This amendment is being filed to include the dates on the signature page of the
10-Q and to include the dates and signatures on the Sarbanes Oxley
certifications. No other changes were made to this quarterly report.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM 10Q/A
AMENDMENT #1
-----------------
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended March 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 333-138184
TOMBSTONE CARDS, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 51-0431963
------------------------- ------------------------
(State of Incorporation) (IRS Employer ID Number)
2400 Central Avenue, Suite G, Boulder, CO 80301
-----------------------------------------------
(Address of principal executive offices)
303-684-6644
--------------------------
(Registrant's Telephone number)
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 past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 9, 2008, there were 3,230,000 shares of the registrant's common stock
issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Condensed Balance Sheets - March 31, 2008 and
December 31, 2007 F-1
Condensed Statement of Operations -
Three months ended March 31, 2008 and 2007 F-2
Condensed Statement of Changes in Shareholders' Equity -
March 31, 2008 F-3
Condensed Statement of Cash Flows -
Three months ended March 31, 2008 and 2007 F-4
Notes to the Condensed Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not
Applicable
Item 4. Controls and Procedures 3
Item 4T. Controls and Procedures 3
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 4
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 4
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 4
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable 5
Item 5. Other Information - Not Applicable 5
Item 6. Exhibits 5
SIGNATURES 6
PART I
ITEM 1. FINANCIAL STATEMENTS
TOMBSTONE CARDS, INC.
Condensed Balance Sheets
(Unaudited)
March 31, December 31,
2008 2007
-------------------- -----------------
Assets
Current assets
Cash and cash equivalents.........................................$ 262,850 313,498
Accounts receivable, net.......................................... 3,570 9,256
Inventory, at cost................................................ 9,267 10,057
Prepaid expenses.................................................. 4,452 1,494
-------------------- -----------------
Total current assets.................................... 280,139 334,305
Equipment, net of accumulated depreciation of $17,650............. 41,434 42,414
Deferred patent costs............................................. 440 --
-------------------- -----------------
Total assets............................................$ 322,014 376,719
==================== =================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities..........................$ 25,131 578
Deferred revenue.................................................. -- 448
Current portion - capital lease obligation........................ 1,992 1,992
-------------------- -----------------
Total current liabilities............................... 27,123 3,018
Capital lease obligation, less current portion....................... 3,809 4,776
-------------------- -----------------
Total liabilities....................................... 30,932 7,794
-------------------- -----------------
Shareholders' equity
Common stock...................................................... 816,305 816,305
Additional paid-in capital........................................ 119,292 82,030
Deficit accumulated during development stage...................... (644,516) (529,410)
-------------------- -----------------
Total shareholders' equity.............................. 291,081 368,925
-------------------- -----------------
Total liabilities and shareholders' equity..............$ 322,013 376,719
==================== =================
See accompanying notes to financial statements.
F-1
TOMBSTONE CARDS, INC.
Statements of Operations
(Unaudited)
For the
Three Months Ended
March 31,
----------------------------------
2008 2007
---------------- ----------------
Sales...........................................................$ 35,785 $ 1,916
Cost of sales.................................................... 16,275 1,598
---------------- ----------------
Gross profit................................................. 19,510 318
Expenses
Share-based payment
Common stock options....................................... 37,262 4,875
Selling, general and administrative expenses................. 99,550 65,173
---------------- ----------------
Loss from operations.............................. (117,302) (69,730)
Other income and loss
Interest income.............................................. 2,380 6,682
Interest expense............................................. (184) --
---------------- ----------------
Loss before income taxes.......................... (115,106) (63,048)
Income tax provision............................................. -- --
---------------- ----------------
Net loss.........................................$ (115,106) $ (63,048)
================ ================
Basic and diluted loss per share................................$ (0.04) $ (0.02)
================ ================
Basic and diluted weighted average
common shares outstanding................................... 3,230,000 3,230,000
================ ================
See accompanying notes to financial statements
F-2
TOMBSTONE CARDS, INC.
Statement of Changes in Shareholders' Equity
(Unaudited)
Deficit
Accumulated
Additional During
Common Stock Paid-in Development
----------------------------------
Shares Amount Capital Stage Total
---------------- ---------------- ---------------- ---------------- ----------------
Balance at December 31, 2007........... 3,230,000 $ 816,305 $ 82,030 $ (529,410) $ 368,925
---------------- ---------------- ---------------- ---------------- ----------------
Stock options granted and vested... -- -- 37,262 -- 37,262
Net loss........................... -- -- -- (115,106) (115,106)
---------------- ---------------- ---------------- ---------------- ----------------
Balance at March 31, 2008.............. 3,230,000 $ 816,305 $ 119,292 $ (644,516) $ 291,081
================ ================ ================ ================ ================
See accompanying notes to financial statements
F-3
TOMBSTONE CARDS, INC.
Statements of Cash Flows
(Unaudited)
For the
Three Months Ended
March 31,
---------------------------------------
2008 2007
----------------- -------------------
Cash flows from operating activities:
Net loss....................................................$ (115,106) $ (63,048)
Net cash flows used in
operating activities........................... (47,669) (56,994)
----------------- -------------------
Cash flows from investing activities:
Purchase of property and equipment.......................... (2,979) (9,192)
----------------- -------------------
Net cash flows used in
investing activities........................... (2,979) (9,192)
----------------- -------------------
Net change in cash and
cash equivalents............................... (50,648) (66,186)
Cash and cash equivalents:
Beginning of period......................................... 313,498 634,400
----------------- -------------------
End of period...............................................$ 262,850 $ 568,214
================= ===================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes..............................................$ -- $ --
================= ===================
Interest..................................................$ -- $ --
================= ===================
Noncash investing and financing transactions:
Equipment acquired under capital lease....................$ -- $ --
================= ===================
See accompanying notes to financial statements
F-4
TOMBSTONE CARDS, INC.
Note to Condensed Financial Statements
March 31, 2008
(Unaudited)
Note 1: Basis of Presentation
-----------------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Regulation S-K. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of the
Company, the accompanying unaudited condensed financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 2008, the results of operations
for the three months ended March 31, 2008 and 2007, and cash flows for the three
months ended March 31, 2008. These financial statements should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's annual report on Form 10-KSB for the year ended December 31, 2007.
There have been no updates or changes to our audited financial statements for
the year ended December 31, 2007.
There is no provision for dividends for the quarter to which this quarterly
report relates.
The results of operations for the three months ended March 31, 2008 are not
necessarily indicative of the results to be expected for the full year.
Going Concern
The Company's financial statements for the three months ended March 31, 2008
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company reported an accumulated deficit of $644,516 as of March
31, 2008. The Company did not recognize revenues from its activities during the
three months ended March 31, 2008. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
Note 2: Inventories
-------------------
At March 31, 2008 inventory consisted of:
Raw Materials $ 9,267
================
Note 3: Shareholders' Equity
----------------------------
On March 15, 2008, we granted to two consultants, options to purchase 125,000
and 50,000, respectively, shares of our common stock at an exercise price of
$0.65 and $1.00 per share, in exchange for consulting services. The option to
purchase 50,000 shares of our common stock vests on March 15, 2008 and expires
on August 27, 2009, and the option to purchase 125,000 shares of common stock
vests 50 percent on March 15, 2008 and 50 percent on June 16, 2008, and expires
on March 13, 2013. Our Board of Directors valued our common stock at $0.55 per
share on the grant date. We, utilizing appropriate option pricing software,
estimated the fair value of the options at $.2981 and $.0687 per share, for an
aggregate grant-date fair value of $40,697.
F-5
TOMBSTONE CARDS, INC.
Note to Condensed Financial Statements
March 31, 2008
(Unaudited)
We recorded $37,262 in share-based payment in the accompanying financial
statements for the three-month period ended March 31, 2008. We plan to record
$3,435 in share-based payment in the second quarter of 2008.
Using the Black-Scholes option-pricing, we assumed the following in estimating
the fair value of the options at the grant date:
Risk-free interest rate............................... 1.37% to 2.37%
Dividend yield........................................ 0.00% to 0.00%
Volatility factor..................................... 50.00%
Weighted average expected life........................1.45 years to 5 years
Note 4: Income Taxes
--------------------
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109 (SFAS No. 109), "Accounting for Income Taxes." The
Company incurred net operating losses during the periods shown on the condensed
financial statements resulting in a deferred tax asset, which was reserved;
therefore the net benefit and expense resulted in $-0- income taxes.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2007, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
PLAN OF OPERATIONS
At March 31, 2008, we had cash on hand of $262,850. We intend to use our cash
funds to continue operations. We intend to continue to develop the business
opportunities presented by our OIEPrint(TM) software and our business in the
printing of custom playing cards. The development of the business opportunities
includes continued marketing efforts and product testing over the next twelve
months.
In the continuance of our business operations we do not intend to purchase or
sell any significant assets and we do not expect a significant change in the
number of employees of the Company.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2008 Compared to the Three Months Ended
March 31, 2007
During the three months ended March 31, 2008, we recognized sales of $35,785
compared to sales of $1,916 during the three months ended March 31, 2007 from
the sale of our customized playing cards. The increase of $33,869 was a result
of increased marketing and sales activities.
During the three months ended March 31, 2008, we incurred cost of sales of
$16,275 compared to cost of sales of $1,598 during the three months ended March
31, 2007. The increase of $14,677 was a result of the increase in sales of
product. We recognized a gross profit of $19,510 during the three months ended
March 31, 2008 compared to $318 during the three months ended March 31, 2007.
During the three months ended March 31, 2008, we incurred operational losses of
$115,106 compared to $63,048 during the three months ended March 31, 2007. The
increase of $52,058 is a result of the $34,377 increase in general and selling
expenses combined with the $32,387 increase expenses incurred as a result of
issue equity to pay for services. These increases are a result of increased
operational activities over the prior period.
1
During the three months ended March 31, 2008, we recognized a net loss of
$115,106 compared to a net loss of $63,048 during the three months ended March
31, 2007. The increase of $52,058 is a result of the increased operational
activity discussed above offset by the increase in sales.
LIQUIDITY AND FINANCIAL CONDITION
Net cash used in operating activities during the three months ended March 31,
2008 was $47,669, compared to net cash used in operating activities during the
three months ended March 31, 2007 of $56,994. Net cash used in investing
activities during the three months ended March 31, 2008 was $2,979 compared to
net cash used in investing activities during the three months ended March 31,
2007 of $9,192. During the three months ended March 31, 2008, we invested funds
of $2,979 in the purchase of property and equipment. During the three months
ended March 31, 2008 and 2007, we did not use or receive any funds from
financing activities.
At March 31, 2008, we had total current assets of $280,139, consisting of cash
on hand of $262,850, $3,570 in accounts receivable, $9,267 in inventory and
$4,452 in prepaid expenses. At March 31, 2008, we had total current liabilities
of $27,123, consisting of accounts payable and accrued liabilities of $25,131
and the current portion of lease obligations of $1,992.
During the three months ended March 31, 2008, we granted to two consultants,
options to purchase 125,000 and 50,000, respectively, shares of our common stock
at an exercise price of $0.65 and $1.00 per share, in exchange for consulting
services. The option to purchase 50,000 shares of our common stock vests on
March 15, 2008 and expires on August 27, 2009, and the option to purchase
125,000 shares of common stock vests 50 percent on March 15, 2008 and 50 percent
on June 16, 2008, and expires on March 13, 2013. Our Board of Directors valued
our common stock at $0.55 per share on the grant date. We, utilizing appropriate
option pricing software, estimated the fair value of the options at $.2981 and
$.0687 per share, for an aggregate grant-date fair value of $40,697. We recorded
$37,262 in share-based payment in the accompanying financial statements for the
three-month period ended March 31, 2008. We plan to record $3,435 in share-based
payment in the second quarter of 2008.
2
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), Messrs. Harris and Cox our Chief Executive
Officer and Chief Financial Officer carried out an evaluation under the
supervision and with the participation of our management, of the effectiveness
of the design and operation of our disclosure controls and procedures pursuant
to Exchange Act Rule 15d-14 as of the end of the period covered by this report.
Based on the foregoing evaluation, Messrs. Harris and Cox have concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic SEC filings and to
ensure that information required to be disclosed in our periodic SEC filings is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure as a result of the deficiency in our internal control over
financial reporting discussed below.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of our assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended March 31,
2008. We believe that internal control over financial reporting is effective. We
have not identified any, current material weaknesses considering the nature and
3
extent of our current operations and any risks or errors in financial reporting
under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2008, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from January
1, 2008 through March 31, 2008.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------ ------------------- ------------- ------------- ------------------
------------------ -------------------------- --------------- -------------------------------- -----------------------------------
3/15/08 Options 125,000 Consulting Services Business Associate
------------------ -------------------------- --------------- -------------------------------- -----------------------------------
3/15/08 Options 50,000 Consulting Services Business Associate
Exemption From Registration Claimed
All of the sales by the Company of its unregistered securities were made by the
Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"). All of the individuals and/or entities listed above that
purchased the unregistered securities were almost all existing shareholders, all
known to the Company and its management, through pre-existing business
relationships, as long standing business associates, and employees. All
purchasers were provided access to all material information, which they
requested, and all information necessary to verify such information and were
afforded access to management of the Company in connection with their purchases.
All purchasers of the unregistered securities acquired such securities for
4
investment and not with a view toward distribution, acknowledging such intent to
the Company. All certificates or agreements representing such securities that
were issued contained restrictive legends, prohibiting further transfer of the
certificates or agreements representing such securities, without such securities
either being first registered or otherwise exempt from registration in any
further resale or disposition.
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
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
5
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOMBSTONE CARDS, INC.
(Registrant)
Dated: May 12, 2008 By: /s/ John Harris
-----------------------------------
John Harris, President &
Chief Executive Officer
Dated: May 12, 2008 By: /s/ Neil Cox
-----------------------------------
Neil Cox Chief Financial Officer &
Chief Accounting Officer
6