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Friday, December 14, 2012 3:00:00 PM
10. LITIGATION AND JUDGMENTS
The Company was and is involved in various litigation involving trade creditors, professionals and former employees.
A videographer filed suit in Small Claims Court in Mercer, New Jersey for $2,000 and received a default judgment in November of 2007. The Company has contacted the plaintiff in this matter, and a settlement agreement has been reached.
A materials handling company was granted a judgment for $3,654 by Superior Court of California on January 18, 2008. There has been no further collection activity on this account.
A media company filed a suit to collect unpaid fees dating from October 30, 2007 of $71,033. The media company was granted a judgment for $71,033 by Los Angeles Superior Court on April 6, 2010, which is still owed by the Company. There have been no efforts on the part of the media company to collect the judgment and the Company believes that it will be able to settle the amount for a reduced final payment.
Three former employees hold judgments for unpaid wages in the amounts of $9,274, $15,600 and $16,995 from labor board judgments in 2008. With penalties and accrued interest, the three labor judgments amounted to $65,184 as of September 30, 2012.
An internet marketing company filed suit against the Company and agreed to arbitration which was settled for $20,000 in October of 2010. There have been no payments made on this settlement.
A public relations firm obtained a judgment in the amount of $44,323 on April 9, 2010 for fees owed for services. There has been no collection activity and the Company intends to negotiate a reduced settlement of the final balance owed.
An accounting firm that provided services to the company obtained a judgment through arbitration that was confirmed by the Circuit Court in West Palm Beach for $150,000 on August 25, 2010. On October 18, 2012, the Circuit Court in West Palm Beach issued a final judgment confirming the arbitration award to the plaintiff in the amount of $153,781, plus interest at $4.75% from May 5, 2010 plus attorney fees and the Company recognized a loss on settlement in the amount of $71,463 in the three months ending September 30, 2012.
A grocery services company filed suit to collect $22,000 in fees for advertising services incurred in 2009. The Company has not been in contact with the Company or their legal counsel since February 22, 2011. The Company believes it will be settled for a nominal amount, if anything, based on the age of the payable.
On April 6, 2010, the Company settled litigation with a former controller in which the former controller agreed to return 400,000 shares of Company stock valued at $52,000 in exchange for $8,000 and payments of $1,571 over a 27 month period. The former controller delivered the shares to an escrow agent and the escrow agent will return all of the shares to the Company once all of the payments are made to the former employee. As of September 30, 2012, the balance due the former controller was $31,432.
On February 3, 2011, through mediation, the Company and a Federal Bankruptcy Trustee settled litigation with a former sales person in which the former employee would return 750,000 shares of Company stock valued at $90,000 in exchange for payments of $92,069 over a 14 month period. The Federal Bankruptcy trustee will return all of the shares to the Company once all of the payments are made to the Bankruptcy Trustee. The Company has recorded a $90,000 liability to the former sales person and a $90,000 common stock receivable for the shares being held by the bankruptcy trustee.
11. CUTEST DOG COMPETITION
In May 2009, the Company finalized plans to host a nationwide viral marketing contest known as the “Cutest Dog Competition”. The contest started on August 1, 2009, allowing every dog owner in America to have the opportunity to submit a picture of their dog. The Company announced the winner of the “Cutest Dog Competition” on its website as well as at a major venue on Thanksgiving Day. Prizes were distributed for regional winners, and three top regional winners received a $5,000 prize each, qualified as finalists for the final event. Regional winners from all over the country then competed for the title of the “Cutest Dog Competition” and that winner was awarded the $1 million prize. In November 2009, the winner was announced.
The present value of the $1,000,000 obligation payable over 30 years at 7.5% present value is $336,500. The discount of $663,500 is being amortized over 30 years with an annual cash payment of $33,333. The Company did not make any payments in the nine months ending September 30, 2012. As of September 30, 2012 and December 31, 2011, $383,379 and $378,533, respectively were recorded as prize liabilities.
Link > Most recent 10-Q
"We took salary advances to rectify these issues. We don't see a problem with it. We don't think."
lOl...
On April 30, 2012, the Board of Directors approved salary advances not to exceed $250,000 for each of Mr. Schwartz and Ms. Bershan in 2012. The Board of Directors requires that all salary advances are repaid in full before any transactions pursuant to the grid note are consummated. The Company made salary advances to Mr. Schwartz and Ms. Bershan, which the balance of officer advances as of September 30, 2012 is $371,117.
Our principal sources of liquidity have been sales of equity securities and borrowings. To meet our current requirements to operate, the Company has sold common stock and is currently attempting to undertake the sale of additional equity securities. As new funds are obtained, our principal uses of capital would be to meet our operating requirements, production, marketing and advertising expenditures, and make investments in inventory. Additional cash could be used to reduce past due taxes and other debts and payables.
We will also be looking to seek equity capital through the issuance of additional common stock with other round(s) of funding. There are currently no commitments or other known sources for this funding, other than the $1,000,000 convertible revolving grid note commitment made by CEO Barry Schwartz and President, Lisa Bershan. If these funds are obtained, it would result in additional dilution to our stockholders. Alternative financing may not be available in the future in amounts or on terms acceptable to us, if at all.
"We're not sure why we gave the consultant $3,077,884. We didn't see any of it. We don't think."
