SEC Filing Summary: Rub Music Enterprises, Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2009. The registrant is Rub Music Enterprises, Inc., a Nevada corporation classified as a development stage company and a shell company. The company ceased its original music library operations in 2007 and is currently seeking a business opportunity, specifically looking to merge with or acquire a target company to become a public reporting entity. As of August 7, 2009, there were 40,700,000 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2009 | Three Months Ended June 30, 2009 | Cumulative (Development Stage) |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net Loss | $(11,868) | $(5,833) | $(74,110) |
| Cash Balance (End of Period) | $348 | $348 | $348 |
| Total Assets | $348 | $348 | $348 |
| Total Liabilities | $63,411 | $63,411 | $63,411 |
| Stockholders' Deficit | $(63,063) | $(63,063) | $(63,063) |
| Working Capital | $(63,063) | $(63,063) | $(63,063) |
Debt and Liquidity: The company holds no cash equivalents other than $348 in cash. Current liabilities consist primarily of a $48,000 note payable to the CEO (related party) and $11,851 in trade accounts payable. The company has a significant working capital deficiency.
Material Changes vs. Prior Period
- Revenue: Remained at $0, consistent with the prior period, as operations have been ceased.
- Expenses: General and administrative expenses decreased significantly to $10,121 for the six months ended June 30, 2009, compared to $16,581 in the same period in 2008. This reduction is attributed to lower legal and accounting fees.
- Interest Expense: Increased to $1,747 for the six months ended June 30, 2009, from $316 in the prior year, due to increased borrowing levels from the CEO.
- Cash Flow: Net cash used in operating activities improved to $(10,878) for the six months ended June 30, 2009, compared to $(28,320) in the prior year. Financing activities provided $8,000 in proceeds from related party notes.
- Related Party Transaction: In February 2009, the company transferred its interest in its subsidiary, Rub Music Library, to the former CEO in exchange for the forgiveness of $21,776 in related party accounts payable.
Outlook, Risks, and Unusual Items
- Going Concern: The filing explicitly states that substantial doubt exists regarding the company's ability to continue as a going concern due to current liabilities exceeding current assets and a lack of revenue. The company requires additional capital to meet obligations.
- Strategy: Management is actively seeking a merger or acquisition target to provide a business opportunity. No assurances are given that a target will be found.
- Subsequent Events: In July 2009, the company borrowed an additional $15,000 via unsecured notes due in July 2010 at 8% interest. In connection with this, warrants were issued to purchase 1,500,000 shares at $4.00 per share.
- Risks: The company faces risks associated with its shell status, lack of operating history, and dependence on related party financing. There are no pending legal proceedings.
Investor Verification Checklist
- Verify the status of the $48,000 related party note payable to the CEO and the terms of the subsequent $15,000 borrowing.
- Confirm the company's progress in identifying a merger or acquisition target, as this is the sole stated path to revenue.
- Assess the validity of the $21,776 debt forgiveness transaction and its impact on the equity structure.
- Review the terms of the 1,500,000 warrants issued in July 2009, specifically the $4.00 exercise price relative to the current market value (if any).
- Monitor cash burn rate given the minimal cash balance of $348 and ongoing administrative expenses.