NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
|
|
1.
|
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was incorporated on December
19, 2001 under the name Catalyst Set Corporation and was dormant until July 14, 2007. On September 7, 2007, the Company changed
its name to Interfacing Technologies, Inc. On March 24, 2008, the name was changed to Attune RTD.
Attune RTD (“The Company”,
“us”, “we”, “our”) was formed in order to provide developed technology related to the operations
of energy efficient electronic systems such as swimming pool pumps, sprinkler controllers and heating and air conditioning controllers
among others.
The Company is presented as in the development
stage from July 14, 2007 (Inception of Development Stage) through December 31, 2011. To-date, the Company’s business activities
during development stage have been corporate formation, raising capital and the development and patenting of its products with
the hopes of entering the commercial marketplace in the near future.
USE OF ESTIMATES
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates in the accompanying financial statements include the estimates of depreciable
lives and valuation of property and equipment, allowances for losses on loans receivable, valuation of deferred patent costs, valuation
of equity based instruments issued for other than cash, valuation of officer’s contributed services, and the valuation allowance
on deferred tax assets.
The company recognizes expenses in the same period in which
they are incurred. The company recognizes revenue in the same period in which they are incurred from its business activities when
goods are transferred or services rendered. The company’s revenue generating process consists of the sale of its proprietary
technology or the rendering of professional services consisting of consultation and engineering relating types of activity within
the industry. The company’s current billing process consists of generating invoices for the sale of its merchandise or the
rendering of professional services. Typically, invoices are accepted by vendor and payment is made against the invoice within 60
days upon receipt.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of
cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased
to be cash equivalents. There were no cash equivalents at December 31, 2011 or 2010, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at
cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of five
years. Expenditures for additions and improvements are capitalized while maintenance and repairs are expensed as incurred.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
REVENUE RECOGNITION
We recognize revenue when the following
criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed or determinable, no significant company
obligations remain, and collection of the related receivable is reasonably assured.
The company recognizes revenue in the
same period in which they are incurred from its business activities when goods are transferred or services rendered. The company’s
revenue generating process consists of the sale of its proprietary technology or the rendering of professional services consisting
of consultation and engineering relating types of activity within the industry. The company’s current billing process consists
of generating invoices for the sale of its merchandise or the rendering of professional services. Typically, invoices are accepted
by vendor and payment is made against the invoice within 60 days upon receipt.
Revenues for the year end December 31,
2011 were concentrated solely from one customer.
LOANS RECEIVABLE FROM OFFICERS
Loans receivable consist of monies loaned
to our officers pursuant to loan agreements. The Company evaluates the loans for collectability and establishes an allowance for
losses as necessary. The Company charges off loans receivable against any allowance as determined by the Company. Under Sarbanes
Oxley, receivables from officers are prohibited, hence redemption of the loans in January 2010. As of December 31, 2011 there are
no officer loans present.
DEFERRED PATENT COSTS AND TRADEMARK
Patent costs are stated at cost (inclusive
of perfection costs) and will be reclassified to intangible assets and amortized on a straight-line basis over the estimated future
periods to be benefited (twenty years) if and once the patent has been granted by the United States Patent and Trademark office
(“USPTO”). The Company will write-off any currently capitalized costs for patents not granted by the USPTO. Currently,
the Company has four patents pending with the USPTO.
Trademark costs are capitalized on our balance sheet during
the period such costs are incurred. The trademark is determined to have an indefinite useful life and is not amortized until such
useful life is determined no longer indefinite. The trademark is reviewed for impairment annually. On December 31, 2011, the company
evaluated and fully impaired all patents and trademarks due to uncertainty regarding funding of future cost.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived
assets in accordance with “Accounting for the Impairment or Disposal of Long-Lived Assets” (ASC 360-10). This statement
requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
In December 2011, the Company assessed
its patents and trademarks and based on uncertainty of future funding and commercialization the Company recognized a loss on its
trademark and patents in the amount of $62,633, the carrying value at the time of impairment.
SOFTWARE LICENSE
The Company capitalized its purchase of a software license
in March 2011. The license is being amortized over 60 months following the straight-line method and included in Other Assets on
the balance sheet in accordance to ASC 350. During the year ended December 31, 2011, the company recorded $19,545 of amortization
expense related to the license.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
ACCOUNTING FOR DERIVATIVES
The Company evaluates its convertible
instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting
treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In
the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as
other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion
date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become
subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification
date.
We analyzed the derivative financial instruments (the Convertible
Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked
financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would
enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument
that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock.
A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted
for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s
own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the
instrument’s settlement provisions.
The Company utilized multinomial lattice models that value
the derivative liability within the notes based on a probability weighted discounted cash flow model.
The Company utilized the
fair value
standard set forth
by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred)
or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.
RESEARCH AND DEVELOPMENT
In accordance generally accepted accounting
principles (ASC 730-10), expenditures for research and development of the Company’s products are expensed when incurred,
and are included in operating expenses.
ADVERTISING
The Company conducts advertising for
the promotion of its products and services. In accordance with generally accepted accounting principles (ASC 720-35), advertising
costs are charged to operations when incurred; such amounts aggregated $607 and $11,700 for the years ended December 31, 2011 and
2010, respectively.
STOCK-BASED COMPENSATION
Compensation expense associated with
the granting of stock based awards to employees and directors and non-employees is recognized in accordance with generally accepted
accounting principles (ASC 718-20) which requires companies to estimate and recognize the fair value of stock-based awards to employees
and directors. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite
service periods using the straight-line attribution method.
INCOME TAXES
The Company accounts for income taxes
pursuant to the provisions of SFAS No. 109, “Accounting for Income Taxes” (ASC 740-10), which requires, among other
things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which
management believes it is more likely than not that the net deferred asset will not be realized.
Additionally, the Company adopted the
provisions of the FASB’s Financial Interpretation Number 48 (FIN. 48) (ASC 740-10),
“Accounting for Uncertain
Income Tax Positions”
.
When tax returns are filed, it is highly certain that some positions taken would be sustained
upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the
amount of the position that would be ultimately sustained. In accordance with the guidance of FIN 48, the benefit of a tax position
is recognized in the financial statements in the period during which, based on all available evidence, management believes it is
more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes,
if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than fifty percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds
the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance
sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company
believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability
for unrecognized tax benefits. As of December 31, 2011, tax years 2007, 2008, 2009 and 2010 remain open for IRS audit. The Company
has received no notice of audit from the Internal Revenue Service for any of the open tax years.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
The Company has also adopted FASB Staff
Position FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, (“FSP FIN 48-1”) (ASC 740-10),
which was issued on May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide guidance on how an entity should determine whether a tax
position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively
settled” replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement”
or “settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe
measurement of a tax position under FIN 48. FSP FIN 48-1 clarifies that a tax position can be effectively settled upon the completion
of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an
entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained
based solely on the basis of its technical merits and the statute of limitations remains open. The adoption of FSP FIN 48-1 did
not have an impact on the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company’s
financial instruments, including cash, loans receivable and current liabilities, approximate fair value because of their short
maturities. Based upon the Company’s estimate of its current incremental borrowing rate for loans with similar terms and
average maturities, the carrying amounts of loans payable, and capital lease obligations approximate fair value. The Company adopted
the provisions of ASC 820 on January 1, 2008.
BASIC AND DILUTED NET LOSS PER COMMON
SHARE
Basic net loss per share is computed
by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common
share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive,
potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental common shares
issuable upon exercise of common stock equivalents such as stock options and convertible debt instruments. Potentially dilutive
securities are excluded from the computation if their effect is anti-dilutive. As of December 31, 2011 and 2010, there were no
potentially dilutive securities. As a result, the basic and diluted per share amounts for all periods presented are identical.
NEW ACCOUNTING PRONOUNCEMENTS
In October 2009, the FASB issued an amendment to the accounting
standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting
guidance such that tangible products that contain both software and non-software components that function together to deliver the
product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards.
Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the
scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This
standard will become effective on January 1, 2011.
In October 2009, FASB issued an amendment to the accounting
standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration
is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of
the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each
deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific
objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance
on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements
about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of
revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1,
2011.
In January 2010, the FASB issued an amendment to ASC 820,
Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale
for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding
purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company
is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with
the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective
for fiscal years beginning after December 15, 2010.
In January 2010, the FASB issued an
amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election
of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a
stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied
on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial
statements
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
In February 2010, the FASB Accounting Standards Update 2010-10
(ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds.” The amendments in this Update
are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for
interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions
of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.
In February 2010, the FASB issued ASU
No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements”
(“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through
the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued
and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact
on the Company’s financial position and results of operations.
In March 2010, the FASB (Financial Accounting
Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception
Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning
of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s
first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have
a material effect on the financial position, results of operations or cash flows of the Company.
In December 2010, the FASB Accounting Standards Update 2010-29
Business Combinations Topic 805, which requires a public entity to disclose pro forma information for business combinations that
occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the
current reporting period as though the acquisition date for all business combinations that occurred during the year had been as
of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings
of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business
combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period.
Effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. The adoption did not have an impact on the Company’s financial position and results
of operations.
In April 2011, the FASB issued ASU 2011-02,
“Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”.
This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance,
the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR,
certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual eriods beginning
on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year
of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial
statements.
In June 2011, the FASB issued ASU 2011-05,
“Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods
beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates
the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately
on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in
financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive
income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected
to have a material impact on our financial position or results of operations.
In May 2011, the FASB issued ASU 2011-04, “Fair Value
Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”,
which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and
disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level
3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used
by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2)
for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for
the difference; (3) for financial instruments not measured at fair value but for whichdisclosure of fair value is required, the
fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between
Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. We are currently
evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
In September 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill
for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make
a qualitative evaluation about the likelihood of goodwill impairment to etermine whether it should calculate the fair value of
a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that
an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that
an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an
impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted,
including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s
financial statements for the most recent annual or interim period have ot yet been issued. The adoption of this guidance is not
expected to have a material impact on the Company’s financial position or results of operations.
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate
continuation of the Company as a going concern. For the years ended December 31, 2011 and 2010 the Company had a net loss of $1,379,285
and $1,036,938, respectively, and net cash used in operations of $1,096,024 and $486,879 respectively, and was a development stage
company with little to no revenues. In addition, as of December 31, 2011 the Company had a working capital deficit of $253,417
and a deficit accumulated during the development stage of $3,926,414.
These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include
any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of these uncertainties.
In order to execute its business plan,
the Company will need to raise additional working capital and generate revenues. There can be no assurance that the Company will
be able to obtain the necessary working capital or generate revenues to execute its business plan.
Management’s plan in this regard,
includes completing product development, generating marketing agreements with product distributors and raising additional funds
through a private placement offering of the Company’s common stock.
Management believes its business development
and capital raising activities will provide the Company with the ability to continue as a going concern.
3. LOANS RECEIVABLE FROM OFFICERS
Pursuant to two separate unsecured promissory
notes with our chief executive officer and our chief financial officer (borrowers) dated August 1, 2007, each borrower may borrow
an amount equal to or less than $75,000 each at a rate of 5.75% (subsequently increased to $90,000). Principal and interest are
due under the terms of the loans on or before January 31, 2017. Total principal and interest due under the loans as of December
31, 2011 and 2010 were $0, respectively. On January 31, 2010, the officers/shareholders redeemed 521,439 shares (collectively)
of their common stock in the Company, with a value of $0.35 to satisfy this outstanding debt obligation (See Note 12). Under Sarbanes
Oxley, receivables from officers are prohibited, hence redemption of the loans in January 2010. As of December 31, 2011 there are
no officer loans present.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
|
|
|
Patents and Trademarks consists of the following:
|
|
|
|
Est. Useful
Lives
|
|
December 31, 2011
|
|
|
December 31, 2010
|
|
|
Patent Costs
|
|
20 Years
|
|
$
|
-
|
|
|
$
|
41,378
|
|
|
Trademark
|
|
Indefinite
|
|
|
-
|
|
|
|
21,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
62,631
|
|
|
Less total Accumulated amortization
|
|
|
|
|
-
|
|
|
|
(257
|
)
|
|
|
|
|
|
$
|
-
|
|
|
$
|
62,374
|
|
Total amortization expense relating
to the Company’s patents was $0 and $257 for the years ended December 31, 2011 and 2010, respectively.
In December 2011, the Company assessed its patents and trademarks
and due to uncertainty of future funding and commercialization the Company recognized a loss on its trademark and patents in the
amount of $62,634, the carrying value at the time of impairment.
|
5.
|
|
PROPERTY AND EQUIPMENT
|
Property and equipment consists of the
following:
|
|
|
Est. Useful
Lives
|
|
December 31, 2011
|
|
|
December 31, 2010
|
|
|
Computer equipment
|
|
5 Years
|
|
$
|
10,227
|
|
|
$
|
10,227
|
|
|
Office Equipment
|
|
5 Years
|
|
|
5,605
|
|
|
|
5,605
|
|
|
Vehicles
|
|
5 Years
|
|
|
114,190
|
|
|
|
5,000
|
|
|
|
|
|
|
|
130,022
|
|
|
|
20,832
|
|
|
Less total Accumulated depreciation
|
|
|
|
|
(22,811
|
)
|
|
|
(7,387
|
)
|
|
|
|
|
|
$
|
107,212
|
|
|
$
|
13,446
|
|
Total depreciation expense for the years
ended December 31, 2011 and 2010 was $18,924 and $3,532, respectively.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
Capital Lease obligations consisted of the following at December
31:
|
|
|
2011
|
|
|
2010
|
|
|
Capital lease payable – payable in monthly installments for principal and interest of $189 through October 2011. The debt is personally guaranteed by an officer of the Company.
|
|
$
|
1,932
|
|
|
$
|
1,779
|
|
|
Less current portion:
|
|
|
-
|
|
|
|
-
|
|
|
Long-term capital lease obligation
|
|
$
|
1,932
|
|
|
$
|
1,779
|
|
Interest expense on the above capital
lease was $389 and $389 during the years ended December 31, 2011 and 2010 respectively.
Long Term Debt consists of the flowing:
|
|
|
December 31, 2011
|
|
|
|
December 31, 2010
|
|
|
Note payable related to software license, with monthly payments of $5,650 including interest
|
|
$
|
101,959
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable related to the purchase of 2 Company trucks, bearing interest at 1.9%, payable in monthly installments of $755.11 each
|
|
|
93,160
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
195,119
|
|
|
$
|
-
|
|
|
Less Current Portion
|
|
|
42,349
|
|
|
$
|
-
|
|
|
Total Long Term Debt
|
|
$
|
152,770
|
|
|
$
|
-
|
|
8. CONVERTIBLE NOTE AND FAIR VALUE MEASUREMENTS
On October 2011, the Company issued convertible promissory
note in the amount of $42,500. The convertible note has a maturity date of July 2012 and an annual interest rate of 8% per annum.
The holder of the note has the right to convert any outstanding principal and accrued interest into fully paid and non-assessable
shares of Common Stock. The note has a conversion price of 58% of the average of the three lowest closing bid stock prices over
the last ten days and contains no dilutive reset feature. Due to the indeterminable number of shares to be issued at conversion
the company recorded a derivative liability. The derivative feature of the note taints all existing convertible instruments, specifically
the 900,000 warrants (term of 3 years) the company issued on April 2010 with an exercise price of $0.40.
Fair Value Measurements –
Derivative liability:
The Company evaluated
the conversion feature embedded in the convertible notes to determine if such conversion feature should be bifurcated from its
host instrument and accounted for as a freestanding derivative. Due to the note not meeting the definition of a conventional debt
instrument because it contained a conversion rate that fluctuated with the Company’s stock price, the convertible note and
other dilutive securities were accounted for in accordance with ASC 815. According to ASC 815, the derivatives associated with
the convertible notes were recognized as a discount to the debt instrument, and the discount is being amortized over the life of
the note and any excess of the derivative value over the note payable value is recognized as additional interest expense at issuance
date.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
Further, and in
accordance with ASC 815, the embedded derivatives are revalued at each balance sheet date and marked to fair value with the corresponding
adjustment as a “gain or loss on change in fair value of derivatives” in the consolidated statement of operations.
As of December 31, 2011, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was
$121,546. During the year ended December 31, 2011, the Company recognized a loss on change in fair value of derivative liability
totaling $87,116.
Key
assumptions used in the valuation of derivative liabilities associated with the convertible notes were as follows:
|
|
●
|
The note face amount as of 12/31/11 is $42,500 with an initial conversion price of 58% of the 3 lowest lows out of the 10 previous
days (effective rate of 43.57%).
|
|
|
●
|
The projected volatility curve for each valuation period was based on the historical volatility of the company;
|
|
|
●
|
An event of default would occur 1% of the time, increasing 1.00% per quarter to a maximum of 10%;
|
|
|
●
|
The Holder would redeem based on availability of alternative financing, increasing 2.0% monthly to a maximum of 10%; and
|
|
|
●
|
The Holder would automatically convert the notes at maturity if the registration was effective and the company was not in default.
|
The 3 year warrants with an exercise
price of $0.40 and no reset features were valued using the Black Scholes model and the following assumptions: stock price at valuation,
$0.10; strike price, $0.40; risk free rate 0.12%; 3 year term; and volatility of 522% resulting in a relative fair value of $89,753
relating to these warrants.
The accounting guidance for fair value measurements provides
a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined
as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal
or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting guidance
established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. This hierarchy
prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs
that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the
full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used
to measure assets and liabilities at fair value. An asset or liability’s classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value measurement.
Assets and liabilities measured at fair value on a recurring
and non-recurring basis consisted of the following at December 31, 2011:
|
|
|
|
|
|
Fair value Measurements at December 31, 2011
|
|
|
|
|
Carrying Value at December 31, 2011
|
|
|
(Level 1)
|
|
|
(Level
|
|
|
(Level 3)
|
|
|
Derivative Liability
|
|
$
|
121,546
|
|
|
$
|
-
|
|
|
$
|
41,378
|
|
|
$
|
121,546
|
|
The following is a summary of activity of Level 3 liabilities
for the period ended December 31, 2011:
|
Balance at October 1, 2011
|
|
$
|
-
|
|
|
Increase in liability due to debt
|
|
$
|
34,430
|
|
|
Derivative Gain - Convertible note
|
|
$
|
(2,637
|
)
|
|
|
|
|
|
|
|
Derivative Loss - Tainted Warrants
|
|
$
|
89,753
|
|
|
Balance December 31, 2011
|
|
$
|
121,546
|
|
Changes in fair value of the embedded conversion option liability
are included in other income (expense) in the accompanying statements of operations.
The Company estimates the fair value of the embedded conversion
liability utilizing the Black-Scholes pricing model, which is dependent upon several variables such as the expected term (based
on contractual term), expected volatility of our stock price over the expected term (based on historical volatility), expected
risk-free interest rate over the expected term, and the expected dividend yield rate over the expected term. The Company believes
this valuation methodology is appropriate for estimating the fair value of the derivative liability. The following table summarizes
the assumptions the Company utilized to estimate the fair value of the embedded conversion option at December 31, 2011:
|
Assumptions
|
|
December 31, 2011
|
|
|
Expected term
|
|
|
1.0
|
|
|
Expected Volatility
|
|
|
107
|
%
|
|
Risk free rate
|
|
|
0.21
|
%
|
|
Dividend Yield
|
|
|
0.00
|
%
|
There were no changes in the valuation techniques during
2011.
The weighted average interest rate for short term notes as of December 31, 2011 was 9.62%.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
Upon formation, the Company was authorized
to issue 50,000 shares of common stock with no par value. On September 7, 2007, the Company amended its articles of incorporation
to increase the number of authorized common shares to 1,000,000. On September 7, 2007, the Company enacted a 280 for 1 forward
stock split pursuant to an Amended and Restated Articles of Incorporation filed with the Secretary of State of the State of Nevada.
All share and per share data in the accompanying financial statements has been retroactively adjusted to reflect the stock split.
On November 28, 2007, the Company again amended its articles of incorporation to establish two classes of stock. The first class
of stock is Class A Common Stock, par value $0.0166, of which 59,000,000 shares are authorized and the holders of the Class A Common
Stock are entitled to one vote per share. The second class of stock is Class B Participating Cumulative Preferred Super-voting
Stock, par value $0.0166, of which 1,000,000 shares are authorized. Each share of Class B preferred stock entitles the holder to
one hundred votes, either in person or by proxy, at meetings of shareholders. The holders are permitted to vote their shares cumulatively
as one class with the common stock. The Class B Participating Cumulative Preferred Super-voting Stock pays dividends at 6%. For
the years ended December 31, 2011, 2010, 2009, 2008, and 2007, the board of directors did not declare any dividends. Total undeclared
Class B Participating Cumulative Preferred Super-voting Stock dividends as of December 31, 2011 2010, 2009, 2008, and 2007 were
$90,487, $70,237, $49,987 and $29,737, and $9,487 respectively.
Class A Common Stock
Issuances of the Company’s common
stock during the years ended December 31, 2007, 2008, 2009, 2010 and 2011 included the following:
Shares Issued for Cash
During 2007, 224,000 shares of Class
A common stock were issued for $36,000 cash with various prices per share ranging from $0.15 to $0.25. Additionally, the Company
paid cash offering costs of $2,500.
During 2008, 2,352,803 shares of Class
A common stock were issued for $360,250 cash with various prices per share ranging from $0.13 to $0.25. Additionally, the Company
paid cash offering costs of $1,500.
In 2009, 3,688,438 shares of Class A
common stock were issued for $437,435 cash with various prices per share ranging from $0.04 to $0.35. Additionally, the company
paid cash offering costs of $7,000.
In 2010, 2,138,610 shares of Class A
common stock were issued for $442,181 cash with various prices per share ranging from $.18 to $.35.
In 2011, 6,349,750 shares of Class A
common stock were issued for $1,318,751 cash with various prices per share ranging from $.20 to $.35.
Shares Issued for Services
In 2007, 14,000,000 vested shares of
Class A common stock were issued to founders having a fair value of $232,400, based on a nominal value of $0.0166 per share. The
$232,400 was expensed upon issuance as the shares were fully vested.
In 2007, 50,000 shares of Class A common
stock were issued for legal services provided to the company with a value of $7,500 or $0.15 per share, based on a contemporaneous
cash sales price.
In 2008, 169,000 shares of Class A common
stock were issued for services having a fair value of $34,530 ranging from $0.13 to $0.25 per share, based on contemporaneous cash
sales prices.
In March 2009, 8,000 shares of Class
A common stock were issued for services provided to the Company with a value of $2,400 or $0.07 per share, based on a contemporaneous
cash sales price.
ATTUNE RTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011
AND 2010 AND
THE PERIOD FROM JULY 14, 2007 (INCEPTION
OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
In June 2009, 17,333 shares of Class
A common stock were issued for services provided to the Company with a value of $2,600 or $0.15 per share, based on a contemporaneous
cash sales price.
In August 2009, 41,000 shares of Class
A common stock were issued for services provided to the Company with a value of $6,150 or $0.15 per share, based on a contemporaneous
cash sales price.
In February 2009, 500,000 shares of
contingently returnable Class A common stock were issued to a consultant pursuant to an agreement whereby the consultant must establish
a contract with a specific distributor and produce a sale of the Company’s product through such distribution channel. As
of the date of this filing, no sales have occurred under the contract and the shares are not considered issued or outstanding for
accounting purposes.
In January 2010,
21,000 shares of Class A common stock were issued for services provided to the Company with a value of $5,250 or $0.25 per share,
based on a contemporaneous cash sales price.
In June 2010, 750,000 shares of Class
A common stock were issued for services provided to the Company with a value of $270,200 at values ranging from $0.20 to $0.50
per share, based on a contemporaneous cash sales price.
In July 2010, 250,000 shares of Class
A common stock were issued for services provided to the Company with a value of $37,500 or $0.15 per share, based on a contemporaneous
cash sales price.
In December 2010, 55,000 shares of Class
A common stock were issued to 2 vendors for services with a value of $28,050, based on based on a contemporaneous cash sales price.
In June 2011, 815,000 shares of Class
A common stock were issued for services provided to the Company with a value of $220,050 at $0.27 per share, based upon the fair
value of the common stock on a quoted exchange at the date of grant.
In August 2011, 50,000 shares of Class A common stock were
issued for services provided to the Company with a value of $10,000 at $.20 per share, based upon the fair value of the common
stock on a quoted exchange at the date of grant.
In November 2011, 100,000 Shares of
Class A common stock were issued for services provided to the Company with a value of $20,000 at $0.20 per share, based upon the
fair value of the common stock on a quoted exchange at the date of grant.
Shares Issued in Conversion of
Other Liabilities
During 2008, 100,000 shares of Class
A common stock were issued upon conversion of a $35,000 liability to a vendor. The shares were valued at $0.15 per share or $15,000,
based on a contemporaneous cash sales price and the Company recorded a $20,000 gain on conversion of debt.
In July 2009, 139,944 shares of Class
A common stock were issued upon conversion of a $48,980 liability from a vendor. The shares were valued at $16,793 or $0.12, based
on a contemporaneous cash sales price. The Company agreed with the vendor, prior to conversion, that it would guarantee the value
of the stock, when sold by the vendor, up to the dollar value for the 2009 liability converted ($48,980) and the above mentioned
2008 conversion as it was the same vendor ($35,000) and any difference in value, if less than the liability, would be paid in cash
by the Company. As a result, the Company recorded the $48,980 conversion as a liability along with the prior year conversion of
$35,000 which resulted in an additional loss on conversion of $35,000. The total cumulative liability to guarantee equity value
from fiscal 2009 totaled $83,980 as relating to the above shares at December 31, 2009. These shares were actually issued in 2010;
however the liability was recorded in 2009 based on this guarantee
In August 2009, the Company converted
$55,200 of loans due to a shareholder into 788,571 shares of common stock, which were valued at $118,286 or $0.15 per share, based
on contemporaneous cash sales prices of the Company’s common stock. The Company recognized a loss on conversion of $62,637
and charged $449 to interest expense.
ATTUNE
RTD
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND
THE
PERIOD FROM JULY 14, 2007 (INCEPTION OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
During
2010, 247,249 shares of Class A common stock were issued upon conversion of $39,272 of vendor liabilities. The shares were valued
from $0.10 to $.36 per share, based on a contemporaneous cash sales price and the Company recorded a $49,615 loss on conversion
of debt
In
March 2010, 120,000 shares of Class A common stock were issued upon conversion of a $24,000 liability from a vendor. The shares
were valued at $42,000 or $0.35 per share, based on a contemporaneous cash sales price and the Company recognized a loss on conversion
of $18,000. We agreed with the vendor, prior to conversion, that we would guarantee the value of the stock, when sold by the vendor,
up to the dollar value for the 2009 liability converted in 2010 of $24,000, plus an additional $11,000 for a total sales price
of $35,000 when sold by the vendor. Any difference in value, if less than the liability, will be paid by us in cash or through
the issuance of additional common stock. As a result, we recorded the $24,000 conversion as a liability along with the additional
$11,000 guarantee for a total guarantee liability of $35,000. During 2011, the vendor forgave $25,000 of the payable where the
company recorded as gain on forgiveness of debt. A cash payment of $3,000 was also made in relation to the total payable outstanding.
The
total cumulative liability to guarantee equity value totaled $90,980 as of December 31, 2011. No shares have been sold by the
vendor through December 31, 2011. 259,942 shares of the Company’s common stock are guaranteed to cover the existing liability.
In
2010 the Company issued 900,000 warrants to several investors in the Company. These warrants are attached to issuances of common
stock.
Warrant
Activity for the year ended December 31, 2010 is as follows:
|
|
|
Warrant Shares
|
|
|
Exercise Price
|
|
|
Value if Exercised
|
|
|
Expiration Date
|
|
|
April 15, 2010
|
|
|
900,000
|
|
|
$
|
.040
|
|
|
$
|
360,000
|
|
|
|
April 15, 2013
|
|
On
October 2011, the Company issued a Convertible Note which as a result taints all convertible instruments outstanding. As such
the Company recorded a derivative liability of $89,753 for warrant outstanding, refer to Note 8.
In
February 2011, the Company redeemed 30,000 shares of its Common Stock for a value of $5,000, the share prices was based on a share
price of $0.16 per share.
2010
Equity Incentive Plan
In
June 2010, we registered 4,000,000 shares of our Class A Common Stock pursuant to our 2010 Equity Incentive Plan which was also
enacted in June 2010. Our Board of Directors have authorized the issuance of the Class A Shares to employees upon effectiveness
of a recently issued Registration Statement. The Equity Incentive Plan is intended to compensate Employees for services rendered.
The Employees who will participate in the 2010 Equity Incentive Plan have agreed or will agree in the future to provide their
expertise and advice to us for the purposes and consideration set forth in their written agreements pursuant to the 2010 Equity
Incentive Plan. The services to be provided by the Employees will not be rendered in connection with: (i) capital-raising transactions;
(ii) direct or indirect promotion of our Class A Common Shares; (iii) maintaining or stabilizing a market for our Class A Common
Shares. The Board of Directors may at any time alter, suspend or terminate the Equity Incentive Plan.
As
of December 31, 2011, 800,000 shares were approved under this plan for issuance by the Board of Directors. 200,000 shares each
were approved for issuance to Shawn Davis, Thomas Bianco, Paul Davis and Raymond Tai.
As
of December 31, 2011, the balance sheet date, none of the shares under this plan were granted or issued.
Class
B Participating Cumulative Preferred Super-voting Stock
Issuances
of the Company’s preferred stock during the years ended December 31, 2007, 2008 and 2009 included the following:
ATTUNE
RTD
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND
THE
PERIOD FROM JULY 14, 2007 (INCEPTION OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
Shares
Issued for Cash
In
2007, 133,333 shares of Class B preferred stock were issued for $45,000 cash or $0.3375 per share.
Shares
Issued for Services
In
2007, 866,667 shares of Class B preferred stock were issued to founders for services rendered during 2007 with a value of $0.3375
per share based on the above contemporaneous sale of Class B preferred stock.
There
was no income tax expense in 2011 and 2010 due to the Company’s net taxable losses, other than the minimum Franchise Tax
due to the State of California of $800.
Deferred
tax asset and the valuation account is as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Deferred tax asset
|
|
|
|
|
|
|
|
|
|
NOL Carryforward
|
|
$
|
(1,255,851
|
)
|
|
$
|
(787,272
|
)
|
|
Valuation allowances
|
|
|
(1,255,851
|
)
|
|
|
(787,272
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
Current Federal Tax
|
|
|
-
|
|
|
$
|
-
|
|
|
Current State Tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Change in NOL Benefit
|
|
|
522,285
|
|
|
|
393,680
|
|
|
Change in valuation allowance
|
|
|
(522,285
|
)
|
|
|
(393,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefits
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At December 31, 2011 and 2010 the Company has net operating losses
(NOL) of approximately $1,379,285 and $644,496, respectively that will expire from 2027 to 2031. In the event that a significant
change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the
NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently
believe that such a change has occurred.
ATTUNE
RTD
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND
THE
PERIOD FROM JULY 14, 2007 (INCEPTION OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
A
valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.
Accordingly, a valuation allowance was established in 2011 and 2010 for the full amount of our deferred tax assets due to the
uncertainty of realization. Management believes that based upon its projection of future taxable operating income for the foreseeable
future, it is more likely than not that the Company will not be able to realize the benefit of the deferred tax assets at December
31, 2011 and 2010. The valuation allowance as of December 31, 2011 and 2010 was $1,255,851 and $787,272, respectively.
|
11.
|
|
COMMITMENTS
AND
CONTINGIENCIES
|
Effective
March 26, 2008, the Company entered into two employment agreements with its Chief Executive Officer and Chief Financial Officer.
These agreements established a yearly salary for each of $120,000. As of December 31, 2011 and 2010, the Company owed its officers
$120,068 and $242,636, respectively, based on the terms of the agreement.
During
the year ended December 31, 2007, neither officer was paid for his services. Based on the value of the above agreement, the Company
recorded the estimated value of contributed services from its officers of $111,781 representing work performed from formation
of the Company through December 31, 2007.
Operating
Leases
The
Company currently leases office space under a one year operating lease agreement expiring on September 30, 2012. Within sixty
days of expiration, the Company has the option to extend the lease for an additional two years. Under the lease agreement rent
was set at $1,400 per month
The
following is a schedule by years of future minimum rental payments required under the operating lease:
|
2012
|
|
$
|
12,600
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,600
|
|
Rent
expense for the years ended December 31, 2011 and 2010 were $16,800 and $20,301 respectively.
Legal
Matters
From
time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.
As of December 31, 2011 and 2010, there were no pending or threatened lawsuits that could reasonably be expected to have a material
effect on the results of our operations.
ATTUNE
RTD
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND
THE
PERIOD FROM JULY 14, 2007 (INCEPTION OF DEVELOPMENT STAGE) TO DECEMBER 31, 2011
In
March of 2010, Attune RTD engaged the services of a vendor to complete work described in the Scope of Services portion of a March
2010 agreement. Pursuant to the Agreement, the company paid the vendor a total of $70,618 towards the completion of services.
The agreement contained a “not to exceed cost” of $89,435. On or about September 21, 2010 the company issued vendor
250,000 shares of Restricted Class A Common Stock as an incentive for vendor to deliver services not later than March 1, 2011.
Vendor agreed to incrementally deliver work in process. No work in process was received from vendor. Vendor requested the company
pay an additional $18,817.50. On or about October 4, 2010, vendor repudiated the agreement. On February 23, 2011 The Company engaged
the services of legal counsel and made written demand for the return of the stock certificate and attempted to initiate settlement
negotiations. Vendor did not acknowledge receipt of letter.
As
of this date, the company is currently contemplating litigation with counsel to cancel the stock certificate. Attune's alleged
damages resulting from vendors failure to perform and subsequent repudiation of the contract, including the companies lost opportunity
costs, should it pursue litigation against vendor will need to be established by an economic expert. Vendor could conceivably
pursue litigation against the company for the $18,818, however the Company believes this is not probable and therefore a contingent
liability is not warranted.
|
12.
|
|
RELATED
PARTY
TRANSACTIONS
|
During
the years ended December 31, 2008 and 2007, the Company received funds from the issuance of a shareholder loan agreement to a
shareholder. During the year ended December 31, 2007, the Company had received $30,000 under this agreement. During the year ended
December 31, 2008, the Company received and additional $30,000 and repaid $4,800. The outstanding balance as of December 31, 2008
was $55,200. This debt was converted into 788,571 shares of Class A common stock in fiscal 2009 (See Note 9).
The
Company entered into two unsecured promissory notes with its Chief Executive Officer and Chief Financial officer (see Note 4).
The balance due under these loans was $175,825 as of December 31, 2009. As of December 31, 2009, the Company owed the same two
officers $175,239 based on the terms of their employment contracts (see Note 3). On January 31, 2010, the officers/shareholders
redeemed 521,439 shares (collectively) of their common stock in the Company, with a value of $0.35 to satisfy this outstanding
debt obligation. Under Sarbanes Oxley, receivables from officers are prohibited, hence redemption of the loans in January 2010.
As of December 31, 2011 there are no shareholder loans present.
As
of December 31, 2011 and 2010, the Company owed its 2 principal officers combined accrued salaries of $120,068 and $242,636, respectively.
Subsequent
to December 31, 2011, the Company entered into an agreement to execute a convertible promissory note in the amount of $42,500
bearing interest at 8% per annum, with the note due and payable in July 2012. The note is convertible into shares of Class A common
stock at a variable conversion price based on 58% of the market value of the stock at the time of conversion. On January 5, 2012,
the funding was received by the company.
Management
evaluated all activity of the Company through March 30, 2012 (the issuance date of the Company’s financial statements) and
concluded that no subsequent events have occurred that would require recognition in the financial statements.
