|• FORM 10-Q • EX-31.1 • EX-31.2 • EX-32.1 • EX-32.2 • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE • XBRL TAXONOMY EXTENSION LABEL LINKBASE • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the quarterly period ended June 30, 2012
For the transition period from to
Commission file number: 000-27729
(Exact name of registrant as specified in its charter)
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 or No ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 x or No ¨.
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 the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x or ¨
There were 50,004,474 shares of the registrants common stock outstanding as of August 7, 2012.
See accompanying notes to condensed financial statements.
See accompanying notes to condensed financial statements.
See accompanying notes to condensed financial statements.
Note 1. Basis of Presentation
The unaudited condensed financial statements included herein have been prepared by Zap.Com Corporation (Zap.Com or the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP), have been condensed or omitted pursuant to such rules and regulations. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by US GAAP. These interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 8, 2012. The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2012.
Note 2. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of the Companys financial instruments for which the disclosure of fair value is required were as follows:
The carrying amounts of accounts payable approximate fair value and, accordingly, they are not presented in the table above. The fair values of short-term investments, which consist entirely of U.S. Treasury instruments classified as held-to-maturity, are based on observed market prices (Level 2 fair value measurement).
At June 30, 2012, the Companys short-term investments consisted of a U.S Treasury Bill, which had a remaining maturity of approximately four months with an interest rate of 0.13%. At December 31, 2011, the Companys short-term investments consisted of a U.S. Treasury Bill, which had a remaining maturity of approximately four months with an interest rate of 0.14%.
Note 3. Related Party Transactions
Since its inception, the Company has utilized the services of the management and staff of Harbinger Group Inc. (the Companys Principal Stockholder), under a shared services agreement that allocated these costs on a percentage of time basis. The Company also shares office space with its Principal Stockholder under such agreement. Through June 30, 2012, the Principal Stockholder has waived its rights under the shared services agreement to be reimbursed for these costs. The Company recorded approximately $18,000 and $15,000 as contributed capital for such services for the six months ended June 30, 2012 and 2011, respectively. The Company believes these allocations were made on a reasonable basis; however, they do not necessarily represent the costs that would have been incurred by the Company on a stand-alone basis.
This Managements Discussion and Analysis of Financial Condition and Results of Operations of Zap.Com Corporation (the Company, Zap.Com, we, us, or our) should be read in conjunction with our unaudited condensed financial statements included elsewhere in this report and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the Form 10-K) filed with the Securities and Exchange Commission (the SEC) on March 8, 2012. Certain statements we make under this Item 2 constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. See Forward-Looking Statements in Part II Other Information of this report. You should consider our forward-looking statements in light of our unaudited condensed financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the SEC.
The Company was incorporated in Nevada in 1999 for the purpose of creating and operating a global network of independently owned web sites. Harbinger Group Inc. (our Principal Stockholder or HGI) owns approximately 98% of our outstanding common stock. Currently, we have no business operations, other than complying with our reporting requirements under the Securities Exchange Act of 1934. We may search for assets or businesses to acquire so that we may in the future become an operating company, or we may sell assets and/or liquidate our operations.
We have broad discretion in selecting a business strategy for the Company, as part of which, we may decide to engage in one or more business combinations, or we may sell our assets and/or liquidate our operations. If we elect to pursue a business combination, we have broad discretion in identifying and selecting both the industries and the possible acquisition or business combination opportunities. We have not identified a specific industry to focus on and have no present plans, proposals, arrangements or understandings with respect to a business combination or acquisition of any specific business. There can be no assurance that we will, or will be able to, identify or successfully complete any such transactions. As of the date of this report, we are not a party to any agreements providing for a business combination or other acquisition of assets. If we enter into any such transaction, we may pay acquisition consideration in the form of cash, debt or equity securities or a combination thereof. In addition, as a part of any such transaction we may consider raising additional capital through the issuance of equity or debt securities, including the issuance of preferred stock.
Results of Operations
For the three and six months ended June 30, 2012 and 2011, our operations consisted of the following:
Revenues. We had no revenues for the three and six months ended June 30, 2012 and 2011, and we do not presently have any revenue-generating business.
Cost of revenues. We had no cost of revenues for the three and six months ended June 30, 2012 and 2011.
General and administrative expenses. General and administrative expenses consist primarily of legal and accounting professional services, printing and filing costs, expenses allocated for services by our Principal Stockholder under a shared services agreement, and various other costs. General and administrative expenses increased by $13,000 to $41,000 for the three months ended June 30, 2012 from $28,000 for the three months ended June 30, 2011. General and administrative expenses increased by $20,000 to $132,000 for the six months ended June 30, 2012 from $112,000 for the six months ended June 30, 2011. These increases in general and administrative expenses for the three and six month periods were principally related to an increase in professional fees for our outsourced internal audit function and for the outside services related to our required implementation of eXtensible Business Reporting Language (XBRL) for filings with the SEC.
Interest Income. Interest income was insignificant for the three and six months ended June 30, 2012 and 2011. Our interest income will continue to be negligible while our cash is maintained in bank accounts or invested in U.S. Government instruments with nominal interest rates.
Liquidity and Capital Resources
We have not generated any significant revenue since our inception. As a result, our primary source of liquidity has been from our initial capitalization and, to a lesser extent, the interest income generated on our cash equivalents and short-term investments. As we limit our investments principally to U.S. Government instruments, we do not expect to earn significant interest income in the near term. At June 30, 2012, our cash and cash equivalents were $304,000 and we held $750,000 in short-term investments.
Since our inception, we have utilized services of the management and staff and occupied office space of our Principal Stockholder under a shared services agreement that allocated these costs. Our Principal Stockholder has waived its rights under the shared services agreement to be reimbursed these costs through June 30, 2012. For the six months ended June 30, 2012 and 2011, we recorded approximately $18,000 and $15,000, respectively, as contributed capital for these services.
We believe that we have sufficient resources to satisfy our existing liabilities and our anticipated operating expenses for the next twelve months. Until such time as we actively pursue a business combination, asset acquisition or liquidate our operations, we expect these expenses to consist mainly of general and administrative expenses incurred in connection with maintaining our status as a public reporting company. We have no commitments for capital expenditures and foresee none, except for possible future business combinations or asset acquisitions. In order to effect a business combination or asset acquisition, however, we may need additional financing. There is no assurance that any such financing will be available or available on terms favorable or acceptable to us.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements at June 30, 2012 that have or are reasonably likely to have a current or future material effect on our financial position, results of operations or cash flows.
Summary of Cash Flows
Cash used in operating activities was $98,000 for the six months ended June 30, 2012 compared to $81,000 for the six months ended June 30, 2011. The $17,000 increase is principally due to an increase in professional fees.
Cash used in investing activities was $600 for the six months ended June 30, 2012, and cash provided by investing activities was $500 for the six months ended June 30, 2011. The cash used in or provided by investing activities is the result of the net purchases and maturities of short-term investments during the respective periods.
We had no cash flows from financing activities for the six months ended June 30, 2012 and 2011.
Recent Accounting Pronouncements Not Yet Adopted
As of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would have a material impact on our financial statements.
Critical Accounting Policies and Estimates
As of June 30, 2012, our critical accounting policies and estimates have not changed materially from those set forth in our Form
We do not have any long-term debt obligations, capital leases obligations, operating lease obligations or purchase obligations at June 30, 2012.
We do not have any market risk exposure to changes in interest rates, foreign currency exchange rates, equity prices or commodity prices at June 30, 2012. At that date, our investments consist entirely of a U.S Treasury Bill, which had a remaining maturity of approximately four months. We had no outstanding derivative instruments or long-term debt at June 30, 2012.
Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision of the Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Companys management, including the CEO and CFO, concluded that, as of June 30, 2012, the Companys disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and is accumulated and communicated to the Companys management, including the Companys CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Notwithstanding the foregoing, there can be no assurance that the Companys disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Companys periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Changes in Internal Controls Over Financial Reporting
An evaluation was performed under the supervision of the Companys management, including the CEO and CFO, of whether any change in the Companys internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended June 30, 2012. Based on that evaluation, the Companys management, including the CEO and CFO, concluded that no significant changes in the Companys internal controls over financial reporting occurred during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
Zap.Com Corporation (referred to as the Company, we, us, or our) has made forward-looking statements in this Quarterly Report on Form 10-Q that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management. Generally, forward-looking statements include information concerning possible or assumed future actions, events or results of operations of our Company. Forward-looking statements include, without limitation, the information regarding our assets and operations and managements plans for the Company.
Forward-looking statements may be preceded by, followed by or include the words may, will, believe, expect, anticipate, intend, plan, estimate, could, might, or continue or the negative or other variations thereof or comparable terminology. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.
Forward-looking statements are not guarantees of performance. You should understand that the following important factors, in addition to those discussed in Part I-Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission (the SEC) on March 8, 2012 (the Form 10-K), could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements.
Important factors that could affect our future results include, without limitation, the following:
Some of the above-mentioned factors are described in further detail in the section entitled Risk Factors set forth in our Form 10-K. You should assume the information appearing in this report is accurate only as of June 30, 2012 or as otherwise specified herein, as our business, financial condition, results of operations and prospects may have changed since that date. Except as required by applicable law, including the securities laws of the U.S. and the rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
When considering an investment in the Company, you should carefully consider the risk factors discussed in our Form 10-K for fiscal year ended December 31, 2011 and the risk factor below. Any of these risk factors could materially and adversely affect our business, financial condition and results of operations, and these risk factors are not the only risks that we may face. Additional risks and uncertainties not presently known to us or that are not currently believed to be material also may adversely affect us. With the exception of the modifications to previously disclosed risk factors discussed below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Form 10-K.
We are dependent on certain key personnel and our affiliation with our Principal Stockholder and Harbinger Capital; our Principal Stockholder, Harbinger Capital and its affiliates will exercise significant influence over us and our business activities; and business activities, legal matters and other matters that affect our Principal Stockholder and Harbinger Capital and certain key personnel could adversely affect our ability to execute our business strategy.
We are dependent upon the skills, experience and efforts of Philip A. Falcone, Omar M. Asali and Thomas Williams, the Chairman of our board, our President and our Chief Executive Officer, one of our directors and the President of HGI, and our Chief Financial Officer and Executive Vice President, respectively. As a result of their positions with our Company, Mr. Falcone, Mr. Asali and Mr. Williams have significant influence over our business strategy and make most of the significant policy and managerial decisions of our Company. Mr. Falcone is also the Chief Executive Officer and Chief Investment Officer of Harbinger Capital Partners LLC (Harbinger Capital), the parent company of HGI, and may be deemed to be an indirect beneficial owner of the shares of our common stock owned by HGI. Accordingly, Mr. Falcone may exert significant influence over all matters requiring approval by our stockholders, including the election or removal of directors and stockholder approval of acquisitions or other significant transactions. The loss of Mr. Falcone, Mr. Asali or Mr. Williams or other key personnel could have a material adverse effect on our business or operating results.
In addition, Mr. Falcones, Harbinger Capitals, Mr. Asalis, Mr. Williams and HGIs reputation and access to acquisition candidates is important to our strategy of identifying acquisition opportunities. While Mr. Falcone, Mr. Asali and Mr. Williams may devote a portion of their time to our business, they are not required to commit their full time to our affairs and will allocate their time between our operations and their other commitments in their discretion.
On June 27, 2012, the United States Securities and Exchange Commission (SEC) filed two civil actions in the United States District Court for the Southern District of New York, asserting claims against Harbinger Capital, Harbinger Capital Partners Offshore Manager, L.L.C., and certain of their current and former affiliated entities and persons, including Mr. Falcone. One civil action alleges that the defendants violated the anti-fraud provisions of the federal securities laws by engaging in market manipulation in connection with the trading of the debt securities of a particular issuer from 2006 to 2008. The other civil action alleges that the defendants violated the anti-fraud provisions of the federal securities laws in connection with a loan made by Harbinger Capital Partners Special Situations Fund, L.P. to Mr. Falcone in October 2009 and alleges further violations in connection with the circumstances and disclosure regarding alleged preferential treatment of, and agreements with, certain fund investors. As previously disclosed, Harbinger Capital and certain of its affiliates received Wells Notices in December 2011 with respect to the matters addressed by these actions.
We understand that Harbinger Capital and its affiliates deny the charges in the SECs complaints and intend to vigorously defend against them. It is not possible at this time to predict the outcome of these actions, including whether the matters will result in settlements on any or all of the issues involved. However, in these actions the SEC is seeking a range of remedies, including permanent injunctive relief, disgorgement, civil penalties and prejudgment interest and an order prohibiting Mr. Falcone from serving as an officer and director of any public company.
If Mr. Falcones, Harbinger Capitals, Mr. Asalis, Mr. Williams or HGIs other business interests or legal matters require them to devote more substantial amounts of time to those businesses or legal matters, it could limit their ability to devote time to our affairs and could have a negative effect on our ability to execute our business strategy.
Pursuant to the requirements 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.