NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. As of June 30, 2014, we had $42,871 in deferred revenues and $5,761 in deferred costs related to our annual English Olympiad. The competition typically takes place in January and February and all deferred revenues and costs will be recognized at that time.
2. Summary of Significant Accounting Policies
Going Concern
The accompanying 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, has incurred net losses of approximately $792,000 since inception and has a working capital deficit of approximately $251,000. The Company currently has limited liquidity, and does not yet have revenues sufficient to cover operating costs over an extended period of time. 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 financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Basis of Presentation
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”). Outlined below are those policies considered particularly significant. The accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of June 30, 2014, and the results of its operations and cash flows for the three months ended June 30, 2014 and 2013. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange
Commission. The Company believes that the disclosures in the unaudited consolidated financial statements are adequate to make the information presented not misleading. The operating results of the Company on a quarterly basis may not be indicative of operating results for the full year. For further information, refer to the financial statements and notes included in the Company’s Form 10-K for the year ended March 31, 2014.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
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.
Principles of Consolidation
The 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 loss 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 were no common stock equivalents outstanding as of June 30, 2014 and 2013.
Concentration of Risks
During the three months ended June 30, 2014, two customers accounted for 52.8% and 29.3% of revenues, respectively. During the three months ended June 30, 2013, two customers accounted for 63.9% and 24.3% of revenues, respectively. Management believes the loss of these customers would not have a material impact on the Company’s financial position, results of operations, and cash flows.
3. Convertible Note and Derivative Liability
Commencing March 11, 2013, the Company's $32,500 convertible note issued on September 11, 2012 was convertible into common stock. The Company determined that since the conversion price was variable and did not contain a floor, the conversion feature represented a derivative liability.
The Company calculated the derivative liability related to the convertible note issued on September 11, 2012 using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of $47,885, resulting in a full discount to the note, with the excess fair value of the derivative liability over the convertible note of $15,385 charged immediately to expense during the year ended March 31, 2013. The discount was being amortized over the term of the note. During the three months ended June 30, 2014 and 2013, $0 and $21,665, respectively, of the discount was amortized to interest expense.
FIREFISH, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the three months ended June 30, 2013, the holder of the convertible notes converted $4,400 of principal into 5,365,854 shares of common stock and was repaid the remaining balance of $22,700. The derivative liability of $26,318 associated with the converted and paid principal was credited to additional paid-in capital at the time of conversion and payment.
4. Long-term Debt
On December 8, 2012 the Company borrowed $11,993 from a third party under a long-term note. Under the terms of the agreement, the note incurred zero percent interest and had no specified maturity date. Imputed interest on the note was insignificant. In June 2013, the long-term note was paid in full.
5. Common Stock
In June 2013, the Company sold 5,000,000 shares of common stock for proceeds of $50,000.
See Note 3 for discussion regarding $4,400 of convertible notes payable converted into 5,365,854 shares of common stock.
6. Related Party Transactions
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 June 30, 2014, included within accrued expenses - related parties are accrued salary and payroll taxes due under the agreement of $203,985.
In addition, from time to time the Company's Chief Executive Officer advances monies to fund operations. These advances do not incur interest and are due on demand. As of June 30, 2014, advances owed were $29,021.
7. Subsequent Events
Management has assessed subsequent events subsequent to June 30, 2014 through the date of issuance of these consolidated financial statements, and has determined it does not have any material subsequent events to disclose in these consolidated financial statements.