UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008.

OR

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __ to __

Commission File Number 333-136806

LATERAL MEDIA, INC.

(formerly Asianada, Inc.)

(Exact name of registrant as specified in its charter)

 

DELAWARE		98-0539032
(State of other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
2121 Avenue of the Stars Suite 2550 Los Angeles, CA90067		(Zip Code)
(Address of principal executive offices)

 

(310) 601- 2500

 

(Registrant's telephone number, including area code)

 

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 past 90 days. Yes x No o

 

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. (Check one):

Large accelerated filer  o                                                                                                           Accelerated filer  o

Non-accelerated filer o                                                                                                Smaller reporting company  x

(do not check if smaller reporting company)

Indicate by check mark whether the registrant is a Shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

 

As of February 19, 2009, the Company had 9,143,836 shares of common stock par value $0.001 per share issued and outstanding.

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LATERAL MEDIA, INC.

(formerly Asianada, Inc.)

NOTES TO FINANCIAL STATEMENTS

December 31, 2008

(Unaudited)

 

1. ORGANIZATION

 

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 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 help sellers of cars, boats, RV’s and motorcycles to market their products using the internet.

  

The Company has elected June 30 as its fiscal year end.

 

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 operations, 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.

 

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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.

 

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.

Income Taxes 

 

Effective July 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company's financial statements in accordance with FASB Statement 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements as of December 31, 2008.

 

The Company's policy is to classify assessments, if any, for tax related interest as interest expenses and tax related penalties as general and administrative expenses.

 

New Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business Combinations.”  SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including noncontrolling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

 

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In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51" (“SFAS No. 160”). The objective of this statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require the following changes. The ownership interests in subsidiaries held by parties other than the parent shall be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. The amount of consolidated net income attributable to the parent and to the noncontrolling interest must be clearly identified and presented on the face of the consolidated statement of income. When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary is initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment and entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of SFAS No. 160 before December 15, 2008 is prohibited. The Company has not determined the effect, if any, that may result from the adoption of SFAS No. 160 on its financial statements.

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

 

4. RELATED PARTY TRANSACTIONS

Loan Agreement

 

On July 11, 2007, as amended on November 15, 2007, April 18, 2008  and August 1, 2008, the Company executed a loan agreement (the “Loan Agreement”), with Trinad Capital Master Fund (“TCMF”), a stockholder of the Company, whereby TCMF agreed to lend the Company up to a principal amount of $750,000 (the “Loan”). The Loans bear interest at the rate of 10%, per annum. The entire outstanding principal amount of the Loans 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 $1,000,000.  TCMF may, at its option, receive any payment of principal and interest due on the Loan 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 entered into an agreement with TCMF to repay all outstanding principal and accrued interest thereon by issuance of shares of the Company’s common stock whereby $750,000, plus accrued interest of $47,876 was repaid by the issuance of 1,063,836 shares of common stock of the Company. TCMF may also continue to make additional loans to the Company in accordance with the Loan Agreement.

During January 2009, the Company borrowed an additional $350,000 from TCMF.

For the six months ended December 31, 2008 and 2007, interest expense was $29,109 and $2,844, respectively.

 

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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 5 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. Either party may terminate by mutual written agreement. The Company may terminate immediately by giving written notice and payment of a termination fee of $1,000,000. The Company has paid $180,000 in management fees for the six months ended December 31, 2008.

On August 1, 2008, the Company entered into an amendment  to the Management Agreement with Trinad providing 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.

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, per month, for fifteen percent (15%) of the current premises leased by Trinad.

 

5. FAIR VALUE MEASUREMENTS

 

Effective July 1, 2008, the Company adopted both SFAS No. 157 and SFAS No. 159.

 

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 of 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/chief executive officer to purchase a variety of internet domain names and technology software, including some relating to the automobile industry, such as AutoSuperSaver.com and LuxuryCarSpot.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, together with the employment agreement, an agreement not-to-compete for an aggregate period of five years.

 

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The shares of common stock underlying the warrant are subject to a two year lock-up period, commencing upon issuance of the shares under 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.  Principal and interest under the note which is not paid by the monthly due dates shall be deferred and, on the final due date, any deferred payments shall be cancelled and the note and interest thereon shall be deemed to be paid-in full.

 

The Company determined the fair values 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

 

The purchased technology software and covenant not-to-complete are being amortized over 5 years. Amortization expense for the six months ended December 31, 2008 was $14,864.  As of December 31, 2008, amortization expense for each of the five succeeding years was as follows:

2009		$	184,020
2010		$	184,020
2011		$	184,020
2012		$	184,020
2013		$	169,174

The effective interest rate on the note payable is 19%, per annum.

 

7. EMPLOYMENT AGREEMENT

 

On December 2, 2008, the Company entered into an employment agreement with its chairman of the board of directors and chief executive officer for a term of three years.  The agreement provides for a base salary of $250,000, per year, and a bonus on terms and conditions pursuant to the discretion of the board of directors of the Company, prior to February 15 of each calendar year during which the executive remains employed by the Company.

 

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8.  2007 EMPLOYEE DIRECTOR AND CONSULTANT STOCK PLAN

 

On December 2, 2008, the Company amended its 2007 Employee, Director, and Consultant Stock Plan (the “Plan”) to increase the number of shares of common stock that may be issued under the Plan from 1,000,000 to 4,000,000 shares.

 

9. SUBSEQUENT EVENT

 

On January 9, 2009, the Company purchased certain office equipment and domain names for an aggregate of $19,940.

 

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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, or 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

We were inactive and were considered a “shell” company by the SEC through February 12, 2009 and are 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 help sellers of cars, boats, RV’s and motorcycles to market their products using the internet 

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 Pursuant To 18 U.S.C. Section 1350, as
		adopted pursuant to Section 302 Of The Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, as
		adopted pursuant to Section 302 Of The Sarbanes-Oxley Act of 2002.