LATERAL MEDIA INC.

(Formerly Asianada, Inc.)

BALANCE SHEET

 

		March 31, 2009				June 30, 2008
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash		$	46,730			$	85,187
Accounts receivable			46,352				-
Prepaid expenses			90,000				-
Security deposit			5,005
Total Current Assets			188,087				85,187
PROPERTY AND EQUIPMENT-net			62,350				-
OTHER ASSETS
Technology software, net			470,294				-
Covenant not-to-compete, net			388,954				-
Domain names			208,000				-
Total Other Assets			1,067,248				-
Total Assets		$	1,317,685			$	85,187
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	340,303			$	105,579
Related party loan payable and accrued interest			673,004				518,767
Current portion of note payable			365,852				-
Total Current Liabilities			1,379,159				624,346
LONG-TERM LIABILITIES
Note payable			470,465				-
Total Liabilities			1,849,624				624,346
STOCKHOLDERS' DEFICIT
Preferred Stock - 5,000,000 shares authorized at par value $0.001 - none outstanding			-				-
Common stock - 75,000,000 shares authorized at $0.001 par value; 9,143,836 and 8,080,000 shares issued and outstanding at March 31, 2009 and June 30, 2008, respectively			9,144				8,080
Additional paid - in capital			1,151,510				44,651
Accumulated deficit			(1,692,593	)			(591,890	)
Total Stockholders' Deficit			(531,939	)			(539,159	)
Total Liabilities and Stockholders' Deficit		$	1,317,685			$	85,187

 

See notes to unaudited financial statements.

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LATERAL MEDIA, INC.

(Formerly Asianada, Inc.)

STATEMENT OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
REVENUES		$	284,273			$	-			$	284,273			$	-
COST OF REVENUES			(254,897	)			-				(254,897	)			-
GROSS PROFIT			29,376				-				29,376				-
GENERAL AND ADMINISTRATIVE EXPENSES			(554,986	)			(115,110	)			(1,130,079	)			(360,233	)
NET LOSS		$	(525,610	)		$	(115,110	)		$	(1,100,703	)		$	(360,233	)
NET LOSS PER COMMON SHARE - basic and dilutive		$	(0.06	)		$	(0.01	)		$	(0.13	)		$	(0.04	)
WEIGHTED AVERAGE SHARES OUTSTANDING - basic and diluted			9,143,836				8,080,000				8,546,461				8,080,000

 

See notes to unaudited financial statements.

 

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LATERAL MEDIA, INC.

(Formerly Asianada, Inc.)

STATEMENT OF CASH FLOWS

(UNAUDITED)

 

		For the Nine Months Ended
		March 31,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,100,703	)		$	(360,233	)
Adjustments to reconcile net loss to net cash used   in operating activities:
Stock based compensation			15,786				8,458
Depreciation and amortization expense			5,176				-
Amortization of discount on note payable			20,460				-
Amortization of intangibles			60,870				-
Changes in assets and liabilities:
Accounts receivable			(46,352	)			-
Prepaid expenses			(90,000	)			-
Accounts payable and accrued liabilities			303,837				135,783
Net cash used in operating activities			(830,926	)			(215,992	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(67,526	)			-
Purchases of domain names			(18,000	)			-
Increase in security deposit			(5,005	)			-
Net cash used in investing activities			(90,531	)			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loan payable			883,000				250,000
Net cash provided by financing activities			883,000				250,000
(Decrease) increase in cash			(38,457	)			34,008
Cash, beginning of period			85,187				-
Cash, end of period		$	46,730			$	34,008
Noncash Transactions:
Issuance of common stock in payment of related party loan payable
and accrued interest thereon		$	797,876				-
Acquisition of intangible assets (in exchange for note payable and
a warrant to purchase common stock)		$	1,102,382				-

 

See notes to unaudited financial statements.

 

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LATERAL MEDIA, INC.

(Formerly Asianada, Inc.)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

1. ORGANIZATION AND OPERATIONS

 

Lateral Media, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on February 17, 2006. On September 27, 2007, the Company reincorporated in Delaware and increased its authorized capital stock from 75,000,000 shares to 80,000,000 shares, consisting of 75,000,000 shares of common stock, par value $0.001, per share, and 5,000,000 shares of “blank check” preferred stock, par value $0.001, per share. No terms have been established for the preferred stock.

 

On December 4, 2008, the Company merged into its newly formed, wholly-owned subsidiary, Lateral Media, Inc., a Delaware corporation, effectively changing its name from Asianada, Inc. to Lateral Media, Inc.

 

The Company was planning to acquire and explore mineral properties through June 15, 2007 when this was abandoned, and the Company became an inactive development stage company.  

On December 2, 2008, the Company commenced nominal operations and, on January 12, 2009, launched The Recycler Publishing Network, websites designed to assist sellers of cars, boats, RVs and motorcycles to market their products using the internet.

Through March 31, 2009, the Company has purchased additional domains names, software and other assets, hired employees and has expanded its operations.

The Company also creates and markets content for websites, using content designed to optimize visitors through search engine optimization.

The Company had formerly been a development stage company.

 

2. GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses and negative operating cash flow since inception, and future losses are anticipated. The Company's plan of operation, even if successful, may not result in cash flow sufficient to finance and expand its business. These factors raise substantial doubt about the Company's ability to continue as a going concern. Realization of assets is dependent upon continued operations of the Company, which in turn is dependent upon management's plans to meet its financing requirements and the success of its future operations. These financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying interim unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations set forth in Regulation S-X of the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods have been included. These financial statements should be read in conjunction with the financial statements of Lateral Media, Inc. together with Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the year ended June 30, 2008. Interim results are not necessarily indicative of the results for a full year.   

 

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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 amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Intangible Assets

Intangible assets are recorded at fair value and, if they have a definitive life, will be amortized. The carrying value of the intangible assets will be evaluated by management for impairment at least annually or upon the occurrence of an event which may indicate that the carrying amount may be greater than its fair value. If impaired, the Company will write-down such impairment. In addition, the useful life of the intangible assets will be evaluated by management at least annually or upon the occurrence of an event which may indicate that the useful life may be definitive and the Company will commence amortization over such useful life.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method.

Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments which extend the lives of the assets are capitalized.  The cost and accumulated depreciation of assets retired or otherwise disposed of are relieved from the appropriate accounts and any profit or loss on the sale or disposition of such assets is credited or charged to income.

Revenue Recognition

Revenue is recognized when evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured, and delivery or performance of service has occurred.

Website marketing revenue is recognized upon placement on the Company’s website and content design revenue is recognized when services are provided.

 

New Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

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4. RELATED PARTY TRANSACTIONS

Loan Agreement

 

On July 11, 2007, as amended on November 15, 2007, April 18, 2008, August 1, 2008 , the Company executed a loan agreement (“Loan Agreement”), with Trinad Capital Master Fund (“TCMF”), a principal stockholder of the Company, whereby TCMF agreed to lend the Company up to a principal amount of $750,000. The loans under the Loan Agreement bear interest at 10%, per annum. The entire outstanding principal amount of the loans and accrued interest thereon are payable by the Company upon a sale of securities (other than a sale of shares of the Company’s common stock to officers, directors or employees of or consultants to the Company in connection with their provision of services to the Company) to a third party or parties with proceeds to the Company of not less than $1,000,000.  TCMF may, at its option, receive any payment of principal and interest due on the loans in the form of common stock or other securities that may be issued by the Company in the event the Company consummates a financing in connection with a change of control or similar transaction involving the Company, calculated based on the value of the shares of common stock or other securities sold or issued by the Company in such financing transaction.

$500,000 was advanced during the year ended June 30, 2008 and an additional $250,000 was advanced through December 31, 2008.

On December 18, 2008, the Company repaid the entire principal and accrued interest outstanding under the Loan Agreement, $750,000 and $47,876, respectively, by the issuance of 1,063,836 shares of common stock to TCMF.

TCMF may continue to make additional loans to the Company in accordance with the Loan Agreement.

On April 30, 2009, the Company entered into a fourth amendment to the Loan Agreement, which increased the principal amount of the Loan to up to $1,000,000 and provided that the principal amount of the loan and accrued interest thereon are due and payable by the Company upon a sale of securities (other than a sale of shares of the Company’s common stock to officers, directors or employees of or consultants to the Company in connection with their provision of services to the Company) to a third party or parties with proceeds to the Company of not less than $1,250,000.

As of March 31, 2009, the Company borrowed $633,000 and, in April 2009, the Company borrowed an additional $137,000 from TCMF.

For the nine months ended March 31, 2009 and 2008, interest expense on the loans was $39,113 and $2,844, respectively.

 

Management Agreement

On July 11, 2007, the Company entered into a Management Agreement (the “Management Agreement”) with Trinad Management, LLC (“Trinad”), an affiliate of TCMF. Pursuant to the terms of the Management Agreement, which is for a term of five years, Trinad will provide certain management services, including, without limitation, the sourcing, structuring and negotiation of a potential business combination transaction involving the Company. The Company has agreed to pay Trinad a management fee of $90,000 per quarter, plus reimbursement of all expenses reasonably incurred by Trinad in connection with the provision of management services. The Company may terminate the Management Agreement immediately by giving written notice and payment of a termination fee of $1,000,000. The Company has paid $270,000 and $259,355 in management fees for the nine months ended March 31, 2009 and 2008, respectively, and has prepaid $90,000.

On August 1, 2008, the Company entered into an amendment  to the Management Agreement with Trinad, which provided that payment of the termination fee may be satisfied by the issuance of shares of the Company’s common stock or other securities that may be issued by the Company in the event the Company consummates a financing in connection with a change of control or similar transaction involving the Company, calculated based on the value of the shares of common stock or other securities sold or issued by the Company in such financing transaction.

 

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Lease

 

On May 1, 2008, the Company entered into a sublease for office space with Trinad, on a month-to-month basis, with rent of $3,500 through January 2009, and increased to $8,500 thereafter, per month.

 On March 1, 2009, the Company entered into a lease for office space for a term of six months and has a right to renew for an additional six months.  The lease is payable in monthly installments of $3,718.

5. FAIR VALUE MEASUREMENTS

 

Effective July 1, 2008, the Company adopted both SFAS No. 157 and SFAS No. 159, without an effect on the financial statements.

 

Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require the use of fair value measurements. A fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability, or, in the absence of a principal market, the most advantageous market for the asset or liability.

 

 SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement 115” (“SFAS 159”), permits an entity to elect to measure various financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings at each subsequent reporting date.

 

6. ASSET PURCHASE

On December 2, 2008, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with an entity owned by the Company’s new Chairman of the Board of Directors and Chief Executive Officer to purchase a variety of internet domain names and technology software, including some relating to the automobile industry, such as RecyclerClassics.com and ExpertAutos.com, in exchange for a warrant to purchase 1,800,000 shares of the Company’s common stock,  exercisable at $1.25, per share, over five years, and an unsecured contingent promissory note of $1,000,000.  The Purchase Agreement also provides for an agreement not-to-compete for an aggregate period of five years.

 

The shares of common stock underlying the warrant are subject to a two year lock-up period, commencing upon issuance of the shares underlying the warrant.  The note bears interest at 6% per annum, and  is payable in 36 equal monthly installments contingent upon sufficient cash flow of the Company during each monthly period, as defined in the note.  If there is not sufficient working capital during any such monthly period, any principal and interest otherwise payable pursuant to the note shall be deferred and, on the final due date, any outstanding deferred payments shall be cancelled and the note and interest thereon shall be deemed to be paid-in full.

 

The Company determined the fair value of the assets purchased under SFAS 157, “Fair Value Measurements”, and, as part of the determination, utilized the services of an independent valuation specialist.  Based on the determination, the Company recorded the assets purchased, note payable and warrant at their estimated fair values at the date of purchase, as follows:

 

Technology software		$	503,886
Internet domain names			190,000
Covenant not-to-compete			416,232
Total assets purchased		$	1,110,118
Note payable		$	815,857
Warrant		$	294,261

 

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The purchased technology software and covenant not-to-complete are being amortized over 5 years. Amortization expense for the nine months ended March 31, 2009 was $60,870.  As of March 31, 2009, amortization expense for each of the five succeeding years was as follows:

2010		$	184,024
2011		$	184,024
2012		$	184,024
2013		$	184,024
2014		$	123,152

The domain names are not being amortized as they have an indefinite life.

The effective interest rate on the note payable is 19%, per annum. The discount on the note of $184,143 is being amortized over the term of the note and recorded as interest expense.

 

7. INCOME TAXES 

  

Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements as of March 31, 2009.

 

8.   SUBSEQUENT EVENT

Effective as of April 15, 2009, the Company entered into an employment agreement with Michael Rose, pursuant to which he became executive vice president of operations of the Company, at an annual base salary of $200,000, plus quarterly commissions.  Additionally, the Company granted an option to purchase 228,596 shares of the Company’s common stock, exercisable at $1.25, per share, to Mr. Rose pursuant to the Company’s 2007 Employee, Director and Consultant Stock Plan.

 

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ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Special Note Regarding Forward-Looking Statements

We may, in discussions of our future plans, objectives and expected performance in periodic reports filed by us with the Securities and Exchange Commission (the “SEC”) (or documents incorporated by reference therein) and in written and oral presentations made by us, include projections or other forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or Section 21E of the Securities Act of 1933, as amended (the “Securities Act ”). When used in this Quarterly report on Form 10-Q (“Form 10-Q”), the words “anticipate”, “believe”, “estimated”, “expect” and other similar expressions as they relate to our management or us, are intended to identify such forward looking statements.  Such projections and forward-looking statements are based on assumptions, which we believe are reasonable but are, by their nature, inherently uncertain. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) our inability to obtain sufficient cash to fund ongoing obligations and continue as a going concern; (ii) our ability to carry out our operating strategy; and (iii) other factors, including those discussed below. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

 

DESCRIPTION OF BUSINESS

Prior to February 12, 2009, we were inactive and considered a “shell” company by the SEC and are currently controlled by Trinad Capital Master Fund, Ltd. (“TCMF”), our majority shareholder. We were planning to acquire and explore mineral properties through June 15, 2007 when this was abandoned and the Company became a development stage company.  On December 2, 2008, the Company commenced nominal operations, and on January 12, 2009, launched The Recycler Publishing Network, websites designed to assist sellers of cars, boats, RVs and motorcycles to market their products using the internet. 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

 

None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

 

None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

None.

ITEM 5.    OTHER INFORMATION.

 

None.

ITEM 6.    EXHIBITS.

 

The following Exhibits are attached hereto:

  

Exhibit No.		Document Description
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-15(a) and Rule 15d-
		15(a), promulgated under the Securities Exchange Act of 1934, as amended.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-15(a) and Rule 15d-
		15(a), promulgated under the Securities Exchange Act of 1934, as amended.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

  

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SIGNATURES

 

      In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		LATERAL MEDIA, INC. (Registrant)
Date:           May 20, 2009	By:	/s/ Jeffrey Schwartz
		Jeffrey Schwartz
		Chairman and Chief Executive Officer (Authorized Officer and Principal Executive Officer)
Date:           May 20, 2009	By:	/s/ Charles Bentz
		Charles Bentz
		Chief Financial Officer (Authorized Officer and Principal Financial Officer)

 

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