IGLUE, INC.
(Exact name of registrant
as specified in its charter)
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NEVADA
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731602395
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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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1095 BUDAPEST
SOROKSARI UT 94-96
HUNGARY
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(Address of principal executive offices)
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+36-1-456-6061
(Issuer’s telephone number, including
area code)
Securities registered under Section 12(b) of
the Exchange Act:
Securities registered under Section 12(g) of
the Exchange Act:
Common Stock, $0.11 par value
(Title of Class)
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes
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No
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Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
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Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
Yes
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No
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Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
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Non-Accelerated Filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). . Yes
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No
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The registrant had no revenue for its most
recently completed fiscal year end.
The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant on June 30, 2012, based on a closing price of $9.25 was approximately
$70,851,000. As of June 30, 2012, there were 11,995,370 shares of the Registrant's Common Stock, par value $0.001 per
share, outstanding.
Documents Incorporated By Reference: None.
TABLE OF CONTENTS
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PART I
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Page
No.
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Item 1.
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Business.
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5
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Item 1A.
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Risk Factors.
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9
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Item 1B.
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Unresolved Staff Comments.
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18
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Item 2.
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Properties.
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18
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Item 3.
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Legal Proceedings.
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18
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Item 4.
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Mining Safety Disclosure
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18
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PART II
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Item 5.
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Market For Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of
Equity Securities.
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19
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Item 6.
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Selected Financial Data.
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20
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operation.
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20
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Item 7A
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Quantitative and Qualitative Disclosures About Market Risk.
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26
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Item 8.
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Financial Statements and Supplementary Data.
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26
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Item 9.
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Changes In And Disagreements With Accountants on Accounting and Financial Disclosure.
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26
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Item 9A.
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Controls And Procedures.
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26
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Item 9B.
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Other Information.
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27
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance.
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28
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Item 11.
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Executive Compensation.
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30
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
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30
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence.
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35
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Item 14.
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Principal Accounting Fees and Services.
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35
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PART IV
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Item 15.
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Exhibits, Financial Statements Schedules.
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35
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SIGNATURES
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36
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SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Included in this Form 10-K are “forward-looking”
statements, as well as historical information. Although we believe that the expectations reflected in these forward-looking statements
are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct.
Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors,
including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use
forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “may,” “project,” “plan,” “will,” “shall,” “should,”
and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking
statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual
results will be consistent with these forward-looking statements. Important factors that could cause our actual results, performance
or achievements to differ from these forward-looking statements include the following:
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the availability and adequacy of our cash flow to meet our requirements;
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economic, competitive, demographic, business
and other conditions in our local, regional and global markets;
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actions taken or not taken by third-parties,
including competitors, as well as legislative, regulatory, judicial and other governmental authorities;
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competition in our industry;
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the failure to obtain or loss of any license or permit;
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changes in our business and growth strategy,
capital improvements or development plans;
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the availability of additional capital to support capital improvements and development; and
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other factors discussed under the section entitled “Risk Factors” or elsewhere
in this annual report.
All forward-looking statements attributable
to us are expressly qualified in their entirety by these and other factors. We undertake no obligation to update or revise these
forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect
the occurrence of unanticipated events or otherwise.
PART I
Item 1. Business.
As used in this annual report, “we”,
“us”, “our”, or “Company” refers to iGlue, Inc.
Our Company
Our
Company has developed an internet semantic search and content organizer application called iGlue. iGlue makes sense of search results
based on context by using automatic annotation of web pages using the entities present in iGlue’s proprietary semantic database.
iGlue extracts information from the annotated page and stores it, thereby
automatically expanding its database. The iGlue
system
determines the specific meaning a given phrase uses. For example, “Smith”
may refer to a profession or a given name, “JFK” may mean the president, the airport, or the space center.
iGlue
works by disambiguating between these different connotations and assigning the correct meaning to the word automatically. The iGlue
system
then displays relevant information such as facts, pictures, videos, geographic locations,
related links, products, and advertisements about the word or entity within an appealing compact pop up window containing multimedia
enhancements. Through the use of our application iGlue, we have developed a semantic framework for organizing data by integrating
natural language processing and resource description framework approaches into a single system in which these different components
mutually reinforce each other. As of June 30, 2011, the Company has completed development of iGlue and has released its first version
to the general public. We are now focusing on international expansion and growth.
Company History
We are a Nevada corporation that operates through
our wholly owned subsidiary In 4, Kft., a Hungarian limited liability company (“In 4, Kft.”). We are focused on the
development and commercialization of iGlue, a semantic search engine. iGlue is an integrated online content manager and search
engine built with social media extensions. The iGlue search system helps us understand information on the internet and enables
the internet to adapt to our search by managing entities instead of keywords.
We were originally incorporated in the State
of Nevada on November 8, 2000, under the name The King Thomason Group, Inc., (“KT”). KT’s activities from inception
until June 2007 consisted primarily of insurance and estate planning services. On October 10, 2008, we changed our name to Hardwired
Interactive, Inc. and functioned since that date as a shell company aiming to identify, evaluate and complete a business combination
with an operating company.
On November 3, 2011, we entered into a securities
exchange agreement (the “Exchange Agreement”) by and among the Company, Park Slope, LLC (the “Hardwired Majority
Shareholder”), In 4, Kft. (“In 4”), and all of the shareholders of In 4 (the “In 4 Shareholders”)
who are signatories to the Exchange Agreement. On November 11, 2011 (the "Closing Date" or the "Closing"),
pursuant to the terms of the Exchange Agreement, the In 4 Shareholders transferred and contributed all of their shares (the “In
4 Shares”) to the Company, resulting in our acquisition of all of the outstanding In 4 Shares. In return, we issued to the
In 4 Shareholders, their designees or assigns (the “Share Exchange”), an aggregate of 1,000,000 shares of Series A
convertible preferred stock, par value $0.001 per share of the Company (the “Series A Preferred Stock”), and 886,000
shares of Series B convertible preferred stock, par value $0.001 per share of the Company (the “Series B Preferred Stock”,
and together with the Series A Preferred Stock the “Hardwired Exchange Shares”). The foregoing issuances of the Hardwired
Exchange Shares to the In 4 Shareholders, their designees or assigns, constituted 100% of the issued and outstanding preferred
stock of In4 as of and immediately after the consummation of the transactions contemplated by the Exchange Agreement.
Reverse stock split
On January 15, 2012 the Company
performed a reverse stock split of 1:110, merging every 110 share to 1 resulting in a reduction of the issued and outstanding
number shares from 151,282,223 to 1,375,293, with corresponding increase of par values from $0.001 to $0.11. All reference to
shares and per share amounts in the accompanying interim consolidated financial statements have been retroactively restated
to reflect the aforementioned reverse stock split. At the same time, 886,000 number of shares from Series B shares was
converted into common shares at 1:10.
Our shares of common
stock began trading under the symbol “
KGTH
” on the Pink Sheets of the National Quotation
Bureau. On March 8, 2012, we begin trading under the symbol “IGLU” on the OTCQB.
Our executive offices are located at Soroksari ut 94-96, Budapest,
1095 Hungary.
Principal Products or Services and their Markets
Overview
iGlue
uses automatic annotation of web pages by matching words with entities present in iGlue’s proprietary semantic database.
Additionally, iGlue extracts information from annotated pages and stores it in its database
, thereby automatically expanding
its size. The system
automatically disambiguates the specific meaning of a given phrase or
word.
iGlue distinguishes between these meanings and assigns or annotates the correct meaning to the word automatically.
The iGlue system
then displays relevant information such as facts, pictures, videos, geographic
locations, related links, tweets, products and advertisements about the entity or word within a convenient pop-up window in a compact,
appealing way with multimedia enhancements.
iGlue’s Database
iGlue’s
current database contains
over 100 million data points, including (i) over 10 million entities, (ii) over 38 million semantic
connections, (iii) over 4 million geographical locations, (iv) more than 1.5 million names, and (v) more than 300,000 institutional
name entries.
We are continuously adding and improving this database and believe we will
reach over 1 billion searchable entities by the end of the quarter.
iGlue’s
machine and hand annotation process is supported by a large, custom built, proprietary semantic database containing facts and related
media such as images, videos, and links. The database is structured with the help of flexible, organically built ontologies, which
are formal, explicit specifications of shared concepts. Data sources are ranked according to quality and reliability. The iGlue
system works by filtering and combining multiple conflicting facts and displaying the best available information to be presented
to the user. This database can be collaboratively edited by adding data points manually, automatically or through iGlue’s
proprietary system. Ontologies can be modified through an easy-to-use editor. Users can customize the user interface and the results
of searches according to their language, interest, and personal style.
In addition,
the database has several built in automated intelligence functions including (i) automatic discovery of duplicate entities,
(ii)
automatic detection of semantic inconsistencies among data
, (iii) automatic inference
technology, and (iv) observed user behavior recommendation system. These intelligence functions enable the system to
store
additional information and update it with user interaction. The system is further supported by the following automated processes:
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Web scraping,
a
computer software technique of extracting information from websites. Usually, such software programs simulate human exploration
of the World Wide Web by either implementing low-level Hypertext Transfer Protocol (HTTP), or embedding certain full-fledged web
browsers, such as Internet Explorer or Mozilla Firefox;
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Machine learning,
a
scientific discipline concerned with the design and development of algorithms that allow computers to evolve behaviors based on
empirical data, such as from sensor data or databases;
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Natural language processing,
a
field concerned with the interactions between computers and human (natural) languages. In essence the machine reads text on websites
and strives to “understand” the meaning of the words and the connection between words, much like the human brain does;
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Normalized incoming data points, automatically
recognizes and assigns the correct iGlue database entity (database entry). For example, when there are multiple entities for one
search iGlue will automatically assign from among the numerous entities in the database the one that is perfect for the editorial;
and
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Matching of simple textual references to
entities present in the database
to grow and further
enhance database size and consistency;
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Users Enhance the iGlue Database
iGlue
users can add a wide variety of information types including images, videos, links, geographic locations, and notes to any word
on the web which enhances the value added content according to the preferences of the user. The information added by an individual
user can be used to benefit the whole iGlue community.
U
sers can vote on the relevance
of multimedia information attached to words by other users through the industry standard “thumbs up” or “thumbs
down” method
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haring of value added content with friends or colleagues is easy
through the most popular channels (Facebook, Twitter, e-mail), without requiring the receiving user to install iGlue.
In
addition,
iGlue has same article cross domain annotation, which means that value added information
by users follow the content to which it is attached by making annotations automatically visible on other webpages. The knowledge
one user adds will be visible to another in real time, across different domains, helping to navigate the online landscape. We believe
this is one of the features unique to iGlue.
iGlue’s Revenue Model
Our goal is to generate revenue on iGlue’s
semantic search engine technology in three distinct manners:
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semantic advertisement targeting;
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semantic recommendation engine; and
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semantic affiliate marketing
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Semantic Advertisement Targeting
Semantic advertising applies semantic analysis
techniques to web pages. The semantic advertising process is designed to accurately interpret and classify the meaning or main
subject of the webpage and populate it with targeted advertising spots. We believe that closely linking content to advertising
will increase the viewer’s interest in the advertised product or service through engagement.
Semantic Recommendation Engine
Semantic recommendation allows high precision
targeting of relevant, semantically linked information to users. For example, if users are browsing an editorial on John Fitzgerald
Kennedy, iGlue’s Semantic Recommendation Engine will provide value added contents such as JFK related products from other
through our affiliate marketing system described in more detail below.
Semantic Affiliate Marketing
Affiliate marketing is a marketing practice
in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts.
Examples include rewards sites, where users are rewarded with cash or gifts, for the completion of an offer, and the referral of
others to the site.
Today, this is usually accomplished through
contracting with an affiliate network. iGlue will link its semantic analysis capability to better target affiliate marketing.
Business Strategy and Revenue Generation
Our strategy is to deploy iGlue across the
internet as a standalone, free consumer facing product, while providing value added corporate versions based around a subscription
based business model and advertising revenue sharing program.
We intend to provide iGlue in the following versions:
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free consumer facing plug-in version;
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value added semantic advertising platform; and
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corporate version with semantic advertising and recommendation engine built in;
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We plan to be world leaders in semantic technology. We believe that
iGlue is a unique system of several interwoven computational principles which creates the world’s best search technology.
Competition
We face significant competition in almost every
aspect of our business. Our main source of competition is from companies such as OpenCalais, a Thomson Reuters company, Freebase
and Apture, all of which are Google companies, and Wolfram Alpha, which is now part of Microsoft, Evri and Google Squared. We also
face competition from traditional and online media businesses for a share of advertisers’ budgets and the development of
tools and systems for managing and optimizing advertising campaigns. As we introduce new features of iGlue, as our existing feature
sets evolve, or as other companies introduce new products and services, we may become subject to additional competition.
The areas in which we compete include but are not limited to:
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Users and Engagement:
We compete to attract, engage, and retain users. Since our product is free for users, we compete based on the features, ease of use and value added quality and uniqueness of the experience of our product.
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Advertising
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We compete to attract
and retain advertisers. We distinguish our products by providing highly targeted semantically, contextually and user behavioral
layered social context and engagement to amplify the effectiveness of advertisers’ messages.
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Platform:
We compete to attract
and retain users who can enhance and add items to our semantic database. We compete in this area primarily based on the value of
our semantic targeting and reach to any word on any website that enables users instant encyclopedic value added information access
on a global scale.
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Talent:
We compete to attract and retain
highly talented individuals, especially semantic and natural language software engineers, product and user interface designers,
and product managers. Competition for employee talent is particularly intense in Hungary, where we are headquartered. We compete
for these potential employees by providing a work environment that fosters and rewards creativity and innovation and by providing
compensation packages that we believe will enable us to attract and retain key employees.
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While the semantic search and micro
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search
industry is evolving rapidly we believe that we compete favorably as iGlue’s feature set and integration is unique, efficient
and user friendly.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts
The Company currently has
no patents, trademarks, franchises, concessions, royalty agreements or labor contracts. We plan on filing for several patent applications
in the United States as soon as possible upon closing of additional financing.
Research and Development Activities
For the fiscal years ending December 31, 2012
and 2011, we spent $945,123 and $384,093 on research and project development costs, respectively.
To date, research and project development costs
include the research and development expenses related to the development, marketing and distribution of the iGlue system.
Employees
Including our Chief Executive Officer, Peter
Boros, we had 5 full time employees in 2012 and 6 full time employees in 2011.
Where You Can Find More Information
We are subject to the reporting obligations
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual
report under cover of Form 10, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite proxy
statements with regard to annual stockholder meetings. The public may read and copy any materials the Company files with the Securities
and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains
an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers
that file electronically with the SEC.
Item 1A. Risk Factors.
Risks Relating to Our Company
We have a limited operating history which
makes your evaluation of our business difficult. We have incurred losses in recent periods for start-up efforts and may incur losses
in the future.
We only recently completed our acquisition
of In 4, kft., a Hungarian limited liability company. In 4 Kft., has had a short operating history focused on product development.
Our future is dependent upon our ability to obtain financing and future profitable operations from the commercial success of iGlue.
These factors raise substantial doubt that we will be able to continue as a going concern.
Our independent auditors have expressed
doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing and force us to
cease operations.
In their report dated April 15, 2013, our independent
auditors stated that our financial statements for the years ended December 31, 2012 and 2011 were prepared assuming that we would
continue as a going concern. Our ability to continue as a going concern is an issue raised because to date, we have incurred net
operating losses. We anticipate that we will continue to experience net operating losses.
Our net operating losses will require that
we finance our operations from outside sources, such as obtaining additional funding from the sale of our securities. The going
concern explanatory paragraph included in our auditor's report on our financial statements, however, could inhibit our ability
to raise additional financing. If we are unable to obtain such additional capital, we will not be able to sustain our operations
and would be required to cease our operations. You should consider our independent registered public accountant's comments when
determining if an investment in our Company is suitable.
Even if we do raise sufficient
capital and generate revenues to support our operating expenses, there can be no assurance that the revenue will be sufficient
to enable us to develop our business to a level where it will generate profits and cash flows from operations, or provide a return
on investment. In addition, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders could be significantly diluted, the newly-issued securities may have rights, preferences or privileges
senior to those of existing stockholders and the trading price of our common stock could be adversely effected. Further, if we
obtain additional debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations.
If we are unable to continue as a going concern, you may lose your entire investment.
There are risks associated with our business
plan as a limited liability company in the Republic of Hungary which may adversely affect our ability to effectively develop, market
and distribute our product.
Certain risks may be associated with our efforts
to undertake operations in the Republic of Hungary. Such operations will be subject to political, economic and other uncertainties,
including among other things, import, export and transportation regulations, tariffs, taxation policy, including royalty and tax
increases and retroactive tax claims, exchange controls, currency fluctuations and other uncertainties arising out of the Republic
of Hungary’s sovereignty over our operations.
We expect to operate in a highly competitive
market. We face competition from large, well-established companies with significant resources. We may not be able to compete effectively
which will adversely affect our business plan.
Our commercial success
will depend on our ability and the ability of our sub licensees, if any, to compete effectively in product
development, customer compliance, price, marketing and distribution. There can be no assurance that competitors will not succeed
in developing products that are more effective than what we derived from our research and development efforts or that would render
such products obsolete and non-competitive.
The internet
technology
sector is
characterized by intense competition, rapid product development and technological change.
Most of the competition that we encounter will come from companies, both public and private, research institutions and universities
who are researching and developing technologies and products similar to or competitive with iGlue.
These companies may enjoy numerous competitive
advantages, including:
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significantly greater name recognition;
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established distribution networks;
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additional lines of products, and the ability to offer rebates, higher
discounts or incentives to gain a competitive advantage;
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greater experience in conducting marketing, research and development,
obtaining regulatory approval for products; and
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greater financial and human resources for product development, sales
and marketing, and patent litigation
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As a result, we may not be able to compete
effectively against these companies or their products.
We operate in a new and rapidly changing
industry, which makes it difficult to evaluate our business and prospects.
We plan to derive substantially all of our
revenue from semantic search and semantic advertisement targeting, which is a new and rapidly evolving industry. The growth of
the semantic industry and the level of demand and market acceptance of this field are subject to a high degree of uncertainty.
Our future operating results will depend on numerous factors affecting the semantic search industry, many of which are beyond our
control, including:
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continued worldwide growth in the adoption and use of semantic technology
and other social internet products;
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changes in consumer demographics and public tastes and preferences;
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the availability and popularity of other forms of search and content
management options;
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the worldwide growth of personal computer, broadband Internet and
mobile device users, and the rate of any such growth; and
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general economic conditions, particularly economic conditions adversely
affecting business advertising spending
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Our ability to plan for additional product
development, distribution and promotional activities will be significantly affected by our ability to anticipate and adapt to relatively
rapid changes in the tastes and preferences of our current and potential users. New and different types of search options may increase
in popularity at the expense of our semantic search and annotation technology. A decline in the popularity of search and advertising
in general, or our semantic search and annotation technology in particular would harm our business and prospects.
We have a new business model and a short
operating history, which makes it difficult to evaluate our prospects and future financial results and may increase the risk that
we will not be successful.
We began operations in September of 2007. We
have a short operating history and a new business model, which makes it difficult to effectively assess our future prospects. Our
business model is based on offering a free internet tool for users that brings value added content to any page. Through this unique
product we will aim to place contextually and semantically targeted advertisements that are relevant to users. We are just beginning
to implement this strategy. To date we have not realized any revenue from our semantic ad targeting. You should consider our business
and prospects in light of the challenges we face, which include our ability to, among other things:
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maintain a good relationship with our users, encouraging them to
accept our contextually targeted, relevant, value added advertisements;
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convert businesses into using our highly targeted contextual relevant
ad system in order to realize revenue;
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increase ad purchases by paying businesses;
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retain paying ad buyers, especially higher paying buyers;
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anticipate changes in the semantic search and advertising industry;
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cost-effectively develop and launch new features of iGlue and further
refine our ad targeting system;
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launch additional iGlue features and release enhancements that become
popular;
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develop and maintain a scalable, high-performance technology infrastructure
that can efficiently and reliably handle increased system usage, fast annotation load times and the deployment of new features
and technologies;
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process, store and use data in compliance with governmental regulation
and other legal obligations related to privacy;
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successfully compete with other companies that are currently in,
or may in the future enter, the semantic search, advertising, and annotation market;
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hire, integrate and retain world class talent;
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maintain adequate control of our expenses; and
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successfully expand our business, especially internationally and
in mobile use.
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Security breaches, computer viruses and
computer hacking attacks could harm our business which would adversely affect our results of operations.
Security breaches, computer malware and
computer hacking attacks have become more prevalent in our industry, have occurred on our systems in the past and may occur
on our systems in the future. Any security breach caused by hacking, which involves efforts to gain unauthorized access to
information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other
computer equipment, and the inadvertent transmission of computer viruses could harm our business, financial condition and
operating results. We have experienced and will continue to experience hacking attacks. Due to our leading role in the
semantic search and especially natural language processed annotation field, we believe we are a particularly attractive
target for hackers. Though it is difficult to determine what harm may directly result from any specific interruption or
breach, any failure to maintain performance, reliability, security and availability of our network infrastructure to the
satisfaction of our users may harm our business and our ability to retain existing users and attract new users.
Our core values of focusing on our user
experience first and acting for the long term may conflict with the short-term interests of our business which may negatively impact
our business operations.
One of our core values is to focus on providing
the best internet value added content experience to our users, which we believe is essential to our success and serves the best,
long-term interests of iGlue and our stakeholders. Therefore, we have made, in the past and or may make in the future, significant
investments or changes in strategy that we think will benefit our users, even if our decision negatively impacts our operating
results in the short term. In addition, our philosophy of putting our users first may cause disagreements or negatively impact
our relationships with distribution partners or other third parties. Our decisions may not result in the long-term benefits that
we expect, in which case the success of our semantic platform, business and operating results could be harmed.
If we fail to effectively manage our
growth, our business and operating results could be harmed.
We continue to experience rapid growth in our
headcount and operations, which will continue to place significant demands on our management and our operational, financial and
technological infrastructure. As of December 31, 2012, approximately 50% of our employees had been with us for less than two years.
As we continue to grow, we must expend significant resources to identify, hire, integrate, develop and motivate a large number
of qualified employees. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our ability
to continue launching new games and enhance existing games could suffer.
To effectively manage the growth of our business
and operations, we will need to continue spending significant resources to improve our technology infrastructure, our operational,
financial and management controls, and our reporting systems and procedures by, among other things:
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monitoring and updating our technology infrastructure to maintain
high performance and minimize down time;
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enhancing our internal controls to ensure timely and accurate reporting
of all of our operations;
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enhancing information and communication systems to ensure that our
employees and are well-coordinated and can effectively communicate with each other; and
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appropriately document our information technology systems and our
business processes.
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These enhancements and improvements will require
significant capital expenditures and allocation of valuable management and employee resources. If we fail to implement these enhancements
and improvements effectively, our ability to manage our expected growth and comply with the rules and regulations that are applicable
to public reporting companies will be impaired.
If we do not obtain additional financing,
we will need to curtail our expansion activities and our business may fail, in which case you may lose your investment.
Our current operating funds are not sufficient
to cover current research and development needs, as well as anticipated operating overheads, professional fees and regulatory filing
fees over the next twelve months. In addition, our business plan calls for significant expenses in connection with the development
of further iGlue functions, international expansion and potential acquisition of complementary technologies.
Therefore,
we will need to obtain additional financing in order to complete our full business plan.
We currently do not have any arrangements for
financing and we may not be able to obtain financing when required. Obtaining additional financing would be subject to a number
of factors many of which are beyond our control. These factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.
Our Certificate of Incorporation provides
for indemnification of officers and directors at our expense and limits their liability, which may result in a major cost to us
and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers and/or directors.
Our certificate of incorporation and applicable
Delaware law provide for the indemnification of our directors and officers against attorney’s fees and other expenses incurred
by them in any action to which they become a party arising from their association with or activities on our behalf. This indemnification
policy could result in substantial expenditures by us that we will be unable to recoup.
We have been advised that, in the opinion of
the Commission, indemnification for liabilities arising under federal securities laws is against public policy as expressed in
the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under
federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person
in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection
with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling
precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this
matter, if it were to occur, is likely to be very costly and may result in us receiving negative publicity, either of which factors
is likely to materially reduce the market and price for our shares if such a market ever develops.
Risks Related to Our Securities
We may never pay any dividends to our
shareholders.
The declaration, payment and amount of any future dividends will be made at the discretion of the board
of directors.
We have never declared or paid any cash dividends
or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to
finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The
declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend
upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements,
and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and,
if dividends are paid, there is no assurance with respect to the amount of any such dividend.
There is limited trading market
for our common stock, which may adversely affect the market price of our common stock as well as your ability to resell the shares
that you have acquired.
There is currently limited trading market for
our common stock and a more liquid market may not develop or be sustained. If a consistent and liquid trading market for our
common stock is established, the market price of our common stock may be significantly affected by factors such as actual
or anticipated fluctuations in our operation results, general market conditions and other factors. In addition, the stock market
has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for
the shares of internet companies, which may materially adversely affect the market price of our common stock as well as your ability
to resell the shares that you may have acquired.
Our management team does not have extensive
experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.
Our management team has
had limited U.S. public company management experience or responsibilities, which could impair our ability to comply with legal
and regulatory requirements, such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing on
a timely basis required reports and other required information. Our management may not be able to implement and affect programs
and policies in an effective and timely manner that adequately respond to increased legal or regulatory compliance and reporting
requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition
of fines and penalties and further result in the deterioration of our business.
Our management owns a controlling interest
in the company and will be able to control management decisions thereby limiting the ability of public shareholders to influence
corporate direction and affairs.
Peter Vasko, our former Chief Executive Officer
currently holds the control voting power in the form of 1,000,000 shares of Series A Preferred Stock. These non-trading shares
represent majority voting power compared to our common stock. As such, he has the ability to exert control over our business affairs,
including the ability to delay or prevent a change in our corporate control even if our other stockholders wanted it to occur.
This stockholder will be able to exercise significant control over all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or
merging with us even if our other stockholders wanted it to occur.
Our common stock is a "penny stock,"
and because "penny stock” rules will apply, you may find it difficult to sell the shares of our common stock you acquired
in this offering.
Our common stock is a “penny stock”
as that term is defined under Rule 3a51-1 of the Securities Exchange Act of 1934. Generally, a "penny stock" is a common
stock that trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be very
limited. Penny stocks in start-up companies are among the riskiest equity investments. Broker-dealers who sell penny stocks must
provide purchasers of these stocks with a standardized risk-disclosure document prepared by the U.S. Securities & Exchange
Commission. The document provides information about penny stocks and the nature and level of risks involved in investing in the
penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding
broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser,
and obtain the purchaser's written agreement to the purchase. Many brokers choose not to participate in penny stock transactions.
Due to the penny stock rules, there is less trading activity in penny stocks and you are likely to have difficulty selling your
shares.
If we lose the services of our Officers
or other members of our senior management team, we may not be able to execute our business strategy which may negatively affect
our business operations.
Our success depends in a large part upon the
continued service of our senior management team. The loss of senior management, even temporarily, or any other member of senior
management would harm our business.
If we are unable to attract and retain
highly qualified employees, we may not be able to grow effectively which may result in a cease of business operations.
Our ability to compete and grow depends in
large part on the efforts and talents of our employees. Such employees, particularly programmers, designers, product managers and
engineers, are in high demand, and we devote significant resources to identifying, hiring, training, successfully integrating and
retaining these employees. We have historically hired a number of key personnel from University graduates, and as competition within
Hungary increases for talent, we may incur significant expenses in continuing this practice. The loss of employees or the inability
to hire additional skilled employees as necessary could result in significant disruptions to our business, and the integration
of replacement personnel could be time-consuming and expensive and cause additional disruptions to our business.
We believe that two critical
components of our success and our ability to retain our best employees are our culture and our competitive compensation practices.
As we continue to grow rapidly and develop the infrastructure of a public company, we may find it difficult to maintain our entrepreneurial,
execution-focused culture. In addition, many of our employees may be able to receive significant proceeds from sales of our equity
in the public markets after our listing, which may reduce their motivation to continue to work for us. Moreover, we expect that
this our public company status will create disparities in wealth among our employees, which may harm our culture and relations
among employees.
Our compliance with changing laws and
rules regarding corporate governance and public disclosure may result in additional expenses to us which, in turn, may adversely
affect our ability to continue our operations.
Keeping abreast of, and in compliance with,
changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act
of 2002, new SEC regulations and, in the event we are ever approved for listing on either NASDAQ or a registered exchange, NASDAQ
and stock exchange rules, will require an increased amount of management attention and external resources. We intend to continue
to invest all reasonably necessary resources to comply with evolving standards, which may result in increased general and administrative
expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. This could
have an adverse impact on our ongoing operations.
Risks Related to Our Industry
An increasing number of individuals are
utilizing devices other than personal computers to access the internet, and versions of iGlue developed for these devices might
not gain widespread adoption, or may not function as intended. If we are unable to successfully expand the platforms and devices
on which iGlue is available, or if the versions of iGlue that we create for alternative platforms and devices are not compelling
to our users, our business will be negatively affected.
The number of individuals who access the internet
through devices other than a personal computer, such as smartphones, tablets, televisions and set-top box devices, has increased
dramatically, and we believe this trend is likely to continue. The generally lower processing speed, power, functionality and memory
associated with these devices make the use of iGlue more difficult. Further, if we are forced to streamline certain aspects of
iGlue to properly function on these devices such versions may not be compelling to players. In addition, each device manufacturer
or platform provider may establish unique or restrictive terms and conditions for developers on such devices or platforms, and
iGlue may not work well or be viewable on these devices as a result. We have limited experience in developing and optimizing iGlue
to function on alternative devices and platforms. To expand our business, we will need to support a number of alternative devices
and technologies. Once developed, we may choose to port or convert iGlue into separate versions for alternative devices with different
technological requirements. As new devices and new mobile platforms or updates to platforms are continually being released, we
may encounter problems in developing versions of iGlue for use on these alternative devices and we may need to devote significant
resources to the creation, support, and maintenance of such devices and platforms. If we are unable to successfully expand the
platforms and devices on which iGlue is available, or if the versions of iGlue that we create for alternative platforms and devices
are not compelling to our users, our business will be negatively affected.
Programming errors or flaws in iGlue
could harm our reputation or decrease market acceptance of iGlue, which would harm our operating results.
Any of iGlue’s multiple functions may
contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch, particularly as we
launch new functions and rapidly release new features to existing iGlue blocks under tight time constraints. We believe that if
our users have a negative experience with iGlue, they may be less inclined to continue or resume using iGlue or recommend iGlue
to other potential players. If iGlue contains errors, bugs, flaws or corrupted data after its launch we may not be able to repair
these problems and it will adversely affect our results of operation.
Evolving regulations
concerning data privacy may result in increased regulation and different industry standards, which could prevent us from providing
various functions of iGlue to our users, or require us to modify our software, thereby harming our business.
The regulatory framework for privacy issues
worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use,
storage, transmission and security of personal information by companies operating over the internet and mobile platforms have recently
come under increased public scrutiny. The U.S. government, including the Federal Trade Commission and the Department of Commerce,
has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior
on the internet, including regulation aimed at restricting certain targeted advertising practices. In addition, the European Union
is in the process of proposing reforms to its existing data protection legal framework, which may result in a greater compliance
burden for companies with users in Europe. Various government and consumer agencies have also called for new regulation and changes
in industry practices.
We began operations in 2007 and have just now
begun to grown rapidly. While our administrative systems have developed rapidly, during our earlier history our practices relating
to intellectual property, data privacy and security, and legal compliance may not have been as robust as they are now, and there
may be claims arising from this period that we are not able to anticipate. In addition, our business, including our ability to
operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted, or implemented
in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of
our website, iGlue, features or our privacy policy. In particular, the success of our business has been, and we expect will continue
to be, driven by our ability to responsibly use the data that our users share with us. Therefore, our business could be harmed
by any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of data our users
choose to share with us, or regarding the manner in which the express or implied consent of consumers for such use and disclosure
is obtained. Such changes may require us to modify our software and its features, possibly in a material manner, and may limit
our ability to develop new features that make use of the data that our users voluntarily share with us.
Our business is subject to a variety
of other U.S., European Union and foreign laws, many of which are unsettled and still developing and which could subject us to
claims or otherwise harm our business.
We are subject to a variety of laws in the
United States and abroad, including laws regarding consumer protection, intellectual property, export and national security, that
are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often
uncertain and may be conflicting, particularly laws outside the United States. For example, laws relating to the liability of providers
of online services for activities of their users and other third parties are currently being tested by a number of claims, including
actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories
based on the nature and content of the materials searched, the ads posted or the content provided by users. It is also likely that
as our business grows and evolves and iGlue is used in a greater number of countries, we will become subject to laws and regulations
in additional jurisdictions. We are potentially subject to a number of foreign and domestic laws and regulations that affect the
offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could
be interpreted in ways that could harm our business or expose us to liability. It is difficult to predict how existing laws will
be applied to our business and the new laws to which we may become subject.
If we are not able to comply with these laws
or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement
new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to modify iGlue,
which would harm our business, financial condition and results of operations. In addition, the increased attention focused upon
liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of
our business. Any costs incurred as a result of this potential liability could harm our business and operating results.
It is possible that a number
of laws and regulations may be adopted or construed to apply to us in the United States and elsewhere that could restrict the online
and mobile industries, including user privacy, advertising, taxation, content suitability, copyright, distribution and antitrust.
Furthermore, the growth and development of electronic commerce may prompt calls for more stringent consumer protection laws that
may impose additional burdens on companies such as ours conducting business through the internet and mobile devices. We anticipate
that scrutiny and regulation of our industry will increase and we will be required to devote legal and other resources to addressing
such regulation. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere
regarding these activities may lessen the growth of social services and impair our business.
Our business will suffer if we are unable
to successfully integrate acquired companies into our business or otherwise manage the growth associated with multiple acquisitions.
We intend to pursue acquisitions that are complementary
to our existing business and expand our employee base and the breadth of our offerings. Our ability to grow through future acquisitions
will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, our ability to compete
effectively to attract these candidates and the availability of financing to complete larger acquisitions. Since we expect the
Semantic Internet industry to consolidate in the future, we may face significant competition in executing our growth strategy.
Future acquisitions or investments could result in potential dilutive issuances of equity securities, use of significant cash balances
or incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of
which could adversely affect our financial condition and results of operations. The benefits of an acquisition or investment may
also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the
intended benefits.
Integration of a new company’s operations,
assets and personnel into ours will require significant attention from our management. The diversion of our management’s
attention away from our business and any difficulties encountered in the integration process could harm our ability to manage our
business. Future acquisitions will also expose us to potential risks, including risks associated with any acquired liabilities,
the integration of new operations, technologies and personnel, unforeseen or hidden liabilities and unanticipated, information
security vulnerabilities, the diversion of resources from our existing businesses, sites and technologies, the inability to generate
sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, our relationships with
employees, players, and other suppliers as a result of integration of new businesses.
Our investors may have difficulty enforcing
civil liabilities against our officers and directors under the U.S. federal securities laws because some of our directors and officers
reside in Hungary.
We are a company incorporated under the laws
of Nevada. However, we are a company headquartered in Hungary. As a result, our investors may have difficulty enforcing civil liabilities
under the U.S. federal securities laws against our officers and directors, because some of our directors and officers reside in
Hungary. It may be difficult for an investor to sue, for any reason, us or any of our directors or officers through U.S. jurisdictions
because some of our assets are located outside the U.S. If an investor was able to obtain a judgment against us or any of our directors
or officers in a U.S. court based on U.S. securities laws or other reasons, it may be difficult to enforce such judgment in Hungary.
We are uncertain as to the enforceability, in original actions in Hungarian courts, of liability based upon the U.S. federal securities
laws and as to the enforceability in Hungarian courts of judgments of U.S. courts obtained in actions based upon the civil liability
provisions of the U.S. federal securities laws.
Fluctuations in currency exchange rates
between the U.S. dollar and the currencies of other nations may negatively affect our financial results, which we report in U.S.
dollars.
As we continue to expand our
international operations, we become more exposed to the effects of fluctuations in currency exchange rates. We incur expenses
for employee compensation and other operating expenses at our non-U.S. locations in the local currency, and an increasing
percentage of our international revenue may come from users who pay us in currencies other than the U.S. dollar. Fluctuations
in the exchange rates between the U.S. dollar and those other currencies could result in the dollar equivalent of such
expenses being higher and/or the dollar equivalent of such foreign-denominated revenue being lower than would be the case if
exchange rates were stable. This could have a negative impact on our reported operating results. To date, we have not engaged
in any hedging strategies, and any such strategies, such as forward contracts, options and foreign exchange swaps related to
transaction exposures that we may implement to mitigate this risk may not eliminate our exposure to foreign exchange
fluctuations.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Description of Property
We lease approximately
1,000 square feet of furnished office space at
1095 Budapest, Soroksari ut 94-96, , Hungary. The offices are leased on a
monthly basis for a fee of $500.
Item 3. Legal Proceedings.
We are currently not involved in any litigation
that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or
affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’
officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mining Safety Disclosure.
Not applicable.
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our shares of common
stock began trading under the symbol “
KGTH
” on the Pink Sheets of the National Quotation
Bureau. On March 8, 2012, we begin trading under our new symbol “IGLU” on the OTCQB.
The following table sets forth the high and
low trade information for our common stock for each full quarterly period within the two most recent fiscal years. The prices reflect
inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
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Quarter ended
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Low Price
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High Price
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March 31, 2011
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$
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0.12
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$
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0.22
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June 30, 2011
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$
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0.13
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$
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0.13
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September 30, 2011
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$
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0.02
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$
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0.55
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December 31, 2011
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$
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0.55
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$
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2.20
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March 31, 2012
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$
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0.67
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$
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0.67
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June 30, 2012
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$
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0.67
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$
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0.69
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September 30, 2012
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$
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0.14
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$
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2.20
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December 31, 2012
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$
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3.30
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$
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5.50
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Holders of Our Common Stock
As of March 29, 2013, a total of 11,919,370
shares of our common stock of the Company (the “Common Stock”) are currently issued and outstanding held by approximately
650 shareholders of record.
Holders of Our Preferred Stock
As of March 29, 2013, there are 1,000,000 shares
of our Series A Preferred Stock issued and outstanding held by our former Chief Executive Peter Vasko.
Series A Convertible Preferred Stock
As of March 29, 2013, there were 1,000,000
shares of our Series A Preferred Stock issued and outstanding held by former Chief Executive Officer Peter Vasko. Commencing on
January 1, 2013, and continuing until December 31, 2017, Mr. Vasko may convert 200,000 shares of Series A Preferred Stock per calendar
year into shares of Common Stock at the conversion ratio of 3,000,000 shares of Common Stock for each 200,000 shares of Series
A Preferred Stock. Mr. Vasko is entitled to vote together with the holders of the Common Stock and has 42 votes for every share
of Series A Preferred Stock held by Mr. Vasko at the time Mr. Vasko may make such vote. As of this filing Mr. Vasko has not converted
any of the Series A Preferred.
The description of the Series A Preferred Stock
does not purport to be complete and is qualified by reference to the full text of Exhibit 4.1 to the Form 8-K filed on November
14, 2011.
Transfer Agent
The Transfer Agent for our capital stock is Securities Transfer
Corporation, with an address at 2591 Dallas Parkway, Suite 102, Frisco, Texas, 75034.
Dividends
We have not declared or
paid any dividends on our Common Stock and intend to retain any future earnings to fund the development and growth of our business. Therefore,
we do not anticipate paying dividends on our Common Stock for the foreseeable future. There are no restrictions on our
present ability to pay dividends to stockholders of our Common Stock, other than those prescribed by Nevada law.
Securities Authorized for Issuance under Equity Compensation
Plans
The Company has no established equity compensation
plans for the issuance of common stock as payment for employees, consultants or other parties. The Company may utilize its common
stock or options thereof from time to time for equity compensation on a transactional basis. In the future, the Company may establish
some type of an equity compensation plan to provide incentive to current or future employees.
Issuer Purchases of Equity Securities
As of march 29, 2013, we have not purchased
any equity securities.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operation.
THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION
AND RESULTS OF OPERATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS
INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR
FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS
OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS
INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” AND THOSE INCLUDED
ELSEWHERE IN THIS ANNUAL REPORT.
PLAN OF OPERATION
Our Company has developed a semantic search
engine called iGlue. which works by organizing content through the context of our user’s internet search. We have successfully
launched our product and are currently marketing iGlue internationally through our website located at http://www.iglue.com.
iGlue
is a complete semantic framework for organizing data by integrating natural language processing and resource description framework
approaches into a single system in which these different components mutually reinforce each other.
We consider the result
to be a powerful and relevant way to search the web and obtain a much deeper snapshot of the content the consumer discovers and
views on the web. iGlue is a tool consumers can use to shape and curate the web through their own additions using natural language
processing and contextual search methods.
Our plan of operation is to generate revenue
on iGlue’s semantic technology through semantic advertisement targeting, semantic recommendation engine and semantic affiliate
marketing. Our current focus is getting our product known to consumers by internationally marketing its design and functionality.
Currently, we are advertising through the use of our website and plan to promote our product through social media networking.
Our strategy is to deploy iGlue across
the internet as a standalone, free consumer facing product, and at the same time provide value added corporate versions based
around a subscription based business model and advertising revenue sharing program. We intend to provide iGlue as a free
consumer facing plug-in version to attract our users. In addition, we intend to offer a value added semantic advertising
platform as well as a subscription based corporate version with semantic advertising and recommendation engine technology
built in.
RESULTS OF OPERATIONS
Year Ended December 31, 2012 Compared to the Year Ended December 31,
2011
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Year ended
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|
|
December 31,
2012
|
|
|
December 31,
2011
|
|
|
Net sales
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
-
|
|
|
General and administrative expenses
|
|
$
|
6,629,983
|
|
|
$
|
237,752
|
|
|
Loss from operations
|
|
$
|
(7,575,106)
|
|
|
$
|
(621,845)
|
|
|
Net loss
|
|
$
|
(7,664,922)
|
|
|
$
|
(632,584)
|
|
|
Loss per common share – basic and diluted
|
|
$
|
(0.66)
|
|
|
$
|
(0.46)
|
|
iGlue Revenue
Although we have launched our product, we are
currently in a development stage. At this time, we are internationally marketing our technology and have not generated any revenue
to date.
Gross Profit
We are currently in a development stage and
have not begun our revenue generation strategy as described above. As such, we have not recognized any profit to date.
General and Administrative Expenses
General and administrative expenses for the
year ended December 31, 2012, was $ 6,629,983 as compared to $237,752 for the year ended December 31, 2011. The $6,392,231
increase is attributable to an increase in compensation costs of personnel enganged in the administration to complete the commercial
roll out of iGlue. Compensation costs in total of $ 6,429,000, in 2012, relate to stock based payments. The total number of shares
issued and outstanding in respect to stock based compensations are detailed in Note 9 in the financial statements.
Loss from Operations
Loss from operations for December 31, 2012,
was $(7,575,106) as compared to $(621,845) for the year ended December 31, 2011. The increase of $6,953,261 in operating
loss is primarily attributable to the increase of general and administrative expenses while revenue generation has not commenced.
Other expenses
Other expenses consisted of interest expenses
accrued on the Company’s liabilities.
Net Loss
Net loss for year ended December 31, 2012,
was $(7,664,922) or loss per share of $(0.66) as compared to $(632,584) or loss per share of $(0.46), for the comparable year ended
December 31, 2011.
Inflation did not have a material impact on
the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or
uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.
Capital Resources and Liquidity
The following table summarizes total current assets, liabilities
and working capital at December 31, 2010, compared to December 31, 2009.
|
|
|
December 31,
2012
|
|
|
December 31,
2011
|
|
|
Increase/(Decrease)
|
|
Current Assets
|
|
$
|
34,343
|
|
|
$
|
68,547
|
|
|
$
|
(34,204)
|
|
Current Liabilities
|
|
$
|
966,907
|
|
|
$
|
818,475
|
|
|
$
|
(148,432)
|
|
Working Capital (Deficit)
|
|
$
|
(932,564)
|
|
|
$
|
(749,928)
|
|
|
$
|
(182,636)
|
At December 31, 2012, we had a working capital
deficit of $932,564, as compared to working capital of $749,928 at December 31, 2011, an increase in working capital deficit of
$182,636. The increase of the deficit is attributable to an increase of total liabilities, including accrued interest
related to the $750,000 note payable to Park Slope, LLC.
Net cash used for operating activities for
the year ended December 31, 2012 and 2011 was $(226,654) and $(600,918) respectively. The net loss for year ended December
31, 2012 and December 31, 2011 was $(7,664,922) and $(632,584) respectively. The Company’s cash used in operations decreased
primarily due to shortage of liquid resources.
Net cash obtained through all financing activities
for the year ended December 31, 2012 was $138,899 as compared to $609,907 for the year ended December 31, 2011. The
decrease indicated the Company’s inability to raise additional funding from investors.
Going Concern
As reflected in the accompanying financial
statements, the Company had a net loss of $(7,664,922) and net cash used in operations of $(226,654) for the year ended December
31, 2012, and working capital and stockholders’ deficit of $(932,564) and $(928,763) respectively, at December 31, 2012. These
factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue its
operations is dependent on management's plans, which include the raising of capital through debt and/or equity markets with some
additional funding from other traditional financing sources, including term notes.
The Company will require additional funding
to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The
Company believes its current available cash along with anticipated revenues and financing may be insufficient to meet its cash
needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable
to the Company, if at all, in 2013.
In response to these problems, management has taken the following
actions:
|
|
-
|
seek additional third party debt and/or equity financing;
|
|
|
-
|
continue with the implementation of the business plan;
|
|
|
-
|
increase revenue through sponsorship and advertising deals.
|
The following table sets forth our approximate anticipated capital
needs, subject to available financing, over the next twelve months:
|
Salaries, Wages
|
|
1,750,000
|
|
Operating Expenses
|
|
400,000
|
|
Office rental/Hungary and US
|
|
350,000
|
|
Server lease and broadband access
|
|
420,000
|
|
Legal Expenses
|
|
250,000
|
|
Public status related
|
|
500,000
|
|
Equipment
|
|
400,000
|
|
Patenting
|
|
500,000
|
|
Research and Development
|
|
500,000
|
|
Marketing
|
|
2,000,000
|
|
Conferences
|
|
750,000
|
|
Travel
|
|
400,000
|
|
Other
|
|
500,000
|
|
TOTAL:
|
|
8,720,000
|
To date all of our funding has been generated
from investment(s) obtained from a Venture Capital fund and from Private Investors. During the next twelve months we anticipate
raising the above outlined funding to continue our international expansion, however as of this writing we only have sufficient
funds to proceed with basic company operations only; we do not have sufficient funds to fully implement our business plan until
such time that we are able to raise additional funding, to which there is no guarantee. If we do not obtain the funds necessary
for us to continue our business activities we may need to curtail or cease our operations until such time as we have sufficient
funds.
We currently have no arrangements for such
financings and can give you no assurance that such financings will be available to us on terms that we deem acceptable or at all.
We believe that as a newly public company our ability to raise funds have been significantly enhanced but this in itself will not
guarantee that we will in fact be able to raise the funding outlined in our business strategy.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operations
through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders
and outside investors. Our principal use of funds has been for the further development of iGlue, our consumer product and for capital
expenditures and general corporate expenses.
During the year ended December 31, 2012, there
was a total of $138,899 received from private placements, and there were no proceeds received from the exercise of stock options. Private
placements related to proceeds from six non-affiliated individuals during the first six months of 2012. The total amount comprised
of 116,275 pieces of shares at $1 per share and 11,312 pieces of shares at $2 per share.
We expect to rely upon funds raised from private
placements, as well as future equity and debt offerings, and current and future grant opportunities to implement our growth plan
and meet our liquidity needs going forward. Management believes that our Company’s cash will be sufficient to
meet our working capital requirements for the next twelve month period, but will not be sufficient to move forward beyond the development
stage, at which point further funding will be necessary. However, we cannot assure you that such financing will be available to
us on favorable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital
needs are identified and we are not successful in obtaining the financing, we may be forced to curtail our existing or planned
future operations.
Cash and Cash Equivalents
As of December 31, 2012 and 2011,
consolidated cash and equivalent balances totaled $565 and $42,477, respectively. As of December 31, 2012 the Company’s
cash balance is located in jurisdictions outside of the U.S. The Company’s ability to efficiently access cash balances
in foreign jurisdictions is subject to local regulatory and statutory requirements.
CRITICAL ACCOUNTING
POLICIES
The preparation of financial statements in
conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.
A summary of the critical accounting policies and the judgments that we make in the application of those policies is presented
in Note 2 to our financial statements. Our financial statements are based on the selection of accounting policies and the application
of accounting estimates, some of which require management to make significant assumptions. Actual results could differ materially
from the estimated amounts. The following accounting policy is critical to understanding and evaluating our reported financial
results:
Use of estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures 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.
Property and equipment
Property and equipment is stated at historical
cost less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis
over the estimated useful lives of the assets, varying from 3 to 5 years or, when applicable, the life of the lease, whichever
is shorter.
Long-lived assets
We comply with the accounting and reporting
requirements of Statement of Financial Accounting Standards (“SFAS”) No. 144,
Accounting for the Impairment or Disposal
of Long-Lived Assets
. We will periodically evaluate the carrying value of long-lived assets when events and circumstances warrant
such a review. Long-lived assets will be written down if the evaluation determines that the fair value is less than the book amount.
Income taxes
We comply with SFAS No. 109,
Accounting
for Income Taxes
, which requires an asset and liability approach to financial reporting for income taxes. Deferred
income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities
that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
income tax assets to the amount expected to be realized.
Revenue recognition
In accordance with the provisions of Staff
Accounting Bulletin (“SAB”) No. 101,
Revenue Recognition,
as amended by SAB 104, revenues are generally recognized
when products are shipped or as services are performed. However, due to the nature of our business, there are additional
steps in the revenue recognition process, as described below:
|
|
Sponsorships: We follow the guidance of Emerging Issues Task Force (“EITF”) Issue 00-21
Revenue Arrangements with Multiple Deliverables,
and assign the total of sponsorship revenues to the various elements contained within a sponsorship package based on their relative fair values.
|
Fair Value of Financial Instruments
We follow paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of our financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of our financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level 1 Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 pricing inputs
that are generally observable inputs and not corroborated by market data.
The carrying amounts of our financial assets
and liabilities, such as accrued expenses, approximate our fair values because of the short maturity of this instrument.
We do not have any assets or liabilities measured
at fair value on a recurring or a non-recurring basis, consequently, we did not have any fair value adjustments for assets and
liabilities measured at fair value at January 31, 2011, nor gains or losses are reported in the statement of operations that are
attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date
for the period.
Recent accounting pronouncements
In September 2011, the FASB issued Accounting
Standards Update 2011-08 Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment. The objective of this
update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the update permit
an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The
amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2011. The adoption of this standard will not have a material impact on its financial position, results of operations
or cash flows.
In June 2011, the FASB issued Accounting
Standards Update 2011-05 - Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic
220, Comprehensive Income, an entity has the option to present the total of comprehensive income, the components of net income,
and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate
but consecutive statements. In both choices, an entity is required to present each component of net income along with total net
income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for
comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total
net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive
income in that statement.
In the two-statement approach, an
entity is required to present components of net income and total net income in the statement of net income. The statement of
other comprehensive income should immediately follow the statement of net income and include the components of other
comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. Regardless of
whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive
statements, the entity is required to present on the face of the financial statements reclassification adjustments for items
that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income
and the components of other comprehensive income are presented. The amendments in this update do not change the items that
must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net
income. The amendments do not change the option for an entity to present components of other comprehensive income either net
of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit
related to the total of other comprehensive income items. In both cases, the tax effect for each component must be disclosed
in the notes to the financial statements or presented in the statement in which other comprehensive income is presented. The
amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2011. The adoption of this standard will not have a material impact on its financial position, results of
operations or cash flows.
In May 2011, the FASB issued Accounting
Standards Update 2011-04—Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The amendments in this update result in common fair value measurement and disclosure requirements
in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP
for measuring fair value and for disclosing information about fair value measurements. The FASB does not intend for the amendments
in this update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the application
of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair
value or for disclosing information about fair value measurements.
The amendments in this update are effective
for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. The adoption of this
standard did not have a material impact on its financial position, results of operations or cash flows.
OFF-BALANCE SHEET ARRANGEMENTS
We have four Common Stock purchase warrants
each with a term of five years after their issuance date and an exercise price of $5.00, $7.00, $9.00 and $10.00 per share, respectively.
Each Warrant entitles the Holder to purchase from the Company up to 1,000,000 Warrant Shares. As of December 31, 2012, we have
four Warrants outstanding that are exercisable for an aggregate of up to 4,500,000 shares of our Common Stock.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.
We do not hold any derivative instruments and
do not engage in any hedging activities.
Item 8. Financial Statements.
Our consolidated financial statements are contained
in pages F-1 through F-21 which appear at the end of this annual report.
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (“Exchange Act”), as of December 31, 2012. Disclosure controls and procedures are
those controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our Exchange
Act filings is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s
rules and forms, and (2)
accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of December 31 2012, disclosure controls were not effective because of a
material weakness in internal controls over reporting. The Company did not have a sufficient number of personnel with an appropriate
level of knowledge and experience of generally accepted accounting principles in the United States of America (U.S. GAAP) that
are commensurate with the Company’s financial reporting requirements. As a result of the material weakness, the Chief Executive
Officer and Chief Financial Officer concluded that as of December 31, 2012, the Company’s disclosure controls and procedures
were ineffective.
Management’s Annual Report on Internal Control over Financial
Reporting
Management, including our Chief Executive Officer
and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a – 15(f). Management conducted an assessment as of December 31, 2012 of the
effectiveness of our internal control over financial reporting based on the framework in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31 2012, internal controls over
financial reporting were not effective because the Company had material weaknesses. The Company did not have a sufficient number
of personnel to provide for adequate segregation of duties and independent review and approval of specific transactions. In addition,
the Company lacked a sufficient number of personnel with an appropriate level of knowledge and experience of generally accepted
accounting principles in the United States of America (U.S. GAAP).
CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
During the fiscal year ended December 31, 2012,
there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
Item 10. Directors, Executive Officers,
and Corporate Governance.
Directors and Executive Officers
The following table and biographical summaries
set forth information, including principal occupation and business experience, about our directors and executive officers as of
March 29
, 2013. There is no familial relationship between or among the nominees, directors or
executive officers of the Company.
|
NAME
|
|
AGE
|
|
POSITION
|
|
OFFICER AND/OR DIRECTOR
SINCE
|
|
|
|
|
|
|
|
|
|
Peter Boros
|
|
37
|
|
Chief Executive Officer and Director
|
|
May 23, 2012
|
|
Zoltán Bűdy
|
|
43
|
|
Chief Financial Officer
|
|
February 2012
|
|
|
|
|
|
|
|
|
On May 16, 2012, Peter Vasko resigned from
his position as Chief Executive officer and Director of the Company as disclosed in the Current Report on Form 8-K filed on May
23, 2012.
On February 20, 2012, Gabor Horvath Dori resigned
from his position as Chief Operating Officer of the Company as disclosed in the Current Report on Form 8-K filed on February 24,
2012.
The Company’s Directors serve in such
capacity until the first annual meeting of the Company’s shareholders and until their successors have been elected and qualified.
The Company’s officers serve at the discretion of the Company’s Board of Directors, until their death, or until they
resign or have been removed from office.
There are no agreements or understandings for
any director or officer to resign at the request of another person and none of the directors or officers is acting on behalf of
or will act at the direction of any other person. The activities of each director and officer are material to the operation of
the Company. No other person’s activities are material to the operation of the Company.
Peter Boros, Chief Executive Officer and Director
Mr. Peter Boros is currently the Company’s
Chief Executive Officer and director. In this role, Mr. Boros is responsible for the day to day operations of the Company. Since
July 1, 2007, Mr. Boros has served as the Commercial Director of Co-Op Inc., a retail chain in Hungary. From 2000 to 2007, Mr.
Boros was the manager of the Sales and Marketing Department of Co-Op Inc. Additionally, since 2006, Mr. Boros was the owner and
operator of Co-Op Gyor, Inc., a grocery chain which was sold in 2011. In 1999, Mr. Boros graduated from the Budapest University
of Economic Sciences. Due to the foregoing management and leadership experience, we believe Mr. Boros is qualified to serve as
the sole member of the Board.
Zoltan Budy, Chief Financial Officer
Mr. Budy is currently the Chief
Financial Officer of the Company. In this role, Mr. Budy has management oversight and responsibility over all financial
functions and capital resources of the Company, including corporate finance, project finance, corporate accounting, reporting
and risk management. Prior to joining the Company, since 2007, Mr. Budy has been the Partner and Managing Director of RIBZ
Consulting, a professional advisory firm. In this role, Mr. Budy is responsible for providing financial management and
accounting support to a diverse range of international businesses. From 2002 to 2007, Mr. Budy served as the Chief Internal
Auditor and Financial Manager of E.On Group, Bulgaria, an international private electricity distribution company. In this
role, Mr. Budy was responsible for establishing audit functions, reporting on the adequacy and effectiveness of internal
controls and the implementation of financial reporting standards. In 2005, Mr. Budy received his certificate from the
Association of Chartered Certified Accountants. In 1993 Mr. Budy received a B.A. in International Accounting from Webster
University in St. Louis, Missouri.
FAMILY RELATIONSHIPS
There are no family relationships among our
directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.
SUBSEQUENT EXECUTIVE RELATIONSHIPS
There are no family relationships among our
directors and executive officers. No director or executive officer has been a director or executive officer of any business which
has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past five years. No director or executive
officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past five years.
No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities
during the past five years. No director or officer has been found by a court to have violated a federal or state securities or
commodities law during the past five years.
None of our directors or executive officers
or their respective immediate family members or affiliates are indebted to us.
Code of Ethics
We do not currently have a code of ethics that
applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or Controller, or persons performing
similar functions. Because we have only limited business operations, we believe a code of ethics would have limited utility. We
intend to adopt such a code of ethics as our business operations expand and we have more directors, officers and employees.
COMMITTEES OF THE BOARD OF DIRECTORS
Concurrent with having sufficient members and
resources, the board of directors intends to establish an audit committee and a compensation committee. The audit committee will
review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system
of internal controls. The compensation committee will review and recommend compensation arrangements for the officers and employees.
No final determination has yet been made as to the memberships of these committees or when we will have sufficient members to establish
committees. We believe that we will need a minimum of three (3) independent directors to have effective committee systems.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
Section 16(a) of the Exchange Act requires
the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered
under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC.
Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish
the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely on our review of certain reports
filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended,
to the best of the Company’s knowledge, any reports required to be filed were timely filed as of March 29, 2013.
BOARD NOMINATION PROCEDURE
There have been no material changes to the
procedures by which security holders may recommend nominees to the Company’s board of directors.
Item 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
Other
|
|
Option
|
|
|
|
|
|
Name and Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
Awards
|
|
|
*Total
|
|
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
($)
|
|
|
Peter Boros
|
|
2012
2011
2010
|
|
$
$
$
|
0
0
0
|
|
$
$
$
|
|
|
$
$
$
|
|
|
$
$
$
|
|
|
|
$
$
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Vasko (1)
|
|
2012
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2011
|
|
$
|
8,770
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
8,770
|
|
|
|
|
2010
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gabor Horvath Dori(2)
|
|
2012
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2011
|
|
$
|
0
|
|
$
|
0
|
|
$
|
2,480
|
|
$
|
0
|
|
|
$
|
2,480
|
|
|
|
|
2010
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renee Blodgett(3)
|
|
2012
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2011
|
|
$
|
40,000
|
|
$
|
0
|
|
$
|
3,890
|
|
$
|
0
|
|
|
$
|
43,890
|
|
|
|
|
2010
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Passalaqua(4)
|
|
2012
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2011
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2010
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
(1)
|
On May 16, 2012, Peter Vasko, resigned as Chief Executive Officer, President and sole director
of the Company.
|
|
|
(2)
|
On February 12, 2012, Gabor Horvath Dori, resigned as Chief Operating Officer of the Company..
|
|
|
(3)
|
As of December 31, 2011 the company terminated the employment of Renee Blodgett as Chief marketing
Officer of the Company.
|
|
|
(4)
|
On November 11, 2011, Joseph Passalaqua, resigned as Chief Executive Officer, President and sole
director of the Company.
|
In 2012 the Company's Chief Executive Officer, Peter Vasko, the
Company's Chief Operating Officer, Gabor Horvath Dori have resigned. As we position ourselves for international expansion we also
embarked on locating, hiring and retaining key executives for long term commercialization goals. in 2013 we will hire these executives
and implement our expansion program. Our current Chief Executive, Peter Boros, is qualified to run operations until additional
executives can be hired. We do not see the departure of our former executive as effecting our ability to function until such time
when we will be ready to hire and retain key employees
.
EMPLOYMENT CONTRACTS
The Company has not entered into any employment agreements with
our officers or directors. The Company intends to enter into employment agreements with our executive officers as we expand our
business operations.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
As of
March
29
, 2013, our authorized capitalization was 210,000,000 shares of capital stock, consisting of 200,000,000 shares of
common stock, $0.001 par value per share and 10,000,000 shares of preferred stock, $0.001 par value per share. As of
March
29
, 2013, there were 11,919,370 shares of our common stock outstanding, all of which were fully paid, non-assessable
and entitled to vote. As of
March 29, 2013
, there were 1,000,000 shares of our Series A
Preferred stock all of which are fully paid, non-assessable and entitled to vote. Each share of our common stock entitles its
holder to one vote on each matter submitted to the stockholders.
Each share of Series A Preferred
stock entitles its holder to 42 votes on each matter submitted to the stockholders.
The following table sets forth, as of
March
29
, 2013, the number of shares of our common stock owned by (i) each person who is known by us to own of record or
beneficially five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive
officers and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons
listed below has sole voting and investment power with respect to the shares of our common stock beneficially owned.
Executive Officers, Directors, and More than 5% Beneficial Owners
The address of each beneficial owner who is
an officer or director is c/o the Company at 1078 Budapest, Marek Jozsef, Utca 35, Hungary.
|
Title of Class
|
|
Name of Beneficial Owner (1)
|
|
Number of Shares(2)
|
|
|
Percent of Class
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Peter Boros
9012 Gyor
Ybl Miklos ut 23
Hungrary
|
|
|
677,222
|
|
|
|
6.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group holding Common Stock (1 persons)
|
|
|
760,000
|
|
|
|
7.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Peter Vasko
1078 Budapest
Marek Jozsef utca 35
Hungrary
|
|
|
760,000
|
|
|
|
7.13
|
%
|
|
Series A Preferred Stock
|
|
Peter Vasko
1078 Budapest
Marek Jozsef utca 35
Hungrary
|
|
(3)
|
1,000,000
|
|
|
|
100
|
%
|
|
Common
|
|
Power of the Dream Ventures, Inc.
1095 Budapest
Soroksari ut 94-96
Hungary
|
|
|
2,884,986
|
|
|
|
27.07
|
%
|
|
Common
|
|
Park Slope, LLC
P.O. Box 2843
Liverpool, New York, 13089
|
|
(4)
|
727,273
|
|
|
|
6.82
|
%
|
|
Common
|
|
Gyorgy Markos
1118 Budapest
Elopatak utca 55
Hungary
|
|
|
1,560,000
|
|
|
|
14.64
|
%
|
|
Common
|
|
Daniel Kun, Jr.
1037 Budapest
Perenyi ut 16/B
Hungary
|
|
|
921,500
|
|
|
|
8.65
|
%
|
|
Common
|
|
Viktor Rozsnyay
2049 Diosd
Ligetszepe ut 54
Hungary
|
|
|
893,715
|
|
|
|
8.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers, directors and 5% holders of Common Stock as a group
(7 persons)
All officers and directors and 5% holders as a group holding Series
A Preferred Stock (1 person)
|
|
|
7,747,474
1,000,000
|
|
|
|
79.58
100
|
%
%
|
|
|
|
|
|
|
|
|
|
|
1.
|
Beneficial ownership generally includes voting or investment power
with respect to securities. Unless otherwise indicated, each of the beneficial owners listed above has direct ownership of and
sole voting power and investment power with respect to the securities. Beneficial ownership is determined in accordance with Rule
13d–3(d)(1) under the Exchange Act and includes securities for which the beneficial owner has the right to acquire beneficial
ownership within 60 days.
|
|
|
2.
|
As of march 29, 2013, we have
11,919,370
shares of Common Stock issued and outstanding. As of the same date, we have 1,000,000 shares of Series
A Preferred Stock issued and outstanding. .
|
|
|
3.
|
Commencing on January 1, 2013, Peter Vasko may convert up to 200,000
shares of Series A Preferred Stock per calendar year into 3,000,000 shares of Common Stock of the Company.
|
|
|
4.
|
Park Slope, LLC is controlled by Joseph C. Passalaqua and as such
there is beneficial ownership of the shares held by each entity.
|
SHARE ISSUANCES
Share Exchange
Pursuant to the Securities Exchange Agreement, on the November 3, 2011, we issued an aggregate of 1,000,000 shares of Series A
Preferred Stock and 886,000 shares of Series B Preferred Stock of the Company to the shareholders of In 4, Kft. in exchange for
100% of the outstanding shares of In 4 Kft. The foregoing description of the Securities Exchange Agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of Exhibit 2.1 to the Current Report on Form 8-K filed
on November 14, 2011.
These securities were not registered under
the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(2) of the
Securities Act. The securities were exempt from registration under Section 4(2) of the Securities Act because the issuance of such
securities by the Company did not involve a “public offering,” as defined in Section 4(2) of the Securities Act, due
to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of
securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of
investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) of the Securities Act
since they agreed to, and received, share certificates bearing a legend stating that such securities are restricted pursuant to
Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the
market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has
met the requirements to qualify for exemption under Section 4(2) of the Securities Act.
Senior Convertible Note
On November 3, 2011, we authorized and issued
a senior convertible note (the “Note”) to the order of Park Slope, LLC. The Note must be paid in full by December 31,
2012 (the “Maturity Date”) and accrues interest on the outstanding amount of the loan at a rate of 12% per annum in
one lump sum payable on the Maturity Date. The foregoing description of the Note does not purport to be complete and is qualified
in its entirety by reference to the full text of Exhibit 4.3 to the Current Report on Form 8-K filed on November 14, 2011.
These securities were not registered
under the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section
4(2) of the Securities Act. The securities were exempt from registration under Section 4(2) of the Securities Act because the
issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(2) of the
Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the
offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of
securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by
Section 4(2) of the Securities Act since they agreed to, and received, share certificates bearing a legend stating that such
securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would
not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an
analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(2) of the
Securities Act.
On December 30, 2012 we extended this senior
convertible noter to December 31, 2013.
Warrants
We have four Common Stock purchase warrants
issued and outstanding each with a term of five years after their issuance date and an exercise price of five dollars ($5.00),
seven dollars ($7.00) nine dollars ($9.00) and ten dollars ($10) per share, respectively. Each warrant entitles the holder to purchase
from the Company up to 1,000,000 shares of Common Stock. As of March 29, 2013, we have four warrants outstanding that are exercisable
for an aggregate of up to 4,500,000 shares of our Common Stock. The foregoing description of the warrants does not purport to be
complete and is qualified in its entirety by reference to the full text of Exhibit 4.4 to the Current Report on Form 8-K filed
on November 14, 2011.
These securities were not registered under
the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(2) of the
Securities Act. The securities were exempt from registration under Section 4(2) of the Securities Act because the issuance of such
securities by the Company did not involve a “public offering,” as defined in Section 4(2) of the Securities Act, due
to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of
securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of
investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) of the Securities Act
since they agreed to, and received, share certificates bearing a legend stating that such securities are restricted pursuant to
Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the
market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has
met the requirements to qualify for exemption under Section 4(2) of the Securities Act.
DESCRIPTION OF SECURITIES
As of
March 29
,
2013, our authorized capitalization was 210,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock,
$0.001 par value per share and 10,000,000 shares of preferred stock, $0.001 par value per share. As of
March
29
, 2013, there were 11,919,370 shares of our common stock outstanding, all of which were fully paid, non-assessable and
entitled to vote. As of
March 29 2013
, there were 1,000,000 shares of our Series A Preferred
stock all of which are fully paid, non-assessable and entitled to vote.
COMMON STOCK
As of
March 29
,
2013, we had 11,919,370 shares of common stock outstanding. The shares of our common stock presently outstanding, and any shares
of our common stock issued upon exercise of warrants, will be fully paid and non-assessable. Each holder of common stock is entitled
to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to
be taken by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled
to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative
voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining
shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared
by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.
Voting Rights
Each holder of Common Stock is entitled to
one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.
Dividends
Subject to preferences that may be applicable
to any then-outstanding shares of Preferred Stock, if any, and any other restrictions, holders of Common Stock are entitled to
receive ratably those dividends, if any, as may be declared from time to time by the Company’s board of directors out of
legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does
not presently contemplate that there will be any future payment of any dividends on Common Stock.
PREFERRED STOCK
As of March 29, 2013, there are 1,000,000 shares
of our Series A Preferred Stock issued and outstanding held by Peter Vasko, our former Chief Executive Officer.
Series A Convertible Preferred Stock
As of March 29, 2013, there were 1,000,000
shares of our Series A Preferred Stock issued and outstanding held by our former Chief Executive Officer Peter Vasko. Commencing
on January 1, 2013, and continuing until December 31, 2017, Mr. Vasko may convert 200,000 shares of Series A Preferred Stock per
calendar year into shares of Common Stock of the Company at the conversion ratio of 3,000,000 shares of Common Stock for each 200,000
shares of Series A Preferred Stock. Mr. Vasko is entitled to vote together with the holders of the Common Stock and has 42 votes
for every share of Series A Preferred Stock held by Mr. Vasko at the time Mr. Vasko may make such vote.
Series B Convertible Preferred Stock
As of March 29, 2013, there are 0 shares of
our Series B Preferred Stock issued and outstanding. Each share of our Series B Preferred Stock automatically converted to ten
shares of Common Stock of the Company upon effectiveness of the 1:110 reverse split of our Common Stock.
WARRANTS
We have four Common Stock purchase warrants
issued and outstanding each with a term of five years after their issuance date and an exercise price of $5.00, $7.00, $9.00 and
$10.00 per share, respectively (the “Warrant” or “Warrants”). Each Warrant entitles the holder to purchase
from the Company up to 1,000,000 shares of Common Stock. As of March 29, 2013, we have three Warrants outstanding that are exercisable
for an aggregate of up to 4,500,000 shares of our Common Stock.
ANTI-TAKEOVER PROVISIONS
Our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws contain provisions that may make it more difficult for a third party to acquire or may discourage
acquisition bids for us. Our Board of Directors may, without action of our stockholders, issue authorized but unissued common stock
and preferred stock. The issuance of additional shares to certain persons allied with our management could have the effect of making
it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause
such removal. The existence of unissued preferred stock may enable the Board of Directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such stock with terms that could render more difficult
or discourage an attempt to obtain control of us, thereby protecting the continuity of our management. Our shares of preferred
stock could therefore be issued quickly with terms that could delay, defer, or prevent a change in control of us, or make removal
of management more difficult.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Company’s Amended and Restated Bylaws
provide for indemnification of directors and officers against certain liabilities. Officers and directors of the Company are indemnified
generally for any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, against expenses, including attorneys’ fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted
in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful.
The Company’s Amended and Restated Articles
of Incorporation further provides the following indemnifications:
(a) a director of the Corporation shall not
be personally liable to the Corporation or to its shareholders for damages for breach of fiduciary duty as a director of the Corporation
or to its shareholders for damages otherwise existing for (i) any breach of the director’s duty of loyalty to the Corporation
or to its shareholders; (ii) acts or omission not in good faith or which involve intentional misconduct or a knowing violation
of the law; (iii) acts revolving around any unlawful distribution or contribution; or (iv) any transaction from which the director
directly or indirectly derived any improper personal benefit. If Nevada Law is hereafter amended to eliminate or limit further
liability of a director, then, in addition to the elimination and limitation of liability provided by the foregoing, the liability
of each director shall be eliminated or limited to the fullest extent permitted under the provisions of Nevada Law as so amended.
Any repeal or modification of the indemnification provided in these Articles shall not adversely affect any right or protection
of a director of the Corporation under these Articles, as in effect immediately prior to such repeal or modification, with respect
to any liability that would have accrued, but for this limitation of liability, prior to such repeal or modification.
(b) the Corporation shall indemnify, to the
fullest extent permitted by applicable law in effect from time to time, any person, and the estate and personal representative
of any such person, against all liability and expense (including, but not limited to attorney’s fees) incurred by reason
of the fact that he is or was a director or officer of the Corporation, he is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary, or agent of, or in any similar managerial or fiduciary position
of, another domestic or foreign corporation or other individual or entity of an employee benefit plan. The Corporation shall also
indemnify any person who is serving or has served the Corporation as a director, officer, employee, fiduciary, or agent and that
person’s estate and personal representative to the extent and in the manner provided in any bylaw, resolution of the shareholders
or directors, contract, or otherwise, so long as such provision is legally permissible.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by our directors, officers or controlling persons
in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection
with any securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether such indemnification by us is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issues.
Item 13. Certain Relationships
and Related Transactions.
On November 3, 2011, we entered into a separation
and release agreement with Mr. Joseph C. Passalaqua our former President, Chief Executive Officer, sole director and majority shareholder.
Pursuant to the separation and release agreement, Mr. Passalaqua and the Company agreed to the following: (i) payment of $10,000.00;
(ii) promissory note in the amount of $750,000 payable on December 31, 2012; and (iii) 50,000 newly issued shares of Series B Preferred
Stock to be converted into 500,000 shares of our Common Stock.
The description of the separation and release
agreement does not purport to be complete and is qualified by reference to the full text of Exhibit 10.1 to the Form 8-K filed
on November 14, 2011.
Item 14. Principal Accountant Fees and Services.
a. Audit Fees: Aggregate fees billed by
the Company’s auditor
for professional services rendered for the audit of our annual financial statements and review
of our financial statements included in Form 10-Q for the year ended December 31, 2012 were approximately$ 19,460.
Aggregate fees billed by the Company’s
auditor for professional services rendered for the audit of our annual financial statements and review of our financial statements
included in Form 10-Q for the years ended December 31, 2012 and 2011 were approximately $19,460 and $27,344 respectively.
b.Audit-Related Fees: No fees were billed
for assurance and related services reasonably related to the performance of the audit or review of our financial statements and
not reported under “Audit Fees” above in the years ended December 31, 2012 and 2011.
Item 15. Exhibits.
|
Exhibit No.
|
|
Description
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) certification of Peter Boros
|
|
|
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) certification of Zoltan Budy
|
|
|
|
|
|
32.1
|
|
Certification pursuant to 18 USC, section 1350 of Peter Boros
|
|
|
|
|
|
32.2
|
|
Certification pursuant to 18 USC, section 1350 of Zoltan Budy
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
IGLUE, INC.
|
|
|
|
|
|
|
|
Dated: April 15, 2013
|
By:
|
/
s/ Peter Boros
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated: April 15, 2013
|
By:
|
/s/ Zoltan Budy
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial officer and Principal Accounting Officer)
|
|
|
|
|
|
|
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Peter Boros
Peter Boros
|
|
Chief Executive Officer and Director
|
|
April 15, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Zoltan Budy
|
|
Chief Financial Officer
|
|
April 15, 2013
|
|
Zoltan Budy
|
|
|
|
|
|
|
|
|
|
|
iGlue, Inc. (formerly Hardwired Interactive,
Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012 AND
DECEMBER 31, 2011
IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
Index to Financial
Statements
|
|
Page
No.
|
|
Report
of Independent Registered Public Accounting Firm
|
F-3
|
|
Consolidated
Balance Sheet at December 31, 2012
|
F-4
|
|
Consolidated Statements of Operations
and Comprehensive Income for the years ended December 31, 2012 and 2011
|
F-5
|
|
Consolidated Statements
of Deficiency in Stockholders’ Equity for the two years ended December 31, 2012
|
F-6
to F-8
|
|
Consolidated Statements
of Cash Flows for the years ended December 31, 2012 and 2011
|
F-9
|
|
Notes to
Consolidated Financial Statements
|
F-10
to F-24
|
BDO Hungary Audit Ltd.
1103 Budapest, Kőér utca 2/A
Registration number: 002387
|
|
|
|
|
Zsuzsanna Nagy
|
|
Ferenc Baumgartner
|
|
Managing Director
|
|
Certified Auditor
Chamber registration No.: 002955
|
Report of Independent Public Accounting Firm
Board of Directors and Stockholders
iGlue, Inc. (Hardwired Interactive,
Inc.)
(a development stage company)
Budapest, Hungary
We have audited the accompanying balance
sheets of iGlue, Inc. (formerly Hardwired Interactive, Inc.), a development stage company, as of December 31, 2012 and 2011 and
the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period then ended
and the period from inception (September 19, 2007) to December 31, 2012. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of iGlue, Inc. (Hardwired Interactive, Inc.)
at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the two years in the period then
ended and the period from inception (September 19, 2007) through December 31, 2012, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
April 15, 2013
iGlue, Inc. (formerly Hardwired
Interactive, Inc.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Amounts in USD
|
|
|
|
|
|
|
Notes
|
December
31,
2012
|
December
31,
2011
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash
|
|
$565
|
$42,477
|
|
Other receivables
|
3
|
33,778
|
26,070
|
|
Total Current Assets
|
|
34,343
|
68,547
|
|
|
|
|
|
|
Intangible assets, net
|
4
|
1,116
|
1,402
|
|
Fixed assets, net
|
5
|
2,685
|
5,064
|
|
Total Non-Current Assets
|
|
3,801
|
6,466
|
|
|
|
|
|
|
Total Assets
|
|
38,144
|
75,013
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts payable and accrued expenses
|
6
|
$72,704
|
$50,646
|
|
Note payable
|
7
|
750,000
|
750,000
|
|
Other liabilities
|
8
|
144,203
|
17,829
|
|
Total Current Liabilities
|
|
966,907
|
818,475
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
Common stock, $0.11 par value; 11,919,370 and 1,375,293 shares issued and outstanding
|
9
|
1,311,131
|
151,282
|
|
Preferred stock, $0.001 par value 1,000,000 Series A issued and outstanding
|
|
1,000
|
1,000
|
|
Preferred stock, $0.001 par value 886,000 Series B issued and outstanding
|
|
-
|
886
|
|
Unearned compensation
|
|
(2,064,000)
|
-
|
|
Additional Paid-In Capital
Deficit accumulated during development stage
Other Comprehensive Income
|
9
|
9,661,926
(9,953,281)
|
1,324,240
(2,288,359)
|
|
|
|
114,461
|
67,489
|
|
Total Stockholders’ Deficit
|
|
(928,763)
|
(743,462)
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
38,144
|
75,013
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Amounts in USD
|
|
|
Notes
|
|
For the period ended
December 31,
2012
|
|
For the year
ended
December 31,
2011
|
|
For the Period from September 19, 2007 (date of inception) to December 31, 2012
|
|
Net Sales
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
10
|
|
|
|
945,123
|
|
|
|
384,093
|
|
|
|
2,051,802
|
|
|
General administration
|
|
|
11
|
|
|
|
6,629,983
|
|
|
|
237,752
|
|
|
|
7,012,034
|
|
|
Operating expenses
|
|
|
|
|
|
|
7,575,106
|
|
|
|
621,845
|
|
|
|
9,063,836
|
|
|
Loss from operations
|
|
|
|
|
|
|
(7,575,106
|
)
|
|
|
(621,845
|
)
|
|
|
(9,063,836
|
)
|
|
Interest expenses and exchange gains
|
|
|
12
|
|
|
|
(89,816
|
)
|
|
|
(10,739
|
)
|
|
|
(129,445
|
)
|
Net loss
|
|
|
|
|
|
|
(7,664,922
|
)
|
|
|
(632,584
|
)
|
|
|
(9,193,281
|
)
|
|
Other comprehensive income (loss)
|
|
|
12
|
|
|
|
46,972
|
|
|
|
(7,395
|
)
|
|
|
114,461
|
|
Total comprehensive loss
|
|
|
|
|
|
|
(7,617,950
|
)
|
|
|
(639,979
|
)
|
|
|
(9,078,820
|
)
|
Basic loss per share
|
|
|
|
|
|
$
|
(0.66
|
)
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
Weighted average number of shares outstanding – Basic and diluted
|
|
|
|
|
|
|
11,599,152
|
|
|
|
1,375,293
|
|
|
|
|
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ DEFICIT
AND COMPREHENSIVE INCOME
Amounts in USD
|
|
|
Stocks
Shares
|
|
Stocks
Amount
|
|
Capital
receivable
|
|
Accumulated Deficit During Developmental Stage
|
|
Additional
Paid In
Capital
|
|
Other Comprehensive Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
1,051,877
|
|
|
$
|
17,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,306
|
|
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(200
|
)
|
|
|
(200
|
)
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(47,733
|
)
|
|
|
|
|
|
|
|
|
|
|
(47,733
|
)
|
|
Balance at December 31, 2007
|
|
|
1,051,877
|
|
|
$
|
17,306
|
|
|
$
|
—
|
|
|
$
|
(47,733
|
)
|
|
$
|
—
|
|
|
$
|
(200
|
)
|
|
$
|
(30,627
|
)
|
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,653
|
|
|
|
24,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(231,501
|
)
|
|
|
|
|
|
|
|
|
|
|
(231,501
|
)
|
|
Balance at December 31, 2008
|
|
|
1,051,877
|
|
|
$
|
17,306
|
|
|
$
|
—
|
|
|
$
|
(279,234
|
)
|
|
$
|
—
|
|
|
$
|
24,453
|
|
|
$
|
(237,475
|
)
|
|
Issuance of common stock
|
|
|
160,644
|
|
|
$
|
2,643
|
|
|
|
|
|
|
|
|
|
|
|
251,057
|
|
|
|
|
|
|
$
|
253,700
|
|
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(15,742
|
)
|
|
|
(15,742
|
)
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(253,511
|
)
|
|
|
|
|
|
|
|
|
|
|
(253,511
|
)
|
|
Balance at December 31, 2009
|
|
|
1,212,521
|
|
|
$
|
19,949
|
|
|
$
|
—
|
|
|
$
|
(532,745
|
)
|
|
$
|
251,057
|
|
|
$
|
8,711
|
|
|
$
|
(253,028
|
)
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc.)
(A DEVELOPMENT STAGE
COMPANY)
STATEMENT OF STOCKHOLDERS’ DEFICIT
AND COMPREHENSIVE INCOME
Amounts in USD
|
|
|
Stocks
Shares
|
|
Stocks
Amount
|
|
Capital
receivable
|
|
Accumulated Deficit During Developmental Stage
|
|
Additional
Paid In
Capital
|
|
Other Comprehensive Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
1,212,521
|
|
|
$
|
19,949
|
|
|
$
|
—
|
|
|
$
|
(532,745
|
)
|
|
$
|
251,057
|
|
|
$
|
8,711
|
|
|
$
|
(253,028
|
)
|
|
Issuance of common stock
|
|
|
162,772
|
|
|
$
|
2,678
|
|
|
|
(666
|
)
|
|
|
|
|
|
|
594,483
|
|
|
|
|
|
|
$
|
596,495
|
|
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,173
|
|
|
|
66,173
|
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(363,030
|
)
|
|
|
|
|
|
|
|
|
|
|
(363,030
|
)
|
|
Balance at December 31, 2010
|
|
|
1,375,293
|
|
|
$
|
22,627
|
|
|
$
|
(666
|
)
|
|
$
|
(895,775
|
)
|
|
$
|
845,540
|
|
|
$
|
74,884
|
|
|
$
|
46,610
|
|
|
Recapitalization under reverse merger
|
|
|
149,906,930
|
|
|
$
|
128,655
|
|
|
|
|
|
|
|
|
|
|
$
|
(128,655
|
)
|
|
|
|
|
|
|
—
|
|
|
Preferred stock series A
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
Preferred stock series B
|
|
|
886,000
|
|
|
$
|
886
|
|
|
|
|
|
|
|
|
|
|
$
|
(886
|
)
|
|
|
|
|
|
|
|
|
|
Payment of advance on stock issue
|
|
|
|
|
|
|
|
|
|
$
|
666
|
|
|
|
|
|
|
$
|
609,241
|
|
|
|
|
|
|
|
609,907
|
|
|
Issue of convertible note for reverse merger (see Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(760,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(760,000
|
)
|
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(7,395
|
)
|
|
|
(7,395
|
)
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(632,584
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(632,584
|
)
|
|
Balance at December 31, 2011
|
|
|
153,168,223
|
|
|
$
|
153,168
|
|
|
|
—
|
|
|
$
|
(2,288,359
|
)
|
|
$
|
1,324,240
|
|
|
$
|
67,489
|
|
|
|
(743,462
|
)
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc.)
(A DEVELOPMENT STAGE
COMPANY)
STATEMENT OF STOCKHOLDERS’ DEFICIT
AND COMPREHENSIVE INCOME
Amounts in USD
|
|
|
Stocks
Shares
|
|
Stocks
Amount
|
|
Accumulated Deficit
During
Developmental Stage
|
|
Additional
Paid In
Capital
|
|
Unearned Compensation
|
|
Other Comprehensive Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
153,168,223
|
|
|
$
|
153,168
|
|
|
$
|
(2,288,359
|
)
|
|
$
|
1,324,240
|
|
|
$
|
—
|
|
|
$
|
67,489
|
|
|
|
(743,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement of shares at $1 per share
|
|
|
116,275
|
|
|
|
12,790
|
|
|
|
|
|
|
|
103,485
|
|
|
|
|
|
|
|
|
|
|
|
116,275
|
|
Share based payment at $8 per share
|
|
|
122,000
|
|
|
|
13,420
|
|
|
|
|
|
|
|
962,580
|
|
|
|
(976,000
|
)
|
|
|
|
|
|
|
—
|
|
Share based payment at $9.25 per share
|
|
|
811,000
|
|
|
|
89,210
|
|
|
|
|
|
|
|
7,412,540
|
|
|
|
(7,501,750
|
)
|
|
|
|
|
|
|
—
|
|
|
Private placement of shares at $2 per share
|
|
|
11,312
|
|
|
|
1,245
|
|
|
|
|
|
|
|
21,379
|
|
|
|
|
|
|
|
|
|
|
|
22,624
|
|
Share based payment at $4.4 per share
|
|
|
200,000
|
|
|
|
22,000
|
|
|
|
|
|
|
|
858,000
|
|
|
|
(880,000
|
)
|
|
|
|
|
|
|
—
|
|
Issue of shares for advance payments
|
|
|
|
|
|
|
47,518
|
|
|
|
|
|
|
|
(47,518
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Adjustment to par value (Stock split)
|
|
|
(142,509,440
|
)
|
|
|
972,780
|
|
|
|
|
|
|
|
(972,780
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Amortization of share based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,293,750
|
|
|
|
|
|
|
|
7,293,750
|
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
(7,664,922
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,664,922
|
)
|
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,972
|
|
|
|
46,972
|
|
|
Balance at December 31, 2012
|
|
|
11,919,370
|
|
|
|
1,312,131
|
|
|
|
(9,953,281
|
)
|
|
|
9,661,926
|
|
|
|
(2,064,000
|
)
|
|
|
114,461
|
|
|
|
(928,763
|
)
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Amounts in USD
|
|
|
For the period
ended
December 31,
2012
|
|
For the period ended
December 31,
2011
|
|
Cumulative from September 19, 2007 (date of inception) to December 31,
2012
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,664,922
|
)
|
|
$
|
(632,584
|
)
|
|
$
|
(9,193,281
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
|
90,247
|
|
|
|
14,301
|
|
|
|
104,548
|
|
|
Stock based payments
|
|
|
7,293,750
|
|
|
|
—
|
|
|
|
7,293,750
|
|
|
Recapitalization under reverse merger
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,000
|
)
|
|
Depreciation and amortization
|
|
|
3,794
|
|
|
|
3,717
|
|
|
|
49,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease in other current assets
|
|
|
(7,708
|
)
|
|
|
(11,255
|
)
|
|
|
(33,778
|
)
|
(Decrease) Increase in accounts payable
other and accrued liabilities
|
|
|
58,185
|
|
|
|
24,903
|
|
|
|
112,359
|
|
|
Net cash used in operating activities
|
|
|
(226,654
|
)
|
|
|
(600,918
|
)
|
|
|
(1,676,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of non-current assets
|
|
|
(1,129
|
)
|
|
|
(4, 164)
|
|
|
|
(53,657
|
)
|
|
Net cash used in investing activities
|
|
|
(1,129
|
)
|
|
|
(4,164
|
)
|
|
|
(53,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stockholders
|
|
|
138,899
|
|
|
|
609,907
|
|
|
|
1,616,307
|
|
|
Net cash from financing activities
|
|
|
138,899
|
|
|
|
609,907
|
|
|
|
1,616,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
46,972
|
|
|
|
(7,395
|
)
|
|
|
114,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(41,912
|
)
|
|
|
(2,570
|
)
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
42,477
|
|
|
|
45,047
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
565
|
|
|
$
|
42,477
|
|
|
$
|
565
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 1 - GENERAL INFORMATION
In4 Ltd. was incorporated in Budapest,
Hungary on September 19, 2007, with the objective to develop Web 3.0 internet technologies based on natural language processing
and semantic analysis The company is located at Soroksari út. 94-96, Budapest, 1095 Hungary. The Company is owned by 3 private
individuals and by Power of the Dreams Ventures, Inc.
Going Concern and Management’s Plan
The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate
the continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has incurred losses from operations since inception. Management anticipates incurring additional
losses in 2012. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from
the licensing or sale of its technologies and products, or to enter into any or a sufficient number of joint ventures. The Company
has no revenue to date.
Since inception through December 31, 2012,
the Company had an accumulated deficit of $9,953,281 and net cash used in operations of $1,676,546. However, management of the
Company believes that the future funding from the private placement of the Company’s common shares will allow them to continue
operations and execute its business plan.
Reverse merger
On November 3, 2011, the Company entered
into a securities exchange agreement with Park Slope, LLC (the “Hardwired Majority Shareholder”), In4, Ltd., and all
of the shareholders of In4 Ltd. On November 11, 2011, pursuant to the terms of the Exchange Agreement, the In4 Ltd shareholders
transferred and contributed all of their shares to the Company, resulting in an acquisition of all of the outstanding In4 Ltd shares.
In return, the Company issued to the In4 Ltd. shareholders, their designees or assigns, an aggregate of 1,000,000 shares of Series
A convertible preferred stock, par value $0.001 per share of the Company (the “Series A Preferred Stock”), and 886,000
shares of Series B convertible preferred stock, par value $0.001 per share of the Company (the “Series B Preferred Stock”,
and together with the Series A Preferred Stock the “Hardwired Exchange Shares”). The foregoing issuances of the Hardwired
Exchange Shares to the In4 Ltd shareholders, their designees or assigns, constituted 100% of the issued and outstanding preferred
stock of In4 Ltd. as of and immediately after the consummation of the transactions contemplated by the Exchange Agreement.
Following the acquisition the former
stockholders of In4 Ltd. owned a majority of the issued and outstanding common stock of iGlue, Inc. and the management of In4 Ltd.
controlled the Board of Directors of iGlue, Inc. and its wholly-owned Hungarian subsidiary In4 Ltd.. Therefore the acquisition
has been accounted for as a reverse merger (the “Reverse Merger”) with In4 Ltd. as the accounting acquirer of iGlue.
The Company has changed its prior name of Hardwired Inc. to iGlue, Inc. The accompanying consolidated financial statements of the
Company reflect the historical results of In4 Ltd., and the consolidated results of operations of iGlue, Inc. subsequent to the
acquisition date. In connection with the Exchange Agreement, iGlue, Inc. adopted the fiscal year end of In4 Ltd. as December
31.
All reference to shares and per share
amounts in the accompanying consolidated financial statements have been restated to reflect the aforementioned shares exchange.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Reverse stock split
On January
15, 2012 the Company performed a reverse stock split of 1:110, merging every 110 share to 1 resulting in a reduction of the issued
and outstanding number shares from 151,282,223 to 1,375,293, with corresponding increase of par values from $0.001 to $0.11.
All
reference to shares and per share amounts in the accompanying consolidated financial statements have been retroactively restated
to reflect the aforementioned reverse stock split.
Business
Through In4, the Company aims to build the world’s largest
semantic micro-search and content organizer (curation) company based around our Award Winning iGlue software. The Company considers
iGlue to be one of the first and major Web 3.0 initiatives currently under development
The Company’s focus is to utilize iGlue’s natural language
processing and semantic micro-search capabilities to bring value added content to words on web pages. Rather than doing a search
to find more information on a given topic (word) the software brings value added multimedia information as presented in a pop-up
window. Images, videos, text, geographic locations, tweets, links, etc. The Company’s strategy is to deploy iGlue across
the internet as a standalone, free consumer facing product, and at the same time provide value added corporate versions based around
a subscription based business model and advertising revenue sharing.
The Company intends to provide iGlue in the following versions:
|
|
·
|
free, consumer facing plug-in version;
|
|
|
·
|
value added semantic advertising platform;
|
|
|
·
|
corporate version with semantic advertising and recommendation engine built in;
|
The Company expects to be world leaders in semantic technology,
by having iGlue to be a unique ‘system’ of several interwoven computational principles the end result of which is the
world’s best Web 3.0 technology.
Basis of presentation
The accompanying consolidated financial
statements have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America for financial information have been condensed pursuant to such rules and regulations. In the opinion of
management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered
necessary to make the financial statements not misleading as of and for the periods ended December 31, 2012, December 31, 2011
and for the period from September 19, 2007 (date of inception) to December 31, 2012.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The significant accounting policies
adopted in preparation of the financial statements are set out below.
Use of Estimates:
The preparation of the financial statements
in conformity with (US) GAAP requires management to make estimates, judgments and assumptions that affect amounts reported herein.
Management believes that such estimates, judgments and assumptions are reasonable and appropriate. However, due to the inherent
uncertainty involved, actual results may differ from those based upon management’s judgments, estimates and assumptions.
Critical accounting policies requiring the use of estimates are depreciation and amortization and share-based payments
iGlue, Inc. (formerly Hardwired
Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Revenue Recognition:
Sales are recognized when there is evidence
of a sales agreement, the delivery of the goods or services has occurred, the sales price is fixed or determinable and collectability
is reasonably assured, generally upon shipment of product to customers and transfer of title under standard commercial terms. Sales
are measured based on the net amount billed to a customer. Generally there are no formal customer acceptance requirements or further
obligations. Customers do not have a general right of return on products shipped therefore no provisions are made for return.
Accounts Receivable and Allowance
for Doubtful Accounts:
Accounts receivable are stated at historical
value, which approximates fair value. The Company does not require collateral for accounts receivable. Accounts receivable are
reduced by an allowance for amounts that may be uncollectible in the future. This estimated allowance is determined by considering
factors such as length of time accounts are past due, historical experience of write offs, and customers’ financial condition.
Inventories:
Inventories are stated at the lower
of cost, determined based on weighted average cost or market. Inventories are reduced by an allowance for excess and obsolete inventories
based on management’s review of on-hand inventories compared to historical and estimated future sales and usage.
Fixed assets:
Fixed assets are stated at cost or fair
value for impaired assets. Depreciation and amortization is computed principally by the straight-line method. Asset amortization
charges are recorded for long lived assets. In the related periods, no asset impairment charges were accounted for.
Depreciation is recorded commencing
the date the assets are placed in service and is calculated using the straight line basis over their estimated useful lives.
The estimated useful lives of the various
classes of long-lived assets are approximately 3-7 years.
Pensions and Other Post-retirement
Employee benefits:
In Hungary, pensions are guaranteed
and paid by the state or by pension funds, therefore no pensions and other post-retirement employee benefit costs or liabilities
are to be calculated and accounted by the Company.
Product warranty:
The Company accrues for warranty obligations
for products sold based on management estimates, with support from sales, quality and legal functions, of the amount that eventually
will be required to settle such obligations. At December 31, 2012, the Company had no warranty obligations in connection with the
products sold.
Advertising costs:
Advertising and sales promotion expenses
are expensed as incurred.
iGlue, Inc. (formerly Hardwired
Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Research and development:
In accordance with ASC 730-10-25 “Accounting
for Research and Development Costs,” all research and development (“R&D”) costs are expensed when they are
incurred, unless they are reimbursed under specific contracts. Assets used in R&D activity, such as machinery, equipment, facilities
and patents that have alternative future use either in R&D activities or otherwise are capitalized.
Income taxes:
The Company accounts for income taxes
in accordance with ASC 740-10-25, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
Valuation allowances are provided against
deferred tax assets to the extent that it is more likely than not that the deferred tax assets will not be realized.
Comprehensive Income (Loss):
ASC 220-10-25, “Accounting for
Comprehensive Income,” establishes standards for reporting and disclosure of comprehensive income and its components (including
revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The items of other comprehensive income
that are typically required to be disclosed are foreign currency items, minimum pension liability adjustments, and unrealized gains
and losses on certain investments in debt and equity securities. Accumulated other comprehensive income, at December 31, 2012 is
$114,461.
Translation of Foreign Currencies:
The U.S. dollar is the functional currency
for all of the Company’s businesses, except its operations in Hungary. Foreign currency denominated assets and liabilities
for this unit is translated into U.S. dollars based on exchange rates prevailing at the end of each period presented, and revenues
and expenses are translated at average exchange rates during the period presented. The effects of foreign exchange gains and losses
arising from these translations of assets and liabilities are included as a component of equity, under other comprehensive income.
Loss per Share:
Under ASC 260-10-45, “Earnings
Per Share”, basic loss per common share is computed by dividing the loss applicable to common stockholders by the weighted
average number of common shares assumed to be outstanding during the period of computation. Diluted loss per common share is computed
using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. There
were no common stock equivalents or potentially dilutive securities outstanding during the periods ended December 31, 2012 and
December 31, 2011, respectively. Accordingly, the weighted average number of common shares outstanding for the periods ended December
31, 2012 and December 31, 2011, respectively, is the same for purposes of computing both basic and diluted net income per share
for such years.
iGlue, Inc. (formerly Hardwired
Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
Business Segment:
ASC 280-10-45, “Disclosures About
Segments of an Enterprise and Related Information,” establishes standards for the way public enterprises report information
about operating segments in annual financial statements and requires reporting of selected information about operating segments
in interim financial statements regarding products and services, geographical areas and major customers. The Company has determined
that under ASC 280-10-45, there are no operating segments since substantially all business operations, assets and liabilities are
in Hungarian geographic segment.
Recent Accounting Pronouncements:
In September 2011, the FASB issued Accounting
Standards Update 2011-08 Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment. The objective of this
update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the update permit
an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The
amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2011. The adoption of this standard did not have a material impact on its financial position, results of operations
or cash flows.
In June 2011, the FASB issued Accounting
Standards Update 2011-05 - Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic
220, Comprehensive Income, an entity has the option to present the total of comprehensive income, the components of net income,
and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate
but consecutive statements. In both choices, an entity is required to present each component of net income along with total net
income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for
comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total
net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive
income in that statement.
In the two-statement approach, an entity
is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive
income should immediately follow the statement of net income and include the components of other comprehensive income and a total
for other comprehensive income, along with a total for comprehensive income. Regardless of whether an entity chooses to present
comprehensive income in a single continuous statement or in two separate but consecutive statements, the entity is required to
present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive
income to net income in the statement(s) where the components of net income and the components of other comprehensive income are
presented. The amendments in this update do not change the items that must be reported in other comprehensive income or when an
item of other comprehensive income must be reclassified to net income. The amendments do not change the option for an entity to
present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount
shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items. In both cases,
the tax effect for each component must be disclosed in the notes to the financial statements or presented in the statement in which
other comprehensive income is presented. The amendments in this update are effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2011. The adoption of this standard did not have a material impact on its
financial position, results of operations or cash flows.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
In May 2011, the FASB issued Accounting
Standards Update 2011-04—Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The amendments in this update result in common fair value measurement and disclosure requirements
in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP
for measuring fair value and for disclosing information about fair value measurements. The FASB does not intend for the amendments
in this update to result in a change in the application of the
requirements in Topic 820. Some of the
amendments clarify the application of existing fair value measurement requirements. Other amendments change a particular principle
or requirement for measuring fair value or for disclosing information about fair value measurements.
The amendments in this update are effective
for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. The adoption of this
standard did not have a material impact on its financial position, results of operations or cash flows.
iGlue, Inc. (formerly
Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 3 - OTHER RECEIVABLES
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Taxes receivable
|
|
|
33,778
|
|
|
|
23,977
|
|
|
Deposit given
|
|
|
—
|
|
|
|
1,915
|
|
|
Other
|
|
|
—
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
33,778
|
|
|
|
26,070
|
|
NOTE 4 - INTANGIBLE ASSETS
Intangibles consisted of the followings
at December 31, 2012 and December 31, 2011:
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Rights and software
|
|
$
|
12,979
|
|
|
$
|
11,659
|
|
|
Total
|
|
|
12,979
|
|
|
|
11,659
|
|
Less:
Accumulated amortization
|
|
|
(11,863
|
)
|
|
|
(10,257
|
)
|
Net intangibles
|
|
|
1,116
|
|
|
|
1,402
|
|
NOTE 5 - FIXED ASSETS
Net property and equipment consisted
of the followings at December 31, 2012 and December 31, 2011:
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Computers and office equipments
|
|
$
|
38,761
|
|
|
$
|
33,771
|
|
|
Total
|
|
|
38,761
|
|
|
|
33,771
|
|
Less:
Accumulated depreciation
|
|
|
(36,076
|
)
|
|
|
(28,707
|
)
|
|
Net property and equipment
|
|
|
2,685
|
|
|
|
5,064
|
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 6 - ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
31,638
|
|
|
$
|
25,862
|
|
|
Accrued expenses
|
|
|
41,066
|
|
|
|
24,784
|
|
|
Total
|
|
|
72,704
|
|
|
|
50,646
|
|
NOTE 7 - NOTE PAYABLE
On November 3, 2011, the Company authorized
and issued a debenture to the order of Park Slope, LLC. The debenture must be paid in full by the maturity date and accrued
interest on the outstanding amount of the loan at a rate of twelve percent (12%) per annum in one lump sum payable on the maturity
date of December 31, 2012. The accrued loan interest amounts to $104,548 at December 31, 2012.
On December 28, 2012, the parties agreed to
extend the maturity of the debenture till December 31, 2013.
As such note payable was issued immediately
prior to the reverse merger, such issuance was recorded as additional compensation by the Company prior to the reverse merger.
Accordingly, such compensation is reflected in the accompanying consolidated balance sheet as the accumulated deficit of the Company,
and will not be reflected in the Statement of operations, as such compensation expense was structured as an expense prior to the
recapitalization.
At any time between the original issue
date and the maturity date (December 31, 2012) unless previously repaid by the Company, this Debenture shall be convertible into
shares of common stock of the Company, par value $0.001 per share, at the option of the holder, in whole or in part. The holder
shall effect conversions by delivering to the Company the form of Notice of Conversion specifying therein the amount of the loan
plus interest to be converted. The date which the Company receives the Notice of Conversion shall be the conversion date.
On any conversion date, the loan, or
any portion thereof, is convertible into shares of the Company’s common stock at a conversion price equal to the average
of the immediately preceding three closing bid prices prior to receipt by the Company of the Notice of Conversion to the Company.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 8 - OTHER LIABILITIES
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Liabilities to employees
|
|
$
|
38,848
|
|
|
$
|
2,869
|
|
|
Accrued loan interest
|
|
|
104,548
|
|
|
|
14,301
|
|
|
Other
|
|
|
807
|
|
|
|
659
|
|
|
Total
|
|
|
144,203
|
|
|
$
|
17,829
|
|
NOTE 9 - STOCKHOLDERS’ EQUITY
The proceeds of the following placements related
to 2012:
On June 13, 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 21,100 shares of its common stock at $1.00 per share
to one unaffiliated private investor for the aggregate amount of $21,100.
On June 11, 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 43,300 shares of its common stock at $1.00 per share
to one unaffiliated private investor for the aggregate amount of $43,300.
On April 4, 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 11,312 shares of its common stock at $2.00 per share
to one unaffiliated private investor for the aggregate amount of $22,624.
On April 1, 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 22,624 shares of its common stock at $.001 per share
to one unaffiliated private investor for the aggregate amount of $22,624.
During March 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 29,251 shares of its common stock at $1.00 per share
to two unaffiliated private investors for the aggregate amount of $29,251.
The proceeds of the following placements were
settled as advance in 2011:
On February 10, 2012, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 104,167 shares of its common stock at
$1.00 per share to one unaffiliated private investor for the aggregate amount of $104,167.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 9 - STOCKHOLDERS’ EQUITY
(Continued)
On February 10, 2012, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 91,138 shares of its common stock at $1.00
per share to one unaffiliated private investor for the aggregate amount of $91,138.
On February 10, 2012, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 43,000 shares of its common stock at $1.00
per share to one unaffiliated private investor for aggregate proceeds of $43,000.
On February 10, 2012 pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 185,185 shares of its common stock at
$1.00 per share to one unaffiliated private investor for the aggregate amount of $185,185.
During the year
ended December 31, 2012,
pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended,
there
was a total of $138,899 received from private placements. Private placements related to proceeds from six non-affiliated individuals
during the first six months of 2012. The total amount comprised of 116,275 pieces of shares sold at $1 per share and 11,312 pieces
of shares sold at $2 per share.
Stock based compensations
On June 1, 2012, the Company entered into a
restricted stock agreement with Mr. Peter Boros, Chief Executive Officer of the Company. As part of the agreement Mr. Boros was
granted 490,000 shares of restricted common stock, of which 250,000 shares vested immediately with the rest vesting in equal installments
of 40,000 shares per each closed quarter, commencing with the first quarter of June 30, 2012 and ending on December 31, 2013 or
until such date, if it is prior to December 31, 2013, provided Mr. Boros remains employed by the Company.
On June 1, 2012, the Company entered into a
restricted stock agreement with Mr. Viktor Rozsnyay, interim Director of In4, Ltd, our wholly owned subsidiary. As part of the
agreement Mr. Rozsnyay was granted 150,000 shares of restricted common stock, all of which vested immediately.
On June 1, 2012, the Company entered into a
restricted stock agreement with Mr. Daniel Kun, Jr., an advisor to the Company. As part of the agreement Mr. Kun was granted 100,000
shares of restricted common stock, all of which vested immediately
On June 1, 2012, the Company entered into a
restricted stock agreement with Ms. Stella Kun, Executive Assistant to Mr. Boros and Mr. Rozsnyay. As part of the agreement Ms.
Kun was granted 56,000 shares of restricted common stock, of which 8,000 shares vested immediately with the rest vesting in equal
installments of 8,000 shares per each closed quarter, commencing with the first quarter of June 30, 2012 and ending on December
31, 2013 or until such date, if it is prior to December 31, 2013, provided Ms. Kun remains employed by the Company.
On February 21, 2012, the Company entered into
a restricted stock agreement with Adam Meszaros, Lead Programmer of the Company. As part of the agreement Mr. Meszaros was granted
135,000 shares of restricted common stock, of which 15,000 shares vested immediately with the rest vesting in equal installments
of 15,000 shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or
until such date, if it is prior to December 31, 2013, provided Mr. Meszaros remains employed by the Company. On June 11, 2012 Mr.
Meszaros submitted his immediate resignation, therefore forfeiting his unvested shares. Upon his resignation the Company cancelled
105,000 of Mr. Meszaros’ unvested shares.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 9 - STOCKHOLDERS’ EQUITY
(Continued)
On February 21, 2012, the Company entered into
a restricted stock agreement with Peter Garas, Lead Server Side Programmer at the Company. As part of the agreement Mr. Garas was
granted 54,000 shares of restricted common stock, of which 6,000 shares vested immediately with the rest vesting in equal installments
of 6,000 shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or
until such date, if it is prior to December 31, 2013, provided Mr. Garas remains employed by the Company. On May 31, 2012
Mr. Garas submitted his immediate resignation,
therefore forfeiting his unvested shares. Upon his resignation the Company cancelled 42,000 of Mr. Garas’ unvested shares.
On February 21, 2012, the Company entered into
a restricted stock agreement with Janka Barkoczi, Office Manager of the Company. As part of the agreement Ms. Barkoczi was granted
27,000 shares of restricted common stock, of which 3,000 shares vested immediately with the rest vesting in equal installments
of 3,000 shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or
until such date if it is prior to December 31, 2013, provided Ms. Barkoczi remains employed by the Company. On September 11, 2012
Ms. Barkoczi submitted her immediate resignation, therefore forfeiting his unvested shares. Upon his resignation the Company cancelled
18,000 of Ms. Barkoczi’s unvested shares.
On February 21, 2012, the Company entered into
a restricted stock agreement with Eszter Ripka, Arts Director of the Company. As part of the agreement Ms. Ripka was granted 9,000
shares of restricted common stock, of which 1,000 shares vested immediately with the rest vesting in equal installments of 1,000
shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or until such
date, if it is prior to December 31, 2013, provided Ms. Ripka remains employed by the Company. On September 11, 2012 Ms. Ripka
submitted her immediate resignation, therefore forfeiting his unvested shares. Upon his resignation the Company cancelled 6,000
of Ms. Ripka’s unvested shares.
On February 21, 2012, the Company entered into
a restricted stock agreement with Csaba Toth, Arts Director of the Company. As part of the agreement Mr. Toth was granted 9,000
shares of restricted common stock, of which 1,000 shares vested immediately with the rest vesting in equal installments of 1,000
shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or until such
date, if it is prior to December 31, 2013, provided Mr. Toth remains employed by the Company. On June 20, 2012 Mr. Toth submitted
his immediate resignation, therefore forfeiting his unvested shares. Upon his resignation the Company cancelled 7,000 of Mr. Toth’
unvested shares.
On February 21, 2012, the Company entered into
a restricted stock agreement with Gergely Nyikos, Designer at the Company. As part of the agreement Mr. Nyikos was granted 18,000
shares of restricted common stock, of which 2,000 shares vested immediately with the rest vesting in equal installments of 2,000
shares per each closed quarter, commencing with the first quarter of March 31, 2012 and ending on December 31, 2013 or until such
date, if it is prior to December 31, 2013, provided Mr. Nyikos remains employed by the Company. On June 30, 2012 Mr. Nyikos submitted
her immediate resignation, therefore forfeiting his unvested shares. Upon his resignation the Company cancelled 12,000 of Mr. Nyikos’s
unvested shares.
On February 21, 2012, the Company entered into
a restricted stock agreement with Zoltan Annus, Project Manager of the Company. As part of the agreement Mr. Annus was granted
60,000 shares of restricted common stock, of which 6,000 shares vesting in equal installments per each closed quarter, commencing
with the first quarter of March 31, 2012 and ending on June 30, 2014 or until such date, if it is prior to June 30, 2014, provided
Mr. Annus remains employed by the Company.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 9 - STOCKHOLDERS’ EQUITY
(Continued)
On January 30, 2012, the Company entered into
a restricted stock agreement with Zoltán Budy, who is to serve as the Chief Financial Officer of the Company. As part of
the agreement Mr. Budy was granted 200,000 shares of the Company’s restricted common stock of which 100,000 shares vest upon
execution and 25,000 shares vest quarterly up to December 31, 2012, providing Mr. Budy remains employed by the Company.
As consideration for the above services, the
Company issued an aggregate of 1,133,000 shares of the Company’s common stock. These share issuances were recorded at $9.25,
$8.00 and $4.00 per share, respectively, in the total
amount of $9,357,750 in accordance with measurement
date principles prescribed under FAS 123 (R).
In June 2012, the Company entered into
an agreement with the company of one director for consulting services. According to the agreement the professional provides consulting
services to the Company in 2012. In connection with these services, the Company issued to them 15,000 shares of the Company’s
common stock. As consideration for such services, the Company issued an aggregate of 15,000 shares of the Company’s common
stock. These share issuances were recorded at the fair value of commitment date ($9.25 per share) in the total amount of $138,750
in accordance with measurement date principles prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair value
of the shares over the term of the agreement to stock-based compensation expense, which amounted to $138,750 for the period ended
December 31, 2012, respectively and $138,750 for the period from September 19, 2007 (date of inception) to December 31, 2012, in
accordance with ASC 505-50 and ASC 718-10.
Warrants
On June 11, 2012, the Company issued a Common
Stock Purchase Warrant to PDV Consulting, Kft (“PDV”) Under the terms of the warrant, PDV can acquire a total of 1,500,000
shares of our common stock at a per share price of $10.00. The warrant expires on June 12, 2017. The warrants were issued as part
of the cost of raising equity.
The company evaluated the warrants based on
essential features that would qualify the warrants as liability. Because the warrants did not include any of the qualifying features,
the warrants were classified as equity. As such the Company did not capitalize these warrants because the accounting entries would
not have an impact on the financial statements. Instead, the Company will expense these warrant valued at the date of issuance
unless these warrants are exercised within one year after the date of issuance.
As of December 31, 2012, the Company has four
common stock purchase warrants each with a term of five years after their issuance date and an exercise price of $5.00, $7.00,
$9.00 and $10.00 per share, respectively. The $5.00, $7.00 and $9.00 warrants entitle the holder to purchase from the Company up
to 1,000,000 warrant shares each, while the $10.00 warrant holder can acquire up to 1,500,000 shares. As of December 31, 2012 the
Company has four Warrants outstanding that are exercisable for an aggregate of up to 4,500,000 shares of its common stock.
As of Decmber 31, 2012, there were 1,000,000
shares of Series A Preferred Stock issued and outstanding held by the Company’s former President Peter Vasko. Commencing
on January 1, 2013, and continuing until December 31, 2017, Mr. Vasko may convert 200,000 shares of Series A Preferred Stock per
calendar year into shares of Common Stock at the conversion ratio of 3,000,000 shares of Common Stock for each 200,000 shares of
Series A Preferred Stock. Mr. Vasko is entitled to vote together with the holders of the Common Stock and has 42 votes for every
share of Series A Preferred Stock held by Mr. Vasko at the time Mr. Vasko may make such vote.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 9 - STOCKHOLDERS’ EQUITY
(Continued)
Stock split
On January 15, 2012 the Company performed a
reverse stock split detailed in Note 1 above.
Additional paid in capital related to private
placements made by non affiliated individuals in exchange for subsequent registration subject to the reverse stock split. The placements
were made in cash and accounted for as an advance in 2011. The shares were issued in 2012 after the stock split.
The description of the Series A Preferred Stock
does not purport to be complete and is qualified by reference to the full text of Exhibit 4.1 to the Form 8-K filed on November
14, 2011.
On May 17, 2009 In4 Ltd. received an investment
of $550,000 dollars from one accredited, unaffiliated Hungarian investor. As part of the investment agreement In4 Ltd. stipulated
an equity buyback option. This option states that the company has an option to repurchases from the investor 4% equity for HUF
132,000,000, which option expires on August 12, 2011. As all parties involved have elected to take the company public this agreement
is no longer in effect and in fact has expired on August 12, 2011.
As of December 31, 2012 the Company has four
common stock warrants outstanding that are exercisable for an aggregate of up to 4,500,000 shares of its common stock each with
a term of five years after their issuance date. Three warrants entitle the holder to purchase from the Company up to 1,000,000
warrant shares at an exercise price of $5.00, $7.00, $9.00 each and one warrant entitles the holder to purchase up to1.500.000
warrant shares at an exercise price of $10 per share.
As of February
[
—
]
,
2012, there were 1,000,000 shares of Series A Preferred Stock issued and outstanding held by the Chief Executive Officer and sole
director, Peter Vasko. Commencing on January 1, 2013, and continuing until December 31, 2017, Mr. Vasko may convert 200,000 shares
of Series A Preferred Stock per calendar year into shares of Common Stock at the conversion ratio of 3,000,000 shares of Common
Stock for each 200,000 shares of Series A Preferred Stock. Mr. Vasko is entitled to vote together with the holders of the Common
Stock and has 42 votes for every share of Series A Preferred Stock held by Mr. Vasko at the time Mr. Vasko may make such vote.
On January 15, 2012 the Company performed a
reverse stock split detailed in Note 1 above. The 886,000 preferred stock was also converted into 8,860,000 common stock.
Additional paid in capital related to private
placements made by non affiliated individuals in exchange for subsequent registration subject to the reverse stock split. The placements
were made in cash and accounted for as an advance.
The description of the Series A Preferred Stock
does not purport to be complete and is qualified by reference to the full text of Exhibit 4.1 to the Form 8-K filed on November
14, 2011.
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 10 - RESEARCH AND DEVELOPMENT
(“R&D”)
|
|
|
For the period ended
December 31,
2012
|
|
For the period ended
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Server hosting
|
|
$
|
—
|
|
|
$
|
51,010
|
|
|
Translations
|
|
|
167
|
|
|
|
10,496
|
|
|
Software development
|
|
|
103,718
|
|
|
|
206,005
|
|
|
Payroll expenses
|
|
|
805,818
|
|
|
|
108,737
|
|
|
Other
|
|
|
35,420
|
|
|
|
7,845
|
|
|
Total
|
|
$
|
945,123
|
|
|
$
|
384,093
|
|
NOTE 11 - GENERAL AND ADMINISTRATION
|
|
|
For the period ended
December 31, 2012
|
|
For the period ended
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material expenses
|
|
$
|
1,849
|
|
|
$
|
4,843
|
|
|
Stock based compensation
|
|
|
6,429,000
|
|
|
|
—
|
|
|
Cost of services
|
|
|
103,551
|
|
|
|
229,130
|
|
|
Depreciation and amortization
|
|
|
3,794
|
|
|
|
3,717
|
|
|
Other expenses
|
|
|
91,788
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,629,982
|
|
|
$
|
237,752
|
|
iGlue, Inc.
(formerly Hardwired Interactive, Inc).
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 2012
AND DECEMBER 31, 2011
NOTE 12 - FINANCIAL EXPENSES AND
GAINS, NET
|
|
|
For the period ended
December 31,
2012
|
|
For the period ended
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
90,256
|
|
|
|
14,301
|
|
|
Interest income
|
|
|
—
|
|
|
|
(55
|
)
|
|
Exchange gains, net
|
|
|
(440
|
)
|
|
|
(3,507
|
)
|
|
Total
|
|
$
|
89,816
|
|
|
$
|
10,739
|
|
NOTE 13 - SUBSEQUENT EVENTS
On March 7, 2013, Mr Zoltan Budy resigned from
his position as Principal Financial Officer for iGlue, effective March 31, 2013.
On March 25, 2013, the Company entered into
a restricted stock agreement with Mr. Zoltan Budy, Chief Financial Officer of the Company to compensate for the services rendered
in first quarter, 2013. As part of the agreement Mr. Budy was granted 200,000 shares of restricted common stock, all of which vested
immediately, for services rendered.
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