x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-4532392
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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228 W. Main Street, 2nd Floor
Tustin, California
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92780
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(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer
(Do not check if a smaller reporting company)
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o | Smaller reporting company | x |
PART I – FINANCIAL INFORMATION | |||||
ITEM 1 | Financial Statements | 4 - 25 | |||
ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 | |||
ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 30 | |||
ITEM 4 | Controls and Procedures | 30 | |||
PART II – OTHER INFORMATION | |||||
ITEM 1 | Legal Proceedings | 32 | |||
ITEM 1A | Risk Factors | 32 | |||
ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 32 | |||
ITEM 3 | Defaults Upon Senior Securities | 32 | |||
ITEM 4 | (Removed and Reserved) | 32 | |||
ITEM 5 | Other Information | 33 | |||
ITEM 6 | Exhibits | 33 |
June 30, 2011
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December 31, 2010
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|||||||
ASSETS
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||||||||
Current Assets
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||||||||
Cash
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$ | 38,296 | $ | 107,369 | ||||
Cash, Restricted
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- | 28,839 | ||||||
Accounts Receivable, Net
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55,159 | 133,429 | ||||||
(Net of Allowance of $5,600 as of June 30, 2011 and December 31, 2010) | ||||||||
Capitalized Production Costs, Net
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173,833 | 185,794 | ||||||
Prepaid Royalties
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17,056 | 21,088 | ||||||
Prepaid Expenses
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3,141 | 2,453 | ||||||
Total Current Assets
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287,485 | 478,972 | ||||||
Fixed Assets, Net
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1,980 | 2,481 | ||||||
(Net of depreciation of $3,956 and $3,696 as of June 30, 2011 and December 31, 2010, respectively) | ||||||||
Other Long-term Assets, Net
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69,920 | 320 | ||||||
(Net of amortization of $17,732 as of June 30, 2011 and December 31, 2010) | ||||||||
Capitalized Production Costs, Net
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463,734 | 293,451 | ||||||
TOTAL ASSETS
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$ | 823,119 | $ | 775,224 | ||||
LIABILITIES & EQUITY
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||||||||
Liabilities
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||||||||
Current Liabilities
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||||||||
Accounts Payable | 89,124 | 93,975 | ||||||
Accrued Compensation | 159,282 | 152,702 | ||||||
Accrued Royalties | 330,309 | 270,956 | ||||||
Accrued Interest | 5,242 | 2,580 | ||||||
Accrued Expenses | 2,668 | 1,833 | ||||||
Current Technology Payable | 18,000 | - | ||||||
Unearned Royalties | 276,028 | 229,852 | ||||||
Current Notes Payable | 7,100 | 18,300 | ||||||
Current Notes Payable - Related Party | 125,000 | 75,000 | ||||||
Total Current Liabilities
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1,012,753 | 845,198 | ||||||
Long Term Technology Payable,net
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15,166 | - | ||||||
Long Term Notes Payable-Related Party
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- | 50,000 | ||||||
Total Liabilities
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1,027,919 | 895,198 | ||||||
Equity (Deficit)
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||||||||
Preferred Stock
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- | - | ||||||
$.001 par value per share, 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2011 and December 31, 2010 | ||||||||
Common Stock
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39,039 | 39,039 | ||||||
$.001 par value per share, 100,000,000 shares authorized, 39,038,720 shares issued and outstanding as of June 30, 2011 and December 31, 2010 | ||||||||
Additional Paid-In Capital
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845,462 | 832,989 | ||||||
Common Stock Payable
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33,600 | |||||||
Retained Deficit
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(1,122,901 | ) | (992,002 | ) | ||||
Total Equity (Deficit)
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(204,800 | ) | (119,974 | ) | ||||
TOTAL LIABILITIES & EQUITY (DEFICIT)
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$ | 823,119 | $ | 775,224 |
Three months ended June 30,
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Six months ended June 30,
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|||||||||||||||
2011
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2010
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2011
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2010
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|||||||||||||
Revenues
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$ | 164,418 | $ | 82,446 | $ | 277,018 | $ | 287,574 | ||||||||
Costs and Expenses:
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||||||||||||||||
Cost of Sales - Product Development
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55,707 | 61,064 | 115,843 | 109,452 | ||||||||||||
Cost of Sales - Development Services
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- | 62,260 | - | 128,678 | ||||||||||||
Cost of Sales - Licensing
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45,963 | 5,226 | 65,125 | 28,211 | ||||||||||||
General & Administrative
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100,617 | 48,047 | 214,155 | 110,430 | ||||||||||||
Sales & Marketing
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2,076 | 2,989 | 4,256 | 5,013 | ||||||||||||
Amortization & Depreciation
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241 | 54 | 500 | 108 | ||||||||||||
Total Expense
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204,604 | 179,640 | 399,879 | 381,892 | ||||||||||||
Net Ordinary Income/Loss
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(40,186 | ) | (97,194 | ) | (122,862 | ) | (94,318 | ) | ||||||||
Interest Income/(Expense), net
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(3,620 | ) | (1,907 | ) | (5,937 | ) | (4,162 | ) | ||||||||
Net Income/Loss before taxes
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(43,806 | ) | (99,101 | ) | (128,799 | ) | (98,480 | ) | ||||||||
Income Tax Expense
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- | - | 2,101 | 925 | ||||||||||||
Net Income/Loss
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$ | (43,806 | ) | $ | (99,101 | ) | $ | (130,899 | ) | $ | (99,405 | ) | ||||
Weighted number of common shares outstanding-basic and fully diluted
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39,038,720 | 39,038,720 | 39,038,720 | 37,664,806 | ||||||||||||
Loss per share-basic and fully diluted
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) |
Convertible Preferred Stock
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Common Stock
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Common Stock | Additional Paid | Accumulated | ||||||||||||||||||||||||||||
Shares
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Amount
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Shares
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Amount
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Payable
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In Capital
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Deficit
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Total
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|||||||||||||||||||||||||
Balances as of December 31, 2009
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32,268,599 | $ | - | 32,268,599 | $ | 32,269 | $ | 601,288 | $ | (829,807 | ) | $ | (196,250 | ) | ||||||||||||||||||
Shares issued for cost of equity offering
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3,326,121 | $ | - | 3,326,121 | $ | 3,326 | $ | (3,326 | ) | $ | - | $ | - | |||||||||||||||||||
Stock issued for cash
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3,444,000 | $ | - | 3,444,000 | $ | 3,444 | $ | 340,956 | $ | - | $ | 344,400 | ||||||||||||||||||||
Capitalized cost of equity offering
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- | $ | - | - | $ | - | $ | (145,914 | ) | $ | - | $ | (145,914 | ) | ||||||||||||||||||
Stock based compensation
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$ | 39,985 | $ | 39,985 | ||||||||||||||||||||||||||||
Net loss
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- | $ | - | - | $ | - | $ | - | $ | (162,195 | ) | $ | (162,195 | ) | ||||||||||||||||||
Balances as of December 31, 2010
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39,038,720 | $ | - | 39,038,720 | $ | 39,039 | $ | 832,989 | $ | (992,002 | ) | $ | (119,974 | ) | ||||||||||||||||||
Capitalized cost of equity offering
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- | $ | - | - | $ | - | $ | - | $ | (6,364 | ) | $ | - | $ | (6,364 | ) | ||||||||||||||||
Stock based compensation
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- | $ | - | - | $ | - | $ | - | $ | 16,003 | $ | - | $ | 16,003 | ||||||||||||||||||
Stock issued for Marishco Technology
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- | $ | - | - | $ | - | $ | 33,600 | $ | - | $ | - | $ | 33,600 | ||||||||||||||||||
Discount on Technology Payable
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- | $ | - | - | $ | - | $ | - | $ | 2,834 | $ | - | $ | 2,834 | ||||||||||||||||||
Net loss
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- | $ | - | - | $ | - | $ | - | $ | - | $ | (130,899 | ) | $ | (130,899 | ) | ||||||||||||||||
Balances as of June 30, 2011
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39,038,720 | $ | - | 39,038,720 | $ | 39,039 | $ | 33,600 | $ | 845,462 | $ | (1,122,901 | ) | $ | (204,800 | ) |
June 30, 2011
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June 30, 2010
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|||||||
Cash flows from operating activities:
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||||||||
Net Income/(Loss)
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$ | (130,899 | ) | $ | (99,405 | ) | ||
Adjustments to reconcile net loss to net cash
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||||||||
provided (used) by operating activities:
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||||||||
Depreciation and amortization
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501 | 108 | ||||||
Stock based compensation
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16,003 | - | ||||||
Amortization of capitalized production costs
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111,414 | 108,833 | ||||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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78,270 | 30,831 | ||||||
Capitalized Production Costs
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(269,734 | ) | (151,104 | ) | ||||
Prepaid Royalties
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4,033 | (12,585 | ) | |||||
Prepaid Expenses
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(688 | ) | 486 | |||||
Accounts Payable
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(4,851 | ) | (14,261 | ) | ||||
Accrued Compensation
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6,580 | 11,819 | ||||||
Accrued Royalties
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59,351 | (6,283 | ) | |||||
Accrued Interest
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131 | - | ||||||
Accrued Interest - Related Party
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2,531 | |||||||
Accrued Expenses
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834 | - | ||||||
Unearned royalties
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46,176 | (22,881 | ) | |||||
Net cash provided (used) by operating activities
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$ | (80,348 | ) | $ | (154,442 | ) | ||
Cash flows from financing activities:
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||||||||
Payments for PPM Costs
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(6,364 | ) | (116,206 | ) | ||||
Repayments of debt
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(11,200 | ) | (29,994 | ) | ||||
Stock issued in exchange for cash
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- | 344,400 | ||||||
Net cash provided (used) by financing activities
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$ | (17,564 | ) | $ | 198,200 | |||
Net increase (decrease) in cash
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(97,912 | ) | 43,758 | |||||
Cash at the beginning of the period
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136,208 | 28,904 | ||||||
Cash at the end of the period
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$ | 38,296 | $ | 72,662 | ||||
Non-cash transactions
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||||||||
Prepaid Insurance - Financed
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$ | - | $ | 1,669 | ||||
Stock issued for PPM costs
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$ | - | $ | 3,326 | ||||
Intangible assets purchased
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$ | 69,600 | $ | - | ||||
Debt issued for intangible asset purchase,net
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$ | 33,166 | $ | - | ||||
Stock issued for subscription payable
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$ | 33,600 | $ | - |
·
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Level one — Quoted market prices in active markets for identical assets or liabilities;
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·
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Level two — Inputs other than level one inputs that are either directly or indirectly observable; and
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·
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Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
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June 30, 2011
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December 31, 2010
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|||||||
Capitalized Production Costs
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1,249,126 | 979,390 | ||||||
Accumulated Production Costs Amortization
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(611,558 | ) | (500,145 | ) | ||||
Total Capitalized Production Costs, Net
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$ | 637,567 | $ | 479,245 | ||||
Current
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173,833 | 185,794 | ||||||
Long Term
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463,734 | 293,451 |
June 30, 2011
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December 31, 2010
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|||||||
Computer Equipment
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5,347 | 5,347 | ||||||
Communications Equipment
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830 | 830 | ||||||
Accumulated Depreciation
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(4,197 | ) | (3,696 | ) | ||||
Total Fixed Assets, Net
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$ | 1,980 | $ | 2,481 |
Accrued Compensation Consists of the following at:
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||||||||
June 30, 2011
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December 31, 2010
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|||||||
Employee Reimbursements owed
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- | 3,170 | ||||||
Payroll Liabilities
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391 | 392 | ||||||
Accrued Vacation
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65,290 | 55,540 | ||||||
Accrued Salary
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93,600 | 93,600 | ||||||
Total Accrued Compensation
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$ | 159,282 | $ | 152,702 |
Accrued and Unearned Royalties consists of the following at:
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||||||||
June 30, 2011
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December 31, 2010
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|||||||
Accrued Royalties
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330,309 | 270,956 | ||||||
Unearned Royalties
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276,028 | 229,852 | ||||||
Total Accrued and Unearned Royalties
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$ | 606,337 | $ | 500,808 |
Debt consists of the following at:
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||||||||
June 30, 2011
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December 31, 2010
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|||||||
Line of Credit
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7,100 | 18,300 | ||||||
Notes Payable-Related Party
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125,000 | 125,000 | ||||||
Total Debt
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$ | 132,100 | $ | 143,300 | ||||
Less: Current
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132,100 | 93,300 | ||||||
Long Term
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$ | - | $ | 50,000 |
·
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The facility changed from a “Commercial Non-Revolving Line-of-Credit” to a “Commercial Term Loan” with the effect being that no further funds would be advanced;
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·
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Sunwest Bank released a deposit account which was being used to secure the repayment of the amounts owed under promissory note in exchange for Mr. Craig Holland (a guarantor of the promissory note and owner of the deposit account) agreeing $50,000 of the funds in the deposit account would be used to pay down the amount owed under the promissory note;
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·
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As a result of the $50,000 payment, beginning July 31, 2010, the monthly principal payment was reduced from $5,000 to $1,900; and
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·
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The date on which the principal and any accrued interest were due under the promissory note, as amended (the Maturity Date), was extended from December 31, 2010 to September 30, 2011.
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June 30, 2011
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December 31, 2010
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|||||||||||||||
Number of
Warrants
& Options
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Weighted
Average
Exercise Price
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Number of
Warrants
& Options
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Weighted
Average
Exercise Price
|
|||||||||||||
Outstanding at beginning
of year
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560,000 | $ | 0.10 | - | $ | - | ||||||||||
Granted
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- | - | 560,000 | 0.10 | ||||||||||||
Exercised for cash
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- | - | - | - | ||||||||||||
Exercised for cashless
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- | - | - | - | ||||||||||||
Expired and cancelled
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- | - | - | - | ||||||||||||
Outstanding, end of period
|
560,000 | $ | 0.10 | 560,000 | $ | 0.10 |
Deferred tax asset and the valuation account consists of the following at:
|
||||||||
June 30, 2011
|
December 31, 2010
|
|||||||
Deferred Tax Asset
|
$ | 106,832 | $ | 105,819 | ||||
Valuation Allowances
|
$ | (106,832 | ) | $ | (105,819 | ) | ||
Total:
|
- | - |
June 30, 2011
|
June 30, 2010
|
|||||||
Net Income/Loss
|
$ | (130,899 | ) | $ | (99,405 | ) | ||
Weighted number of common shares outstanding-basic and fully diluted
|
39,038,720 | 37,664,806 | ||||||
Loss per share-basic and fully diluted
|
$ | (0.00 | ) | $ | (0.00 | ) |
3 Months Ended
June 30, 2011
|
6 Months Ended
June 30, 2011
|
3 Months Ended
June 30, 2010
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6 Months Ended
June 30, 2010
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|||||||||||||
Revenue
|
$ | 164,418 | 277,018 | $ | 82,446 | 287,574 | ||||||||||
Costs and Expenses:
|
||||||||||||||||
Cost of Sales – Product Development
|
55,707 | 115,843 | 61,064 | 109,452 | ||||||||||||
Cost of Sales – Development Services
|
- | - | 62,260 | 128,678 | ||||||||||||
Cost of Sales – Licensing
|
45,963 | 65,125 | 5,226 | 28,211 | ||||||||||||
General & Administrative
|
100,617 | 214,155 | 48,047 | 110,430 | ||||||||||||
Sales & Marketing
|
2,076 | 4,256 | 2,989 | 5,013 | ||||||||||||
Amortization & Depreciation
|
241 | 500 | 54 | 108 | ||||||||||||
Total Expense
|
$ | 204,604 | 399,879 | $ | 179,640 | 381,892 | ||||||||||
Net Ordinary Income (Loss)
|
$ | (40,186 | ) | (122,862 | ) | $ | (97,194 | ) | (94,318 | ) | ||||||
Net Income (Loss)
|
$ | (43,806 | ) | (130,899 | ) | $ | (99,101 | ) | (99,405 | ) |
(Unaudited)
June 30, 2011
|
December 31, 2010
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Change
|
||||||||||
Cash
|
$ | 38,296 | $ | 107,369 | $ | (69,073 | ) | |||||
Total Current Assets
|
287,485 | 478,972 | (191,487 | ) | ||||||||
Total Assets
|
823,119 | 775,224 | 47,895 | |||||||||
Total Current Liabilities
|
1,012,753 | 845,198 | 167,555 | |||||||||
Total Liabilities
|
$ | 1,027,919 | $ | 895,198 | $ | 132,721 |
*
|
Filed herewith
.
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Freeze Tag, Inc.
|
|||
Dated: August 15, 2011
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/s/ Craig Holland
|
||
By: Craig Holland
|
|||
Its: President and Chief Executive Officer
|
|||
By:
|
/s/Unreadable | ||
Name:
|
|||
Title:
|
|||
Freeze Tag, Inc.
|
|||
By:
|
/s/ Craig Holland
|
||
Name: Craig Holland
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|||
Title: CEO
|
1.
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I have reviewed this Quarterly Report on Form 10-Q of Freeze Tag, 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.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit 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.
|
Dated: August 15, 2011 | By: |
/s/ Craig Holland
|
|
Craig Holland
|
|||
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Freeze Tag, 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 Exhibit 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
.
|
Dated: August 15, 2011 | By: |
/s/ Mick Donahoo
|
|
Mick Donahoo
|
|||
Chief Financial Officer
|
Dated: August 15, 2011 | By: |
/s/ Craig Holland
|
|
Craig Holland
|
|||
Chief Executive Officer
|
Dated: August 15, 2011 | By: |
/s/ Mick Donahoo
|
|
Mick Donahoo
|
|||
Chief Financial Officer
|