||
Note Buyer
|
Date of Purchase
|
Amount of
Convertible
Note
|
Interest
Rate
|
Original
Due Date
|
Restated
due Date
|
||||||||
Atlas Capital
|
November 14, 2007
|
$
|
2,050,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Crystal Management
|
November 14, 2007
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
William Furr
|
November 14, 2007
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Blueline Fund
|
November 14, 2007
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
August 12, 2008
|
$
|
1,250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Crystal Management
|
August 12, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
UBP, Union Bancaire Privee
|
November 21, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
HSBC Private Bank (Suisse), SA
|
November 21, 2008
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
January 6, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
February 24, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
April 3, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
June 2, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
July 16, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
August 26, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
September 8, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
October 5, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
UBP, Union Bancaire Privee
|
October 9, 2009
|
$
|
250,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
November 6, 2009
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
December 23, 2009
|
$
|
750,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
February 11, 2010
|
$
|
500,000
|
8
|
%
|
11/14/2010
|
11/14/2013
|
||||||
Atlas Capital
|
April 1, 2010
|
$
|
350,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
June 2, 2010
|
$
|
600,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
July 1, 2010
|
$
|
250,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
August 13, 2010
|
$
|
100,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
August 30, 2010
|
$
|
200,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 14, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 30, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
November 9, 2010
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
February 7, 2011
|
$
|
250,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
March 4, 2011
|
$
|
325,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
April 6, 2011
|
$
|
400,000
|
8
|
%
|
11/14/2013
|
|||||||
UBP, Union Bancaire Privee
|
May 4, 2011
|
$
|
400,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
September 6, 2011
|
$
|
500,000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
October 11, 2011
|
$
|
300.000
|
8
|
%
|
11/14/2013
|
|||||||
Atlas Capital
|
November 7, 2011
|
$
|
300,000
|
8
|
%
|
11/14/2013
|
|||||||
UBP, Union Bancaire Privee
|
December 14,2011
|
$
|
500,000
|
8
|
%
|
11/14/2013
|
|||||||
Less – lease conversion
|
September 4, 2009
|
$
|
(200,000
|
)
|
|||||||||
Total Convertible Notes
|
15,475,000
|
·
|
convert the principal then outstanding on its Notes into shares of our common stock, or
|
·
|
receive immediate repayment in cash of the Notes, including any accrued and unpaid interest.
|
·
|
the average of the high and low prices of the Company’s common stock on the OTC Bulletin Board averaged over the five trading days prior to the closing date of the issuance of such Note,
|
·
|
if the Company’s common stock is not traded on the Over-The-Counter market, the closing price of the common stock reported on the Nasdaq National Market or the principal exchange on which the common stock is listed, averaged over the five trading days prior to the closing date of the issuance of such Note, or
|
·
|
the closing price of the Company’s common stock on the OTC Bulletin Board, the Nasdaq National Market, or the principal exchange on which the common stock is listed, as applicable, on the trading day immediately preceding the date such Note is converted, in each case as adjusted for stock splits, dividends or combinations, recapitalizations, or similar events.
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
8.
|
STOCKHOLDERS’ EQUITY
|
Shares
|
Weighted
Average
Exercise Price
|
|||||||
BALANCE, December 31, 2009
|
132,500
|
$
|
4.43
|
|||||
Granted
|
193,000
|
1.13
|
||||||
Exercised
|
-
|
-
|
||||||
Canceled
|
(42,500
|
)
|
3.31
|
|||||
BALANCE, December 31, 2010
|
283,000
|
2.34
|
||||||
Granted
|
28,400
|
1.21
|
||||||
Exercised
|
-
|
-
|
||||||
Canceled
|
(9,500
|
)
|
1.10
|
|||||
BALANCE, December 31, 2011
|
301,900
|
$
|
2.25
|
Currently Exercisable
|
||||||||||||||||||||||
Exercise Price
|
Number of
Options
Outstanding
|
Average
Remaining
Contractual
Life (Years)
|
Weighted
Average
Exercise
Price
|
Number of
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
$
|
.90
|
8,400
|
9.6
|
$
|
.90
|
-
|
$
|
-
|
||||||||||||||
$
|
1.10
|
58,500
|
8.8
|
$
|
1.10
|
14,625
|
$
|
1.10
|
||||||||||||||
$
|
1.14
|
125,000
|
8.1
|
$
|
1.14
|
68,750
|
$
|
1.14
|
||||||||||||||
$
|
1.35
|
20,000
|
9.8
|
$
|
1.35
|
5,000
|
$
|
1.35
|
||||||||||||||
From $2.50 to $3.50
|
45,000
|
3.4
|
$
|
3.31
|
45,000
|
$
|
3.31
|
|||||||||||||||
$
|
5.00
|
25,000
|
3.3
|
$
|
5.00
|
25,000
|
$
|
5.00
|
||||||||||||||
$
|
8.61
|
20,000
|
3.6
|
$
|
8.61
|
20,000
|
$
|
8.61
|
||||||||||||||
Totals
|
301,900
|
6.6
|
$
|
3.06
|
178,375
|
$
|
3.07
|
9.
|
INCOME TAXES
|
December 31,
2011
|
December 31,
2010
|
|||||||
Net current deferred income tax assets related to:
|
||||||||
Allowance for doubtful accounts
|
$
|
260,000
|
$
|
324,000
|
||||
Depreciation
|
114,000
|
113,000
|
||||||
Stock-based expenses
|
226,000
|
226,000
|
||||||
Accrued liabilities – litigation expenses
|
768,000
|
1,264,000
|
||||||
Other
|
8,000
|
7,000
|
||||||
Net operating loss carryforwards
|
24,692,000
|
21,485
,000
|
||||||
Total
|
26,068,
000
|
23,419
,000
|
||||||
Less valuation allowance
|
(26,068,
000
|
)
|
(23,419
,000
|
)
|
||||
Net current deferred income tax
|
$
|
-
|
$
|
-
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
|||||||
Tax benefit computed at statutory rate of 34%
|
$
|
(1,097,000
|
)
|
$
|
(1,343,000
|
)
|
||
State income tax benefit, net of federal effect
|
(161,000
|
)
|
(180,000
|
)
|
||||
Change in valuation allowance
|
1,273,000
|
1,323,000
|
||||||
Permanent differences:
|
||||||||
Stock based compensation
|
(16,000
|
)
|
(13,000
|
)
|
||||
Intangible impairment
|
-
|
212,000
|
||||||
Other permanent differences
|
1,000
|
1,000
|
||||||
Totals
|
-
|
-
|
10.
|
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
|
11.
|
EMPLOYEE BENEFIT PLAN
|
12.
|
SUBSEQUENT EVENTS
|
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
CONTROLS AND PROCEDURES
|
(i)
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
||
(ii)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
||
(iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. EXECUTIVE COMPENSATION |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Exhibit No.
|
|
Description
|
||
3.1
|
Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|||
3.2
|
Sixth Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, as filed with the SEC on January 20, 2010)
|
|||
4.1
|
Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|||
4.2
|
Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|||
4.3
|
Form of Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|||
4.4
|
First Amendment to Convertible Secured Subordinated Note Purchase Agreement, dated August 12, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2008)
|
|||
4.5
|
Second Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement, dated November 21, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.5 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|||
4.6
|
Third Amendment to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement and Amendment to Convertible Secured Subordinated Promissory Notes, dated February 24, 2009, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.6 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|||
4.7
|
Form of Convertible Secured Subordinated Promissory Note to be issued post January 2009 (incorporated herein by reference to Exhibit 4.7 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|||
4.8
|
Fourth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Second Amendment to Convertible Secured Subordinated Promissory Notes and Third Amendment to Registration Rights Agreement, dated March 5, 2010, by and among Smart Online, Inc. Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|||
4.9
|
Form of Convertible Secured Subordinated Promissory Note to be issued post March 5, 2010 (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|||
10.1*
|
2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|||
10.2*
|
Form of Incentive Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.2 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
|||
10.3* | Form of Incentive Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007) | |||
10.4* | Form of Non-Qualified Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.3 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006) |
10.5*
|
Form of Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.6*
|
Form of revised Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.7*
|
Form of Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.8*
|
Form of Restricted Stock Award Agreement (for Employees) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 21, 2007)
|
|
10.9*
|
Form of Restricted Stock Agreement for Employees (incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.10*
|
Form of Restricted Stock Agreement (Non-Employee Director) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on May 31, 2007)
|
|
10.11*
|
Form of Restricted Stock Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.12*
|
Form of revised Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (Non-Employee Director) (incorporated herein by reference to Exhibit 10.12 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010
|
|
10.13*
|
Cash Bonus Program (incorporated herein by reference to Exhibit 10.4 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.14*
|
Equity Award Program (incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.15*
|
Smart Online, Inc. Revised Board Compensation Policy, effective March 26, 2010 (incorporated herein by reference to Exhibit 10.21 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.16*
|
Indemnification Agreement, dated April 14, 2006, by and between Smart Online, Inc. and Tom Furr (incorporated herein by reference to Exhibit 10.44 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
|
Warrant to Purchase Common Stock of Smart Online, Inc., and Registration Rights Agreement, dated February 27, 2007, by and between Smart Online, Inc. and Canaccord Adams Inc. (incorporated herein by reference to Exhibit 10.47 to our Registration Statement on Form S-1, as filed with the SEC on April 3, 2007)
|
||
10.18
|
Registration Rights Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
10.19
|
Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
10.20
|
Web Services Agreement dated October 10, 2010, between UR Association, LLC and Smart Online, Inc. (incorporated herein by reference to Exhibit 10.23 to our Annual Report on Form 10-K, as filed with the SEC on March 31, 2011)
|
|
10.21
|
Office Lease Agreement dated May 1, 2010, between Smart Online, Inc. and Nottingham Hall LLC (incorporated herein by reference to Exhibit 10.24 to our Annual Report on Form 10-K, as filed with the SEC on March 31, 2011)
|
|
10.22
|
Promissory Note dated December 6, 2010, made by Smart Online, Inc. for the benefit of Israel Discount Bank of
New York, as lender (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.23
|
Letter Agreement for $6,500,000.00 Term Facility dated December 6, 2010, by Israel Discount Bank of New
York, and agreed and accepted by Smart Online, Inc. (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.24
|
First Amendment to Office Lease Agreement dated April 28, 2011, between Smart Online, Inc. and Nottingham Hall LLC.
|
|
Consent of Independent Registered Public Accounting Firm
|
||
Certification of Principal Executive Officer Pursuant to Rule 13a-14/15d-14
|
||
Certification of Principal Financial Officer Pursuant to Rule 13a-14/15d-14
|
||
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||
99.1
|
Notice of election of Atlas Capital S.A., dated November 30, 2010, to be reimbursed in cash for the drawdown
on the Paragon Letter of Credit pursuant to the Reimbursement Agreement, dated November 10, 2006, between
the Company and Atlas, as subsequently amended (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
101.1
|
The following materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting language): (i) the Balance Sheet, (ii) the Statement of Operations, (iii) the Statement of Cash Flows and (iv) related notes to these financial statements, tagged as blocks of text
(furnished herewith)
|
SMART ONLINE, INC.
|
|||
March 30, 2012
|
By:
|
/s/ Dror Zoreff
|
|
Dror Zoreff, Interim Chief Executive Officer
|
March 30, 2012
|
By:
|
/s/ Dror Zoreff
|
|
Dror Zoreff
|
|||
Interim Chief Executive Officer and Chairman of the Board
|
|||
March 30, 2012
|
By:
|
/s/ Thaddeus J. Shalek
|
|
Thaddeus J. Shalek
|
|||
Chief Financial Officer and Principal Accounting Officer
|
|||
March 30, 2012
|
By:
|
/s/ Shlomo Elia
|
|
Shlomo Elia
|
|||
Director
|
|||
March 30, 2012
|
By:
|
/s/ Amir Elbaz
|
|
Amir Elbaz
|
|||
Director
|
|||
March 30,2012
|
By:
|
/s/ Robert M. Brinson, Jr.
|
|
Robert M. Brinson
|
|||
Director
|
Exhibit No.
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|
3.2
|
Sixth Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, as filed with the SEC on January 20, 2010)
|
|
4.1
|
Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|
4.2
|
Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.3
|
Form of Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.4
|
First Amendment to Convertible Secured Subordinated Note Purchase Agreement, dated August 12, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2008)
|
|
4.5
|
Second Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement, dated November 21, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.5 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.6
|
Third Amendment to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement and Amendment to Convertible Secured Subordinated Promissory Notes, dated February 24, 2009, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.6 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.7
|
Form of Convertible Secured Subordinated Promissory Note to be issued post January 2009 (incorporated herein by reference to Exhibit 4.7 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.8
|
Fourth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Second Amendment to Convertible Secured Subordinated Promissory Notes and Third Amendment to Registration Rights Agreement, dated March 5, 2010, by and among Smart Online, Inc., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010)
|
|
4.9
|
Form of Convertible Secured Subordinated Promissory Note to be issued post March 5, 2010 (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010)
|
|
10.1*
|
2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|
10.2*
|
Form of Incentive Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.2 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
10.3*
|
Form of Incentive Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.4*
|
Form of Non-Qualified Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.3 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
10.5*
|
Form of Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.6*
|
Form of revised Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.7*
|
Form of Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.8*
|
Form of Restricted Stock Award Agreement (for Employees) under Smart Online Inc.'s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 21, 2007)
|
|
10.9*
|
Form of Restricted Stock Agreement for Employees (incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.10*
|
Form of Restricted Stock Agreement (Non-Employee Director) under Smart Online Inc.'s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on May 31, 2007)
|
|
10.11*
|
Form of Restricted Stock Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.12*
|
Form of revised Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (Non-Employee Director) (incorporated herein by reference to Exhibit 10.12 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.13*
|
Cash Bonus Program (incorporated herein by reference to Exhibit 10.4 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.14*
|
Equity Award Program (incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.15*
|
Smart Online, Inc. Revised Board Compensation Policy, effective March 26, 2010 (incorporated herein by reference to Exhibit 10.21 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.16*
|
Indemnification Agreement, dated April 14, 2006, by and between Smart Online, Inc. and Tom Furr (incorporated herein by reference to Exhibit 10.44 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
10.17
|
Warrant to Purchase Common Stock of Smart Online, Inc., and Registration Rights Agreement, dated February 27, 2007, by and between Smart Online, Inc. and Canaccord Adams Inc. (incorporated herein by reference to Exhibit 10.47 to our Registration Statement on Form S-1, as filed with the SEC on April 3, 2007)
|
|
10.18
|
Registration Rights Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
10.19
|
Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
10.20
|
Web Services Agreement dated October 10, 2010, between UR Association, LLC and Smart Online, Inc. (Incorporated herein by reference to Exhibit 10.23 to our Annual Report on Form 10-K, as filed with the SEC on March 31, 2011)
|
10.21
|
Office Lease Agreement dated May 1, 2010, between Smart Online, Inc. and Nottingham Hall LLC (incorporated herein by reference to Exhibit 10.24 to our Annual Report on Form 10-K, as filed with the SEC on March 31, 2011)
|
|
10.22
|
Promissory Note dated December 6, 2010, made by Smart Online, Inc. for the benefit of Israel Discount Bank of
New York, as lender (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.23
|
Letter Agreement for $6,500,000.00 Term Facility dated December 6, 2010, by Israel Discount Bank of New
York, and agreed and accepted by Smart Online, Inc. (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.24
|
First Amendment to Lease Agreement dated April 28, 2011, between Smart Online, Inc. and Nottingham Hall LLC.
|
|
Consent of Independent Registered Public Accounting Firm
|
||
Certification of Principal Executive Officer Pursuant to Rule 13a-14/15d-14
|
||
Certification of Principal Financial Officer Pursuant to Rule 13a-14/15d-14
|
||
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||
99.1
|
Notice of election of Atlas Capital S.A., dated November 30, 2010, to be reimbursed in cash for the drawdown
on the Paragon Letter of Credit pursuant to the Reimbursement Agreement, dated November 10, 2006, between
the Company and Atlas, as subsequently amended (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
101.1
|
The following materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting language): (i) the Balance Sheet, (ii) the Statement of Operations, (iii) the Statement of Cash Flows and (iv) related notes to these financial statements, tagged as blocks of text
(furnished herewith)
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of Smart Online, 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(s) 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(s) 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: March 30, 2012
|
By:
|
/s/ Dror Zoreff
|
|
Dror Zoreff
|
|||
Interim Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of Smart Online, 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(s) 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(s) 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: March 30, 2012
|
By:
|
/s/ Thaddeus J. Shalek
|
|
Thaddeus J. Shalek
|
|||
Chief Financial Officer and Principal
Accounting Officer
|
/s/ Dror Zoreff
|
|
Dror Zoreff
|
|
Interim Chief Executive Officer
|
|
March 30, 2012
|
/s/ Thaddeus J. Shalek
|
|
Thaddeus J. Shalek
|
|
Chief Financial Officer and
Principal Accounting Officer
|
|
March 30, 2012
|