SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2012
[ ] 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: 333-156637
(Exact name of registrant as specified in its charter)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o
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 has submitted electronically and posted on its corporate Website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One).
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
The aggregate market value of voting stock held by non-affiliates of the registrant at June 20, 2012 was approximately $224,812. The aggregate market value was computed by using the closing price of the common stock as of that date on the Over-the-Counter Bulletin Board (“OTCBB”). (For purposes of calculating this amount only, all directors and executive officers of the registrant have been treated as affiliates.) There were 98,666,650 shares outstanding of the registrant's Common Stock as of June 20, 2012.
TABLE OF CONTENTS
Note about Forward-Looking Statements
This From 10-K contains forward-looking statements, such as statements relating to our financial condition, results of operations, plans, objectives, future performance and business operations. These statements relate to expectations concerning matters that are not historical facts. These forward-looking statements reflect our current views and expectations based largely upon the information currently available to us and are subject to inherent risks and uncertainties. Although we believe our expectations are based on reasonable assumptions, they are not guarantees of future performance and there are a number of important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. By making these forward-looking statements, we do not undertake to update them in any manner except as may be required by our disclosure obligations in filings we make with the Securities and Exchange Commission under the Federal securities laws. Our actual results may differ materially from our forward-looking statements.
ITEM 1. BUSINESS
The following is a summary of some of the information contained in this document. Unless the context requires otherwise, references in this document to “Firefish,” or the “Company” are to Firefish, Inc.
Firefish was incorporated in the State of Nevada on April 29, 2008. Our principal offices are currently located at 12707 High Bluff Drive, Suite 200, San Diego, CA 92130. We occupy this office, which is leased by an associate of Harshawardhan Shetty, on a rent free basis. Our current telephone number is (917) 310-4718. The Company offers mobile and internet marketing services to retailers. The Company also offers educational services to young learners and young adults. On an annual basis, in January and February the Company hosts an English competency competition referred to as the English Olympiad. Both our services are currently offered only in India. In India our offices are located at Level 4, Dynasty Business Park, A-Wing, Andheri-Kurla Road, Andheri (East), Mumbai 400059.
We were originally started by an Indian engineer, our CEO Harshawardhan Shetty, to offer social networking services to young engineering professionals and engineering students in India, including connecting our network members with potential tutoring clients, job placements and professional development resources. We quickly realized that social networking, job placement and tutoring for engineers was barely scratching the surface of the underserved demographic in India in need of social networking services. We discovered that the need for social networking services and ancillary offerings was much bigger than just engineers and included virtually everyone in the 18-24 year old, lower-middle class demographic. To serve this need, we built a robust social networking platform – http://www.ionisee.com - with wide ranging features such as the extensive ability to interact with the platform using mobile phones and the ability to communicate with each other in multiple languages. This portal attracted members through educational offerings and partnerships with NGOs (non-governmental organizations) and educational institutions. We also developed two ancillary lines of businesses that leveraged our user base and developed expertise within our target market (1) text message advertising services to retailers wishing to market their services to our social networking community and (2) educational services to current and potential members of our social networking community such as English language training/certification and English competency competitions. Our current revenues are chiefly derived from text message advertising services to retailers, sponsored competition entry fees for English competency competitions and consulting fees for English language training/certification services.
For our text message advertising services, we have built a website, a mobile advertising platform – http://www.firefish.in – that enables retailers to manage their advertising campaigns to our highly segmented database of consumers. While our database was seeded with users from our social networking community, we have since then significantly increased the size of our database via acquisition of users through events and purchased databases.
Our English competency competition referred to as the English Olympiad is an annual English language program and competition for young learners. We have built a website for the English Olympiad – http://www.englisholympiad.com. The examination is held annually in January and February.
Internet based social networking is a complex and evolving industry. Because this industry is relatively new, revenue models continue to evolve and the definition of what constitutes an Internet based social network continues to change and grow over time. The primary revenue source currently for social networking sites is advertising. On a typical social networking site, users create a profile and can search for and add contacts from the pool of other users with profiles. Some sites focus on a certain type of connection (such as classmates.com which focuses on connecting people who attended school together) or a certain interest (such as TheSocialGolfer.com) while others (such as Facebook) are more generalist. Popular players like Facebook, Twitter, LinkedIn, Google+ and Foursquare have made social networking commonplace. Advertising revenues on social networking sites have gone from essentially nothing to over $5 billion over the course of 5 years. Social networking sites are particularly attractive places for web advertising since users post many details about themselves allowing advertising to be targeted at a carefully selected demographic.
Parallel to the growth of the social networking industry and its associated internet advertising revenues, the mobile advertising industry has also seen rapid growth in the last five (5) years. This rapid growth is a result of greater and greater numbers of people owning smart phones such as iPhones and Android phones. These users then tend to use applications on their smart phones which in turn carry mobile advertising. While, one of the applications that smart phone users use is social networking applications, typically, smart phone users use many different applications from many different application creators on their phone.
Google Admob and Apple’s iAd platform serve as marketplaces to connect advertisers to application creators. Consumers that download the applications are then shown the advertisement.
Specifically in India, the number of smart phones is quite low but the number of feature phones exceeds 700 million units. In feature phones, advertising content appears as a text message. The mobile advertising industry in India is expected to grow from its current size of $5 million to over $400 million by 2015 driven both by tremendous mobile phone penetration and the growth of the organized retail industry. While in the US, Admob and iAd offer retailers a systematic mechanism to reach consumers, there is not such mechanism for retailers trying to reach the large feature phone text message consumer.
Firefish has developed an online-social networking platform (http://www.ionisee.com). Our initial target demographic consists of students, college graduates and career oriented members of the aspiring lower middle class who are 18-30 years old. We were able to recruit initial users for our social networking platform via partnerships with NGOs (non-governmental organizations), educational institutions and other entities. We offer all of the traditional features of social networking, with additional features that include the ability to communicate extensively with the platform over mobile phones and the ability to communicate with others in many languages., Additionally, we have developed two ancillary services to monetize our social networking services (1) advertising services for retailers to send text message marketing messages to our database of users (2) English language training/certification/competition services to current and potential members of our community as paid services.
For our mobile advertising services to retailers we have developed the online platform – http://www.firefish.in. This platform allows retailers to log into their account, choose a consumer segment to send their advertising message to selecting age, gender, location and income levels, compose the advertising message to send, personalize the message via addressing the consumer by name, and schedule the message for later delivery. Retailers can also pay online. In addition, retailers can also call Firefish to fully manage their advertising campaign. While our database of users on the mobile advertising platform was seeded by our users from social networking services, we have significantly grown the size of our database via user acquisition events and database purchases.
Our English language training/certification/competition services consist of (1) the English Olympiad (http://www.englishoympiad.com) an annual English competency program and competition for young learners with the examination being conducted in January and February each year (2) Spoken English classes (3) English certification programs in partnership with non-governmental agencies and state governments.
As Firefish’s model of a demographically targeted social networking website with ancillary business lines in mobile advertising and education is, to the best of our knowledge, unique, the Firefish business does not fit into one single industry. However, Firefish’s chief competition comes from the social networking industry and the mobile advertising industry, both of which are rapidly growing. As a result, the number and sophistication of competitors are also rapidly growing. We hope to distinguish ourselves from these competitors by the combination of services we offer, the high quality of our websites and technology, and our focus on our core demographic.
Popular players like Facebook, Twitter, LinkedIn, Google+ and Foursquare have made social networking commonplace.
As of April 2012, Facebook has more than 900 million active users. Facebook was launched in 2004 and was initially available only to students at Harvard and then to students at any Ivy League school. It continued to expand its user base to any college student and now is available to anyone over the age of 13. Facebook filed for a public offering on February 1, 2012. Based on financials disclosed in the materials for the public offering, analysts estimate Facebook’s valuation at over $100 billion.
Twitter is an online social networking service and microblogging service that enables its users to send and read text-based posts of up to 140 characters, known as "tweets". Created in March 2006, Twitter remains a private company. Advertising revenues at Twitter grew 213% to $139.5 million in 2011. Twitter is expected to double its revenue in 2012. Analysts estimate Twitter’s valuation at $7 billion.
LinkedIn (NYSE: LNKD) is a business-related social networking site. Founded in December 2002 and launched in May 2003, it is mainly used for professional networking. As of 9 February 2012, LinkedIn reports more than 150 million registered users in more than 200 countries and territories. LinkedIn reported revenues of $522 million in 2011. Analysts estimate its valuation at over $11 billion.
Foursquare, is a location-based social networking website for mobile devices, such as smartphones. Users "check in" at venues using a mobile website, text messaging or a device-specific application by selecting from a list of venues the application locates nearby. As of April 2012, the company reported it had 20 million registered users. Foursquare remains a private company. Analysts estimate its valuation $600 million.
AdMob, incorporated in 2006, is one of the world’s largest mobile advertising companies offering advertising solutions for many mobile platforms, including Android, iOS, webOS, Flash Lite, Windows Phone 7 and all standard mobile web browsers. In November 2009 it was acquired by Google for $750 million. It serves more than 40 billion mobile banner and text ads per month across mobile Web sites and handset applications.
iAd is a mobile advertising platform developed by Apple Inc. for its iPhone, iPod Touch, and iPad line of mobile devices allowing third-party developers to directly embed advertisements into their applications.
Founded in India in 2007, InMobi is the largest independent mobile advertising network in the world. The company launched in the U.S. and Europe in early 2010. It is backed by Silicon Valley venture firm, Kleiner Perkins Caufield & Byers, Sherpalo Ventures, and Mumbai Angels. The InMobi network reaches over 314 Million consumers around the globe. There are over 10,000 publishers and 2,000 advertisers in the network.
We have not filed for any patent and/or copyright protection for our websites, proprietary technologies and/or planned products. Presently we intend to rely on trade secret protection and/or confidentiality agreements with our employees, customers, business partners and others to protect our intellectual property rights. Despite certain precautions taken by us, it may be possible for third parties to obtain and use our intellectual property without authorization. This risk may be increased due to the lack of any patent and/or copyright protection. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations. Management will from time to time determine whether applying for patent and copyright protection is appropriate for us. We have no guarantee that, if filed, any applications will be granted or, if awarded, whether they will offer us any meaningful protection from other companies in our business. Furthermore, any patent or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to awards for damages.
We cannot be certain that our websites and our proprietary technologies will not infringe upon patents, copyrights or other intellectual property rights held by third parties. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify and we have not made an exhaustive search of all patent filings. Additionally, most patent applications are kept confidential for twelve to eighteen months, or longer, and we would not be able to be aware of potentially conflicting claims that they make. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses. In addition, we may incur substantial expenses in defending against these third party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim.
Our business, websites and our proprietary technologies may be subject to increasing regulation of content, consumer privacy, distribution and online hosting and delivery in the key territories in which we desire to conduct business. If we do not successfully respond to these regulations, our business may suffer. Legislation is continually being introduced that may affect both the content of proprietary technologies and their distribution. For example, data and consumer protection laws in the United States and Europe impose various restrictions on web sites. Those rules vary by territory although the Internet recognizes no geographical boundaries. Any one or more of these factors could harm our business by limiting the proposed features we plan on incorporating into the website and proprietary technologies, by limiting the size of the potential market for our products, and by requiring costly additional differentiation in the website and proprietary technologies for different territories to address varying regulations.
We have secured the rights to the Internet domain names www.firefish.in, www.ionisee.com and www.englisholympiad.com.
We have no other employees other than our sole officer and director, Harshawardhan Shetty. We rely on skilled consultants and third party work. We intend to expand our current management to retain skilled directors, officers, and employees with experience relevant to our business focus. We may also hire an in-house software development team.
ITEM 1A. RISK FACTORS
FORWARD LOOKING STATEMENTS
This document includes forward-looking statements, including, without limitation, statements relating to Firefish plans, strategies, objectives, expectations, intentions and adequacy of resources. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause Firefish actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors include, among others, the following: ability of Firefish to implement its business strategy; ability to obtain additional financing; Firefish limited operating history; unknown liabilities associated with future acquisitions; ability to manage growth; significant competition; ability to attract and retain talented employees; and future government regulations; and other factors described in this registration statement or in other of Firefish filings with the Securities and Exchange Commission. Firefish is under no obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Our Limited Operating History and Early Stage of Our Company Possess Significant Risks to Our Ability to Generate Sustained Revenue and Operate Successfully
While we have generated significant and sustained revenue streams from intended operations, the Company currently has limited liquidity, and does not yet have enough revenues sufficient to cover operating costs over an extended period of time. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in the early stages of a new business enterprise, particularly companies in highly competitive markets. Since the Company is among many that have entered the social networking market and the mobile advertising market, it faces competition. It also faces many risks specific to its business, which include the need to manage existing and expanding operations, the continuing need to raise additional capital, the dependence upon and need to hire key personnel, and the need to increase spending to adequately market our services. To address these risks, we must, among other things, respond to competitive developments, continue to attract, retain and motivate qualified persons, and continue to upgrade our technologies. We cannot provide any assurances that we will be successful in addressing such risks. The Company's failure to do so could have a material adverse effect on its business, prospects, financial condition and results of operations.
Our Plans Are Dependent Upon Key Individuals and the ability to attract qualified personnel to be successful
In order to successfully develop our services, the Company will be dependent upon Harshawardhan Shetty. The loss of the foregoing individual could have a material adverse effect upon the Company's business prospects and prohibit the Company from successfully achieving its goals. Moreover our success continues to depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for such personnel is intense, and there can be no assurance that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. The competition for web developers, creative personnel and technical directors is especially intense because of the high demand for such individuals. If we are unable to hire, assimilate and retain such qualified personnel in the future, such inability would have a material adverse effect on our business, operating results and financial condition. The Company also depends on Third party contractors and other partners to develop its websites and proprietary technologies. There can be no assurance that we will be successful in either attracting and retaining qualified personnel, or creating arrangements with such Third parties. The failure to succeed in these endeavors will have a material adverse effect on the Company and its ability to consummate its business plans.
If our services fail to gain significant market acceptance, we may not have sufficient capital to pay our expenses and to continue to operate
The market for social networking services and mobile marketing services is subject to continually changing consumer and industry preferences. As a result our services may not achieve and sustain market acceptance sufficient to generate enough revenues to cover our costs and allow us to become profitable or even continue to operate. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described and eventually secure other sources of financing and attain profitable operations. If the Company is unable to obtain adequate capital, it could be forced to cease operations. Management anticipates that the Company will be dependent, for the foreseeable future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. There are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
We are dependent on third parties to complete the development of and maintain our websites and proprietary technologies, and any increased costs associated with third party developers or any delay or interruption in production would negatively affect our ability to continue our operations.
We rely on third parties to complete the development of and maintain our websites and proprietary technologies. The costs associated with relying on third parties may increase our development costs and negatively affect our ability to operate. Since we have less control over a third party because we cannot control the developer’s personnel, schedule or resources we may experience delays. In addition aspects of the website and proprietary technologies may not match our expectations. If this happens we could lose anticipated revenues and may not have the capital necessary to continue our operations. In addition we may be required to rely on certain technology that we will license from third parties, including technology that we integrate and use with our internally developed technology. We cannot provide any assurances that these third party technology licenses will be available to us on commercially reasonable terms. The inability to establish any of these technology licenses, or the loss of such licenses if established, could result in delays until equivalent technology could be identified, licensed and integrated. Any such delays could materially adversely affect our business, operating results and financial condition.
We face the risks of changing consumer and industry preferences and uncertainty of market acceptance of our website and services.
Our social networking and ancillary services are new and evolving concepts. The level of demand and market acceptance of our services, are subject to a high degree of uncertainty. As consumer and industry preferences and trends evolve, there is a high degree of uncertainty about whether users will continue to value some or all of the key features which we intend to incorporate into our websites. The failure of the marketplace to deem our features desirable may discourage use of our website and limit the ability of the Company to generate revenues.
We operate in a highly competitive industry and compete against many large companies
Many companies worldwide are dedicated to social networking and ancillary services related to social networking. We expect more companies to enter both industries. Our competitors in both industries vary in size from small companies to very large companies with dominant market shares and substantial financial resources. The Company’s website will be in competition with these companies and others. Many of our competitors have significantly greater financial, marketing and development resources than we have. As a result, we may not be able to devote adequate resources to develop, acquire or license new technologies, undertake extensive marketing campaigns, adopt aggressive pricing policies or adequately compensate our developers to the same degree as certain of our competitors.
As the social networking and ancillary industries in many of our proposed markets are relatively new and rapidly evolving, our current or future competitors may compete more successfully as the industry matures. In particular, any of our competitors may offer products and services that have significant performance, price, creativity and/or other advantages over our websites and technologies. These products and services may significantly affect the demand for our services. In addition, any of our current or future competitors may be acquired by, receive investments from or enter into other strategic relationships with larger, longer-established and better-financed companies and therefore obtain significantly greater financial, marketing and technology licensing and development resources than we have. If we are unable to compete effectively in our principal markets, our business, financial condition and results of operations could be materially and adversely affected.
Our management has no experience in our relatively new industry, which may make it difficult for you to evaluate our business prospects
Our senior management and employees do not have any direct experience in the social networking and ancillary businesses. There can be no assurance that such employees will be successful in working together to develop the websites and proprietary technologies. In addition, the social networking and ancillary industries are relatively new. Only a limited number of companies have successfully commercialized such services on an international scale. You must consider our business prospects in light of the risks and difficulties we will encounter in the future in a new and rapidly evolving industry. We may not be able to successfully address these risks and difficulties, which could materially harm our proposed business prospects, financial condition and results of operations.
Undetected programming errors or flaws in our websites and proprietary technologies could harm our reputation or decrease market acceptance of the websites and services offered, which would materially and adversely affect our business prospects, reputation, financial condition and results of operations
The websites and proprietary technologies may contain programming errors or flaws, which may become apparent only after its release. In addition, the websites and proprietary technologies may be developed using programs and engines developed by and/or licensed from third party vendors, which may include programming errors or flaws over which we have no control. If our users have a negative experience with the websites and proprietary technologies related to or caused by undetected programming errors or flaws, they may be less inclined to continue or resume use of our services or recommend our services to other potential users. This could materially and adversely affect our business, financial condition and results of operations.
Unexpected network interruptions, security breaches or computer virus attacks could harm our business
The Company has developed, and maintains a substantial computer network infrastructure. Any failure to maintain satisfactory performance, reliability, security and availability of such network infrastructure, whether maintained by us or by third parties, may cause significant harm to our ability to attract and maintain users for our services. Major risks relating to any such future network infrastructure include:
Any of the foregoing factors could reduce a future users’ satisfaction, harm our business and reputation, have a material adverse effect on our financial condition and results of operations.
Our Lack of Patent and/or Copyright Protection and any unauthorized use of the websites and/or proprietary technologies by third parties, may adversely affect our business
We have not filed for any patent and/or copyright protection for our website, planned proprietary technologies and/or planned products. Presently we intend to rely on trade secret protection and/or confidentiality agreements with our employees, customers, business partners and others to protect our intellectual property rights. Despite certain precautions taken by us, it may be possible for third parties to obtain and use our intellectual property without authorization. This risk may be increased due to the lack of any patent and/or copyright protection. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations. Management will from time to time determine whether applying for patent and copyright protection is appropriate for us. We have no guarantee that, if filed, any applications will be granted or, if awarded, whether they will offer us any meaningful protection from other companies in our business. Furthermore, any patent or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to awards for damages.
We may be subject to claims with respect to the infringement of intellectual property rights of others, which could result in substantial costs and diversion of our financial and management resources
We cannot be certain that the websites and proprietary technologies will not infringe upon patents, copyrights or other intellectual property rights held by third parties. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify and we have not made an exhaustive search of all patent filings. Additionally, most patent applications are kept confidential for twelve to eighteen months, or longer, and we would not be able to be aware of potentially conflicting claims that they make. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses. In addition, we may incur substantial expenses in defending against these third party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim. Successful infringement or licensing claims against us may result in substantial monetary damages, which may materially disrupt the conduct of our business and have a material adverse effect on our reputation, business, financial condition and results of operations.
Our businesses may be adversely affected by developments in the Indian economy.
Our future performance will depend in large part on the future economic conditions in India. Accordingly, our business, financial condition, results of operations and prospects are subject to the economic, political, legal and regulatory conditions and developments in India. Any decline in the general economy of India or concern about an imminent decline could delay decisions by prospective customers to make initial evaluations of, or purchases of, our products. Any reduction of or delays in expenditures would harm our business. Adverse developments in the Indian markets may have an adverse effect on the number of our subscribers and results of operations, which could have a material adverse effect on our business.
We have no name recognition, which may prevent us from generating revenues, which will reduce the value of your investment.
Because we are a new company with new products and we have not conducted any significant advertising, there is little or no recognition of the Firefish brand name. However, substantially all of the company’s future revenues are expected to be derived from our websites. Accordingly, broad acceptance by customers of the Company’s websites, services and proprietary technologies are critical to the Company’s future success. Because our lack of name recognition, potential users of our products or joint venture partners may purchase products other than ours that have brand recognition in the market and we may be unable to generate sufficient revenues to meet our expenses or meet our business plan objectives, which will reduce the value of your investment.
If we are unable successfully to manage growth, our operations could be adversely affected.
Our progress is expected to require the full utilization of our management, financial and other resources, which to date has occurred with limited working capital. Our ability to manage growth effectively will depend on our ability to raise funds, to improve and expand operations, including our financial and management information systems, and to recruit, train and manage sales personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development or production delays as we seek to meet increased demand for our products. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
Our future growth is largely dependent upon our ability to develop technologies that achieve market acceptance with acceptable margins.
Our future growth rate depends upon a number of factors, including our ability to: identify emerging technological trends in our target end-markets; develop and maintain competitive products; create our website and proprietary technologies with innovative features that differentiate our products from those of our competitors; and develop, manufacture and bring products to market quickly and cost-effectively. In addition, the markets for our products may not develop or grow as we anticipate. The failure of our products to gain market acceptance or their obsolescence due to more attractive offerings by competitors could significantly reduce our revenues and adversely affect our business, operations and financial results.
We will be dependent upon advertising revenue as the initial source our revenue.
We expect that advertising revenue will be a significant source of revenue in the foreseeable future, although we intend to reduce our dependence on it by attempting to develop ancillary business offerings to our core social networking and mobile marketing services. Advertising contracts are often short-term and/or terminable by the advertiser at any time with little notice. Thus, we have no assurance that we will be able to obtain, and if obtained, retain advertising contracts. Our ability to generate advertising revenue depends on several factors, including:
We may incur substantial unanticipated costs related to our websites and proprietary technologies
Due to changes in technology, new product announcements, competitive pressures, system design and/or other specifications we may be required to change the current plans for our websites and proprietary technologies. Therefore, we cannot provide any assurances that the websites and proprietary technologies can be completed within our projections. In case of budget over-runs and additional expansions, we may choose to finance such capital expenditures through the issuance of additional equity or debt securities, by obtaining a credit facility or by some other financing mechanism. If we choose to seek financing for such expenditures, we cannot provide any assurances that such financing will be available on terms reasonably acceptable to us or at all.
Any capacity constraints or system disruptions could have a material adverse effect
Our business will rely significantly on Internet technologies and infrastructure. Therefore, the performance and reliability of our Internet sites and network infrastructure will be critical to our ability to attract and retain users, advertisers, merchants and strategic partners. Any system error or failure, or a sudden and significant increase in traffic, may result in the unavailability of sites and significantly delay response times. Individual, sustained or repeated occurrences could result in a loss of potential or existing users, advertisers or strategic partners. In addition, because our advertising revenue is expected to be directly related to the number of advertisements it delivers to users, system interruptions or delays would reduce the number of impressions delivered and thereby reduce its revenue.
Our systems and operations will be vulnerable to interruption or malfunction due to certain events beyond our control, including natural disasters, telecommunications failures and computer hacking. We will also rely on Web browsers and online service providers to provide Internet access to its sites. There can be no assurance that we will be able to expand its network infrastructure, either itself or through use of third-party hosting systems or service providers, on a timely basis sufficient to meet demand. We may also have to build redundant facilities or systems, produce a formal disaster recovery plan and possibly obtain sufficient business interruption insurance to compensate for losses that may occur. Any interruption to its systems or operations could have a material adverse effect on company’s business and its ability to retain users, advertisers and strategic partners. Currently, the Company does not have the above-stated plans in place.
Natural disasters can affect our business in a negative manner
The Company's operations and services depend on the extent to which its computer equipment and the computer equipment of its third-party network providers is protected against damage from fire, earthquakes, power loss, telecommunications failures, and similar events.
Despite precautions taken by the Company and its third-party network providers, over which it has no control, a natural disaster or other unanticipated problems at its headquarters or a third-party provider could cause interruptions in the services that it provides. If disruptions occur, the Company may have no means of replacing these network elements on a timely basis or at all. The Company does not currently maintain fully redundant or back-up Internet services or backbone facilities or other fully redundant computing and telecommunications facilities. Any accident, incident, system failure, or discontinuance of operations involving our network or a third-party network that causes interruptions in our operations could have a material adverse effect on its ability to provide services to its customers and, in turn, on its business, financial condition, and results of operations.
Our business will be dependent upon broadband carriers and mobile carriers
The Company will rely on broadband providers and mobile carriers to provide high speed data communications capacity to our customer. The Company may experience disruptions or capacity constraints in these broadband and mobile services. If disruptions or capacity constraints occur, the Company may have no means of replacing these services, on a timely basis or at all. In addition, broadband and mobile access may be limited or unavailable in certain areas, thereby reducing our potential market.
Risks of international operations
The Company markets its products in India. India has technology and online industries that are less well developed than in the United States.
There are certain risks inherent in doing business in international markets, which apply to India, such as the following:
There is a risk that these factors will have an adverse effect on our ability successfully to operate internationally and on our results of operations and financial condition.
Acquisition and investment strategy may not be successful and could adversely affect its business
In the future, the Company may acquire additional products, technologies or businesses, or enter into joint venture arrangements for the purpose of complementing or expanding our business or we may make investments in a new unrelated businesses, products, services or technologies. There can be no assurance that it will be able to identify suitable acquisition or investment candidates. Even if it does identify suitable candidates, there can be no assurance that it will be able to make such acquisitions or investments on reasonable commercial terms or successfully assimilate personnel, operations, products, services or technologies into its operations. This could disrupt its ongoing business, distract the management and employees, increase its expenses, including amortization of goodwill, and materially and adversely affect its financial condition and results of operations. Furthermore, the incurrence or issuance of debt or equity securities may be attributed to the Company to fund any future acquisitions.
The ownership by the Company’s Officers and Directors of a large amount of our Common Stock may limit minority shareholders’ ability to influence corporate affairs.
Our officers and directors and their affiliates currently own an aggregate of 66,550,660 shares. Assuming that no options and warrants are exercised the Company would have outstanding 98,666,650 shares of common stock. In such event our officers and directors would own approximately 67.45% of our outstanding common stock and be in a position to significantly affect all matters requiring shareholder approval, including the election of directors. The interests of our officers and directors may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. The minority shareholders would have no way of overriding their decisions. This level of control may also have an adverse impact on the market value of our shares because they may institute or undertake transactions, policies or programs that result in losses, may not take steps to increase our visibility in the financial community and/ or may sell sufficient numbers of shares to significantly decrease our price per share.
Compliance and continued monitoring in connection with changing regulation of corporate governance and public disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure. Complying with evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies and procedures, and may divert management time and attention from the achievement of revenue generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to uncertainties related to practice, our reputation might be harmed which would could have a significant impact on our stock price and our business. In addition, the ongoing maintenance of these procedures to be in compliance with these laws, regulations and standards could result in significant increase in costs.
We do not expect to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our Common Stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time.
The application of the “Penny Stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
The U.S. Securities and Exchange Commission (the “SEC”) has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
There is no liquid market for our common stock.
Our shares are traded on the OTCBB and the trading volume has historically been very low. An active trading market for our shares may not develop or be sustained. We cannot predict at this time how actively our shares will trade in the public market or whether the price of our shares in the public market will reflect our actual financial performance.
Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability, which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.
Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s promise to repay us, therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us, which we will be unable to recoup.
We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is are likely to materially reduce the market and price for our shares, if such a market ever develops.
You could be diluted from the issuance of additional common stock.
As of March 31, 2012, we were authorized to issue up to 100,000,000 shares of common stock. Subsequent to year end we are authorized to issue up to 1,000,000,000 shares of common stock. To the extent of such authorization, our Board of Directors will have the ability, without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock in the future may reduce your proportionate ownership and voting power.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
We do not own any property, real or otherwise. Our principal offices are currently located at 12707 High Bluff Drive Suite 200, San Diego, CA 92130. We occupy this office, which is leased by an associate of Harshawardhan Shetty, on a rent free basis.
In September 2011, we leased office space in Mumbai, India under a one year lease. Monthly payments are approximately $1,000.
We do not have any investments or interests in any real estate. Our company does not invest in real estate mortgages, nor does it invest in securities of, or interests in, persons primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, nor are we aware of any governmental authority contemplating any legal proceeding against us.
ITEM 4. MINE SAFETY DISCLOSURES.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
We began trading on the OTCBB effective January 31, 2012. The following table sets forth the high and low trade information for our common stock for each quarter since inception of trading. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
There are approximately 43 holders of record of Firefish’s common stock as of March 31, 2012.
Our transfer agent is Pacific Stock Transfer of 500 E. Warm Springs Road, Suite 240, Las Vegas, NV 89119.
Holders of Firefish’s common stock are entitled to receive such dividends as may be declared by the Company’s board of directors. The Company has not declared or paid any dividends on the Company’s common shares and it does not plan on declaring any dividends in the near future. The Company currently intends to use all available funds to finance the operation and expansion of its business.
Recent Sales of Unregistered Securities
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited consolidated 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 consolidated financial statements as of March 31, 2012, 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
We were incorporated in Nevada in April 2008. We are an early stage company and have had limited business operations. We have concentrated our efforts on developing a business plan, creating our websites and proprietary technologies and launching small scale operations. Those activities included, but were not limited to, securing initial capital in order to fund our operations.
While we have generated sustained revenue streams from intended operations, the Company currently has limited liquidity, and does not yet have enough revenues sufficient to cover operating costs over an extended period of time. We will need substantial additional capital to support our proposed operations. We have no committed source for any funds as of date here. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, and could fail in business as a result of these uncertainties.
RESULTS OF OPERATIONS
For the Year Ended March 31, 2012 Compared to the Year Ended March 31, 2011
During the year ended March 31, 2012, we recognized revenues of $278,254, compared to revenues of $78,754 from our operational activities. The increase in sales of $199,500 was a result of increased scale in our English competency competition and launching a new education service product related to vocational training for young adults. In addition, during the fourth quarter we had a significant order in which we resold books published by the Cambridge University Press and provided training and customization services to the State Council of Educational Research & Training, Chhattisgarh.
Costs of sales increased to $176,316 during the year ended March 31, 2012 from $58,420 during the year ended March 31, 2011. The increase was a result of increased revenue activity in fiscal 2012.
During the year ended March 31, 2012, we incurred general and administrative expenses of $220,595 compared to general and administrative expenses $123,966 during the year ended March 31, 2011. The increase in general and administrative expense is directly related to an increase in professional fees in connection with being a public company, contract labor for operational and sales activity, and rent and other operating expenditures for which an entire year was recorded rather than partial year in the prior comparable year.
At March 31, 2012, the Company had total current assets of $172,468, consisting of $171,705 in cash and $763 in accounts receivable. At March 31, 2011, the Company had total current assets of $29,198, consisting of $18,217 in cash and $9,468 in accounts receivable and $1,513 of prepaid expenses.
During the year ended March 31, 2012, the Company generated cash of $123,726 in its operational activities consisting of a net loss of $88,880, and changes in operating accounts of $212,606. During the year ended March 31, 2011, the Company used cash of $52,091 in its operational activities consisting of a net loss of $103,632, non-cash adjustments of $12,050, and changes in operating accounts of $39,491.
During the years ended March 31, 2012 and 2011, the Company did not use nor receive funds from its investing activities.
During the year ended March 31, 2012, the Company received approximately $37,000 from its financing activities compared to $20,000 during the year ended March 31, 2011. The increase in funds was primarily due to $25,000 in proceeds received from convertible notes payable and $4,000 for extension of warrants. The Company used the proceeds received for operations.
On a short-term basis, the Company has not generated revenues sufficient to cover operations. Based on prior history, the Company will continue to have insufficient revenue to satisfy current and recurring costs as it continues its small scale operations. For short term needs the Company will be dependent on receipt, if any, of proceeds from financing activities.
The Company has only common stock as its capital resource. Firefish has no material commitments for capital expenditures within the next year, however if operations are scaled up, substantial capital will be needed to pay for advertising and further development of websites and proprietary technologies.
Need for Additional Financing
The Company does not have capital sufficient to meet its cash needs. The Company will have to seek loans or equity placements to cover such cash needs.
No commitments to provide additional funds have been made by the Company’s management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to Firefish to allow it to cover the Company’s expenses as they may be incurred.
The Company will need substantial additional capital to support its proposed operations. The Company has had a short history of generating revenues. The Company has no committed source for any funds as of the date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, the Company may not be able to carry out its business plan, and could fail in business as a result of these uncertainties.
There is no assurance that the Company will achieve additional monies or financing will be available in the future or, if available, will be at favorable terms. In the event that the Company is unable to raise funds through the sale of its shares, the Company will have substantially less funds available to engage in its operational activities.
CRITICAL ACCOUNTING POLICIES
The Company recognizes revenues from consulting, educational and text message marketing services and 2) sponsored competition entry fees when (a) persuasive evidence that an agreement exists; (b) the products or services has been delivered or completed; (c) the prices are fixed and determinable and not subject to refund or adjustment; and (d) collection of the amounts due is reasonably assured. Revenues from consulting, educational and marketing services are generally recognized when the services have been performed as long as the other criteria have been met. Revenues from educational sponsored events, such as our English Olympiad, are recognized when the event has taken place
OFF-BALANCE SHEET ARRANGEMENTS
There are no off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operations do not employ financial instruments or derivatives which are market sensitive. Short term funds are held in non-interest bearing accounts and funds held for longer periods are placed in interest bearing accounts. Large amounts of funds, if available, will be distributed among multiple financial institutions to reduce risk of loss. The Company’s cash holdings do not generate interest income.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited consolidated financial statements of Firefish, Inc. and subsidiary for the years ended March 31, 2012 and 2011 appear as pages F-1 through F-13, at the end of the document.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On March 17, 2011, Board of Directors of the Registrant dismissed Seale and Beers, CPAs, its independent registered public account firm.
On the same date, March 17, 2011, the accounting firm of Silberstein Ungar, PLLC was engaged as the Registrant’s new independent registered public account firm. The Board of Directors of the Registrant and the Registrant's Audit Committee approved of the dismissal of Seale and Beers, CPAs and the engagement of Silberstein Ungar, PLLC as its independent auditor.
During the two most recent fiscal years and the interim period preceding the engagement of Silberstein Ungar, PLLC, we had not consulted with Silberstein Ungar, PLLC regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements; or (ii) any matter that was either the subject of a disagreement or event identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-K.
During the registrant’s two most recent fiscal years and the subsequent interim periods thereto, there were no disagreements with Silberstein Ungar, PLLC whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Silberstein Ungar, PLLC’s satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's consolidated financial statements. The report of Silberstein Ungar, PLLC with respect to our consolidated financial statements for the years ended March 31, 2011 and 2012 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles except for an explanatory paragraph relative to substantial doubt about our ability to continue as a going concern.
ITEM 9A. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in the Company’s SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer as appropriate to allow timely decisions regarding required disclosure.
Management, after evaluating the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-14(c) as of March 31, 2012 (the "Evaluation Date") concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were not effective to ensure that material information relating to the Company would be made known to them by individuals within those entities, particularly during the period in which this annual report was being prepared and that information required to be disclosed in the Company’s SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
ITEM 9A(T). CONTROLS AND PROCEDURES
MANAGEMENT'S ANNUAL 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 (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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.
Management's assessment of the effectiveness of the registrant's internal control over financial reporting is as of the year ended March 31, 2012. The Company believes that internal control over financial reporting is not effective. We have identified the following current material weakness considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations:
This material weakness was first identified by our Chief Executive and Principal Accounting Officer during the year ended March 31, 2010. This weakness continues to exist as of the March 31, 2012 due to the small size of the Company. We cannot remedy the weakness until additional employee(s) and/or consultants can be retained to adequately segregate duties. Until such time, Management is maintaining adequate records to substantiate transactions.
This annual 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 the Company’s internal control over financial reporting that occurred during the fiscal year ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information as to persons who currently serve as Firefish, Inc. directors or executive officers, including their ages as of March 31, 2012.
Term of Office
Our Directors are appointed for an initial term of one year or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board or the Shareholders of the Company. We may have staggered terms when the number of directors increases to seven or more.
We have one significant employee: Harshawardhan Shetty, who serves as our President and CEO. We have a written employment agreement with Mr. Shetty.
Harshawardhan Shetty, Sole Officer and Director since 2008
Presently, Mr. Shetty is the full-time sole officer and director of Firefish. Prior to his founding Firefish in April of 2008, Mr. Shetty was employed as an Investment Banker in the Media and Telecommunications franchise of Citigroup Global Markets in New York, NY from August 2007 until May of 2008. From August 2005 until May 2007, Mr. Shetty was a student at the Tuck Business School at Dartmouth, where he received his MBA. Prior to attending Tuck, Mr. Shetty was employed as a manager in strategy and business development at a large Indian based NGO, Pratham, based in Mumbai India, where he served from December of 2003 until June of 2005. Mr. Shetty was also previously employed at i2 Technologies, based in Dallas, Texas, in consulting and business development and at Infosys, in Bangalore, India, as a computer programmer. Mr. Shetty has a bachelor of technology degree in Mechanical Engineering from IIT Madras and a Master of Science degree in Mechanical Engineering from the University of Maryland, College Park.
Number of Directors. Our board of directors currently consists of one person. Our bylaws provide that the board of directors may consist of such number of directors as determined by the Board of Directors from time to time.
We may seek to add to our board independent directors, at a future date, who are qualified and willing to serve on our board. Once we add a sufficient number of independent directors into our board, we intend to comply with Securities & Exchange Commission, stock exchange, and FINRA rules regarding board members, committees and other corporate governance standards. There can be no assurance that we will be successful in attracting independent directors.
Independent Directors. None of our current Directors are “independent,” as defined in rules promulgated by the Securities & Exchange Commission, NASDAQ, or various stock exchanges.
Committees. Our board of directors currently does not have an audit committee, compensation committee or any other committee. We are looking for a suitable candidate who meets the definition of “financial expert” and would be independent, to join our board of directors and chair our audit committee. We intend to form an audit committee, compensation committee and other committees of our Board when we recruit additional independent directors, including a financial expert and other directors with the experience necessary for audit committee membership.
Code of Ethics. We have not adopted a code of ethics applicable to our executives, as defined by applicable rules of the SEC. We intend to adopt a code of ethics after we recruit independent directors and when we do, the code will be publicly available on our web site at www.firefish.in. If we make any amendments to our code of ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our code of ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our web site at www.firefish.in and/or in a report on Form 8-K filed with the SEC.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to officers and board members during the fiscal years ended March 31, 2012 and 2011. The table sets forth this information for Firefish Inc., including salary, bonus, and certain other compensation to the Board members and named executive officers for the past two fiscal years and includes all Board Members and Officers as of March 31, 2012.
SUMMARY EXECUTIVES COMPENSATION TABLE
On November 12, 2008, Mr. Shetty entered into an Employment Agreement with the Company. The Employment Agreement provides that Mr. Shetty may receive a monthly salary of $5,000, which he began to draw as of August 1, 2008. The Employment Agreement provided that Mr. Shetty’s 66,666,660 common shares of the Company were subject to repurchase by the Company at $0.0001 per share until the second anniversary of the Employment Agreement, but only in the event his services to the Company are terminated voluntarily or with Cause, as defined in the Employment Agreement. The Employment Agreement provides that our sole executive officer is eligible to participate in our equity incentive plans and other employee benefit programs, if any. However, there can be no assurance that we will adopt such plans.
Mr. Shetty’s employment is “at will” and therefore his Employment Agreement does not have a date of termination. Mr. Shetty’s employment can be terminated with or without cause. As Mr. Shetty is the sole director and officer of the Company and as such the terms of his employment agreement have not been negotiated with or approved by a disinterested third party.
Currently members of the Board of Directors do not receive compensation for their services as Board members. The Company may adopt a policy which will compensate existing and/or new board members. Board members may receive additional compensation for participating in the Committees. The amount of any compensation paid to board members and/or committee members will be set and approved by the board based on the Board’s review of compensation paid by companies which are similarly situated to the Company.
The following table sets forth certain information concerning compensation paid to the Company’s directors during the year ended March 31, 2012:
All of the Company’s officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not established an equity compensation plan or Incentive Stock Option Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information with respect to the beneficial ownership of Firefish, Inc. outstanding common stock by:
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of the date of this document into shares of the Company’s common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of the Company’s common stock that the Company believes was beneficially owned by each person or entity as of March 31, 2012.
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3 also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant or conversion of a security. Any securities not outstanding which are subject to such options, warrants or conversion privileges are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person. Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers and Directors
The Company has utilized offices leased from associates of Harshawardhan Shetty without charge. In August 2010 we leased office space in Mumbai, India under a one year lease. Monthly payments are approximately $850.
On November 12, 2008, Mr. Shetty entered into an Employment Agreement with the Company. The Employment Agreement provides that Mr. Shetty may receive a monthly salary of $5,000, which he has begun to draw as of August 1, 2008. The Employment Agreement provided that Mr. Shetty’s original 66,666,660 common shares of the Company were subject to repurchased by the Company at $0.0001 per share until the second anniversary of the Employment Agreement, but only in the event his services to the Company are terminated voluntarily or with Cause, as defined in the Employment Agreement. The Employment Agreement provides that our sole executive officer is eligible to participate in our equity incentive plans and other employee benefit programs, if any. However, there can be no assurance that we will adopt such plans.
Mr. Shetty’s employment is “at will” and therefore his Employment Agreement does not have a date of termination. Mr. Shetty’s employment can be terminated with or without cause. As Mr. Shetty is the sole director and officer of the Company and as such the terms of his employment agreement have not been negotiated with or approved by a disinterested third party.
The Company conducted a private placement in June of 2008, in which it sold 31,555,550 shares of the Company’s common stock for an aggregate price of $160,000. It also sold warrants to purchase 10,000,000 shares at an exercise price of $0.045 to Genesis Venture Fund India I, LP of which as of March 31, 2012, 1,333,340 remain exercisable. Genesis paid $10,000 for these warrants. Genesis currently owns 444,440 shares of the Company’s common stock, which it purchased in the June 2008 private placement. As of March 31, 2012, affiliates of Genesis, James Price and Jonathan Dariyanani, own 4,416,670 and 1,850,0000 shares of the Company’s common stock, respectively. Subsequent to March 31, 2012, the shares held by James Price were transferred to other entities. Messrs. Price and Dariyanani do not have any beneficial ownership of the shares owned by Genesis, but they do have the right, as principals of Genesis, to vote the Genesis shares until those shares are distributed to Genesis limited partners in accordance with the applicable limited partnership agreement. In fiscals 2011, the Genesis Venture Fund India I, LP exercised 444,440 warrants at $0.045 for an aggregate of $20,000. Total shares of the Company’s common stock held by Genesis Venture Fund India I, LP is 444,440 as of March 31, 2012.
The Company has also entered into an agreement with Zoma Ventures, LLC. Zoma Ventures, LLC has agreed to manage the public offering process for Firefish including hiring additional service providers and making disbursements to the Company’s independent auditors, legal counsel and other service providers. Firefish has expensed $2,500 and $12,050 in services contributed by Zoma Ventures through March 31, 2012 and 2011, respectively. Zoma Ventures is controlled by Jonathan Dariyanani.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On March 17, 2011, Board of Directors of the Registrant dismissed Seale and Beers, CPAs, its independent registered public account firm. On the same date, March 17, 2011, the accounting firm of Silberstein Ungar, PLLC was engaged as the Registrant’s new independent registered public account firm. Silberstein Ungar, PLLC is the Company's principal auditing accountant firm. The Company's Board of Directors has considered whether the provision of audit services is compatible with maintaining Silberstein Ungar, PLLCs independence.
The following table represents aggregate fees billed to the Company for the years ended March 31, 2012 and 2011 by Seale and Beers CPAs and Silberstein Ungar, PLLC.
*The audit fees paid during the years ended March 31, 2012 and 2011 paid on the Company’s behalf by Zoma Ventures, LLC were $2,000 and $4,000, respectively.
All audit work was performed by the auditors' full time employees.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following is a complete list of exhibits filed as part of this Form 10K. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K.
* Previously Filed
** Filed herewith
*** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Consolidated Financial Statements for the Years Ended March 31, 2012 and 2011
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
We have audited the accompanying consolidated balance sheets of Firefish, Inc. and Subsidiary as of March 31, 2012 and 2011 and the related consolidated statements of operations and comprehensive income, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Firefish, Inc. and Subsidiary as of March 31, 2012 and 2011, and the related statements of operations, stockholders’ deficit and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not recognized significant revenues and has an accumulated deficit of $365,917, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
June 22, 2012
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business
Firefish, Inc. (the “Company”) was incorporated in the State of Nevada on April 29, 2008 (“Inception”). The Company’s primary operations are in India.
The Company offers mobile and internet marketing services to retailers. The Company also offers educational services to young learners and young adults. On an annual basis, in January and February the Company hosts an English competency competition referred to as the English Olympiad.
2. Going Concern
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company, however, as of March 31, 2012 has incurred cumulative net losses of approximately $365,917 since inception and has a working capital deficit of $120,516. The Company currently has limited liquidity, and does not yet have revenue sufficient to cover operating costs over an extended period of time. These factors cause substantial doubt about the Company's ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
Management anticipates that the Company will be dependent, for the foreseeable future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3. Summary of Significant Accounting Policies
The accounting policies of the Company are in accordance with the accounting principles generally accepted in the United States of America and are presented in United States dollars (“USD”) using the accrual basis of accounting. Outlined below are those policies considered particularly significant.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value Measurements
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
The carrying amounts reported in the accompanying consolidated financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments.
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
As of March 31, 2012 and 2011, the Company' s cash was considered a level 1 instrument.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Firefish Networks Private Limited, an entity formed under the laws of the nation of India. All significant intercompany transactions have been eliminated in the consolidation.
Basic (Loss) per Common Share
Basic (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are 133,334 and 133,334 common stock equivalents from outstanding warrants as of March 31, 2012 and 2011, respectively. As of March 31, 2012, there are no potentially dilutive shares in connection with convertible notes payable as the note was not yet convertible. These potentially dilutive shares are excluded because they are considered anti-dilutive.
Cash and Cash Equivalents
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Accounts receivable are reported net of allowance for expected losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and the amount management expects to collect are charged to operations in the year in which those differences are determined, with an offsetting entry to a valuation allowance. As of March 31, 2012 and 2011, there have been no such charges.
The Company recognizes revenues from consulting, educational and text message marketing services and 2) sponsored competition entry fees when (a) persuasive evidence that an agreement exists; (b) the products or services has been delivered or completed; (c) the prices are fixed and determinable and not subject to refund or adjustment; and (d) collection of the amounts due is reasonably assured. Revenues from consulting, educational and marketing services are generally recognized when the services have been performed as long as the other criteria have been met. Revenues from educational sponsored events, such as our English Olympiad, are recognized when the event has taken place. Revenues from the resale of educational materials are recognized when shipped to the customer and all others of revenue recognition disclosed above are met. As of March 31, 2012 and 2011, we have no deferred revenues or costs related to our annual English Olympiad our competition took place in January and February and all previously deferred revenues and costs were recognized. As of March 31, 2012, the Company had deferred revenue of $6,905 recorded in accounts payable and accrued expenses on the accompanying balance sheet related to an educational training course in which payment had been received but the course had not been presented.
Comprehensive Income (Loss)
The Company recorded Other Comprehensive Income (Loss) for the year ended March 31, 2012 and 2011 of $(6,996) and $611, respectively, as the result of currency translation adjustments.
Derivative Financial Instruments
The provisions of ASC 815 - “Derivatives and Hedging” applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined ASC 815 and to any freestanding financial instruments that are potentially settled in an entity's own common stock. The guidance impacts the Company's consolidated financial statements and position due to embedded conversion feature on a note payable in which the conversion price resets at current market prices.
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
The Company’s policy regarding advertising is to expense advertising when incurred. The Company has incurred $0 and $111 in advertising expense for the years ended March 31, 2012 and 2011, respectively.
The Company follows ASC 740, Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
Net deferred tax assets consist of the following components as of:
During the years ended March 31, 2012 and 2011, the valuation allowance increased by $33,471 and $40,416, respectively. At March 31, 2012 the Company had approximately $248,000 of federal and state gross net operating losses available. The net operating loss carry forward, if not utilized, will begin to expire in 2031 for federal purposes and 2021 for state purposes.
Based on the available objective evidence, including the Company’s limited operating history and current liabilities in excess of assets, management believes it is more likely than not that the net deferred tax assets at March 31, 2012, will not be fully realizable. Due to the uncertainty surrounding realization of the deferred tax asset, the Company has provided a full valuation allowance against its net deferred tax assets at March 31, 2012.
The Company files income tax returns in the Indian jurisdiction only. Income tax returns filed for fiscal years 2008 and earlier are not subject to examination by U.S. federal state tax authorities. Income tax returns for fiscal years 2008 through 2012 remain open to examination by tax authorities in India. The Company believes that it has made adequate provisions for all income tax uncertainties pertaining to these open tax years.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
As of March 31, 2012, the Company has not issued any share-based payments to its employees or third-party consultants.
The Company will account for stock options issued to employees and consultants under Accounting Standards Codification (“ASC”) 718 “Compensation-Stock Compensation”. Under ASC 718, share-based compensation cost to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite vesting period.
The Company will measure compensation expense for its non-employee stock-based compensation under ASC 505 “Equity”. The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.
Concentration of Risks
The Company maintains its cash accounts in a commercial bank. The total cash balances held in a commercial bank are secured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, although on January 1, 2014 this amount is scheduled to return to $100,000 per depositor, per insured bank.
During the year ended March 31, 2012, two customers accounted for 12% and 58% of revenues. During the year ended March 31, 2011 one customer accounted for 41% of the revenues. As of March 31, 2011, one customer accounted for 85% of the accounts receivable. Management believes the loss of these organizations would have a material impact on the Company’s financial position, results of operations, and cash flows.
The consolidated financial statements are presented in United States Dollars, (“USD”), the reporting currency. The functional currency for the financial statements is Indian Rupees and in accordance with ASC Topic 830, "Foreign Currency Matters", foreign denominated monetary assets and liabilities are translated to their USD equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses were translated at the prevailing rate of exchange at the date of the transaction. Related translation adjustments are reported as a separate component of stockholder’s deficit, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
New Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05, Comprehensive Income (Topic 220): “Presentation of Comprehensive Income”, or ASU 2011-05. The amendments in this ASU require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011, with early adoption permitted. We are currently evaluating the impact of our pending adoption of ASU 2011-05 on our consolidated financial statements.
3. Convertible Note
On February 28, 2012, the Company borrowed $27,500, of which $25,000 in proceeds were received, under a short-term convertible note with a third party. Under the terms of the agreement, the note incurs interest at 8% per annum and is due on November 30, 2012. The note is convertible into common shares after six months and the conversion price is calculated by multiplying 51% (49% discount to market) by the lowest closing bid price during the 30 days prior to the conversion date.
Since the conversion feature is only convertible after six months, there is no derivative liability at the notes inception. However, the Company will account for the derivative liability upon the passage of time and the note becoming convertible if not extinguished, as defined above. Derivative accounting applies upon the conversion feature being available to the holder as it is variable and does not have a floor as to the number of common shares in which could be converted.
In addition, the fees paid to the lender were accounted for as a reduction of the proceeds received resulting in a $2,500 discount. The discount is being amortized over the term of the note. As of March 31, 2012, the discount was $2,500.
4. Common Stock
On May 21, 2010, Genesis Venture Fund India, LLP (“Genesis”), a related party due to significant holdings of the Company’s common stock, completed a partial exercise of its warrants to purchase 10,000,000 common shares of the Company at $0.045 per share by tendering $10,000 for the purchase of 222,220 shares. On June 16, 2010, Genesis exercised warrants for an additional 222,220 shares at $0.045 per share for $10,000.
Under the initial terms of the agreement, the warrants were due to expire on June 29, 2010. On June 29, 2010, the Company extended the expiration date of warrants to purchase 1,333,340 shares of common stock until August 15, 2011. On August 1, 2011, the Company extended the expiration date of warrants to purchase 1,333,340 shares of common stock until October 15, 2011. On December 21, 2011, the Company further extended the expiration date of the warrants to purchase 1,333,340 shares of common stock until March 31, 2012 for consideration of $2,000. On February 27, 2012, the Company further extended the expiration date of the warrants to purchase 1,333,340 shares of common stock until June 30, 2012 for consideration of $2,000.
Subsequent to March 31, 2012, on April 5, 2012, the Company amended the articles of incorporation to increase the number of authorized shares from 100,000,000 to 1,000,000,000 shares. In addition, effective April 18, 2012, the Company enacted a forward stock split of 10 to 1 shares. All share and per share amounts included herein have been changed to reflect this forward stock split.
5. Related Party Transactions
An officer of the Company has agreed to pay for certain costs in connection with the Company’s public filing requirements. These costs included legal and accounting fees. During the year ended March 31, 2012 and 2011 this officer paid $2,500 and $12,050 of these fees, respectively. The Company accounts for these amounts as a contribution of capital to additional paid-in capital.
In addition, the Company has an at-will employment agreement with its Chief Executive Officer. Under the terms of the agreement the Chief Executive Officer is paid a salary of $5,000 per month plus taxes. As of March 31, 2012 and 2011, included within accounts payable and accrued expenses - related parties is accrued salary and payroll taxes due under the agreement of $97,660 and $37,660, respectively.
On April 15, 2011, the Company entered into a consulting agreement with Aero Financial, Inc (“Aero”), a significant shareholder of the Company. Under the terms of the agreement the Company was to perform services related to business plan development, capital raising and overall management of one of Aero’s business ventures. Under the terms of the agreement, the Company was to be paid $10,000 per month for the term beginning April 1, 2011 through termination of December 31, 2011. On May 31, 2011, the agreement was terminated by the Company. The $20,000 received under the agreement has been classified as other income on the accompanying statement of operations and comprehensive loss due to the consulting services provided not being one of the Company’s primary lines of operation.
On July 15, 2011, the Company entered into a consulting agreement with Spectral Capital Corporation, whose legal counsel is a shareholder of the Company. Under the terms of the agreement the Company was paid $10,000 for services related to creating a professional presentation for the entity. The $10,000 received under the agreement has been classified as other income on the accompanying statement of operations and comprehensive loss due to the consulting services provided not being one of the Company’s primary lines of operation.
6. Subsequent Events
The Company has evaluated events subsequent to March 31, 2012 and has determined that no events, other than those disclosed above, have occurred that would materially affect the consolidated financial statements above.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.