SEC Filing Summary: Imagine Media Ltd. (10-K)
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2010, for Imagine Media Ltd. (Ticker: IMLE). The Company, originally formed to publish "Image Magazine" in Denver, Colorado, suspended publishing operations in January 2009 due to declining revenues and increased costs. As of the reporting date, the Company is relatively inactive with no full-time employees and no website. In June 2010, the Company entered a tentative agreement to acquire JAKK'D Holdings, LLC (an alcoholic beverage producer), but this agreement was terminated in January 2011.
Key Financial Metrics
| Metric | 2010 | 2009 |
|---|---|---|
| Net Sales/Revenue | $0 | $400 |
| Net Loss | $(70,327) | $(77,705) |
| Operating Expenses | $66,685 | $74,605 |
| Cash and Equivalents | $83 | $94 |
| Total Current Liabilities | $201,877 | $161,560 |
| Shareholders' Deficit | $(201,794) | $(161,466) |
| Outstanding Shares | 1,410,650 | 1,380,650 |
Liquidity and Debt: The Company has a working capital deficit of approximately $201,794. Liabilities consist primarily of accounts payable ($101,555), indebtedness to related parties ($39,440), and a convertible debenture ($30,000) plus accrued interest ($7,500). The Company has no third-party commitments for capital.
Material Changes vs. Prior Period
- Revenue Cessation: The Company generated zero revenue in 2010 compared to $400 in 2009, reflecting the complete cessation of magazine publishing activities.
- Expense Reduction: Operating expenses decreased by approximately $7,920 (from $74,605 to $66,685), primarily due to the elimination of editorial and production costs associated with the magazine.
- Liability Growth: Total current liabilities increased by $40,317, driven by an increase in trade creditors and short-term advances from non-affiliates and related parties.
- Stock Issuance: The Company issued 30,000 shares of common stock in 2010 to convert $30,000 of indebtedness to related parties.
Outlook, Risks, and Contingencies
Going Concern: The independent auditors have issued a "going concern" opinion. The Company has incurred recurring losses since inception and has a net capital deficiency. The ability to continue operations depends on generating sufficient cash flow or securing a strategic merger/acquisition, with no assurance of success.
Management Commentary: Management plans to restructure debt and increase ownership equity to improve working capital. The Company is seeking a strategic opportunity but has not identified one as of the filing date.
Risks and Contingencies:
- Internal Controls: Management concluded that internal controls over financial reporting were not effective as of December 31, 2010, due to an inability to record transactions in accordance with GAAP and a lack of segregation of duties.
- Trademark Dispute: A third party in California holds a registered trademark for "Image Magazine." While a license is being discussed, the Company has discontinued publishing, so management does not expect a material impact.
- Related Party Dependence: The Company relies heavily on interest-free advances from directors, officers, and affiliates for working capital, which are payable on demand.
Investor Verification Checklist
- Cash Position: Verify the extremely low cash balance ($83) and the lack of committed funding sources.
- Debt Structure: Confirm the terms of the $30,000 convertible debenture (8% interest, matured April 2009, currently in default with 12% penalty interest) and the $17,300 short-term advance due on demand.
- Related Party Transactions: Review the $39,440 in indebtedness to related parties and the history of debt-to-equity conversions.
- Internal Control Deficiencies: Assess the risk of financial misstatement given the management's admission of ineffective internal controls.
- Acquisition Status: Confirm the termination of the JAKK'D Holdings acquisition and the absence of any new strategic initiatives.