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LTNR > SEC Filings for LTNR > Form 10-Q on 16-Dec-2013All Recent SEC Filings

Show all filings for LOTON, CORP

Form 10-Q for LOTON, CORP


16-Dec-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements made in this Quarterly Report on Form 10-Q ("Quarterly Report") are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995). Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "may," "could," "should," "if," "estimates," and similar expressions are intended to identify forward-looking statements.

The forward-looking statements are based on various factors and were derived using numerous assumptions. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

References to "Company," "we" or "us" refer to Loton, Corp, unless the context requires otherwise.

Description of Business

Loton, Corp was incorporated in the State of Nevada on December 28, 2009 to provide 3D rendering, animation and architectural visualization services using advanced computer technology to produce photo realistic 3D rendering, walk-through animation and 360 degree panorama.

On September 9, 2011, Trinad Capital Master Fund, a Cayman Island exempted company, ("Trinad"), entered into a Securities Purchase Agreement with Alex Kuznetsov, a shareholder and the sole director and executive officer of the Company (the "Purchase Agreement"). Pursuant to the terms of the Purchase Agreement, Mr. Kuznetsov sold to Trinad an aggregate of 4,000,000 shares of the Company's common stock $.001 par value per share, representing 80% of the issued and outstanding Common Stock of the Company as of October 31, 2011 (the "Closing"). Trinad paid $311,615 for the shares. The managing member of Trinad Management, LLC, the investment manager of Trinad, is Robert S. Ellin. In accordance with the Purchase Agreement, effective upon the closing (a) Alex Kuznetsov resigned as the Company's Chief Executive Officer, President and sole director, (b) Robert S. Ellin was appointed as the sole director of the Board to serve until the next annual stockholders meeting and until his successor is duly elected and qualified, and (c) Robert S. Ellin was appointed President, Chairman and Chief Executive Officer of the Company. Mr. Ellin became the Chief Financial Officer and Secretary on April 26, 2012. In addition, on April 26, 2012, Jay Krigsman was appointed as a director of the Board to serve until the next annual stockholders meeting and until his successor is duly elected and qualified.

At present, the Company has no sources of revenue and we are an inactive company. The Company is currently considered to be a blank check company. The SEC defines those companies as any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) and Rule 3a51-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies. Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a shell company because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of blank check companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.

Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

The Company currently does not engage in any business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:

(i) filing Exchange Act reports, and

(ii) investigating, analyzing and consummating an acquisition.

We believe we will be able to meet these costs through use of funds in our treasury, through deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. However, we cannot assure you that this will be the case or that the Company will be able to secure any additional funding as needed. Currently, our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and enter into a possible reverse merger transaction with or other acquisition of such company. Management's plan includes obtaining additional funds by equity financings and/or related party loans or advances; however there is no assurance of additional funding being available.

The Company may consider acquiring a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.

Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks. Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders, which is likely to occur if our management offers a substantial interest in our Company to a target business in order to acquire it. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.

The Company anticipates that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

Management Agreement

On September 23, 2011, the Company entered into a Management Agreement ("Management Agreement") with Trinad Management, LLC ("Trinad Management"). Pursuant to the Management Agreement, Trinad has agreed to provide certain management services to the Company for a period of three (3) years, including without limitation the sourcing, structuring and negotiation of a potential business combination transaction involving the Company. Under the Management Agreement the Company will compensate Trinad Management for its services with
(i) a fee equal to $2,080,000, with $90,000 payable in advance of each consecutive three-month period during the term of the Agreement and with $1,000,000 due at the end of the 3 year term unless the Management Agreement is otherwise terminated earlier in accordance with its terms, and (ii) issuance of a Warrant to purchase 1,125,000 shares of the Company common stock at an exercise price of $0.15 per share. The warrant may be exercised in whole or in part by Trinad Management at any time for a period of ten (10) years.

Liquidity and Capital Resources

As of October 31, 2013, the Company had total current assets of $930,306 comprised of cash, prepaid management fees and prepaid expenses in comparison with that of $65,895 comprised of cash and prepaid expenses as of April 30, 2013. The Company had total current liabilities of $623,706 comprised primarily of notes payable of $500,000 due investors, accounts payable of $68,365 and accrued expenses of $31,113, and an advance from our Chief Executive Officer of $24,228 as of October 31, 2013 in comparison with current liabilities of $424,607 as of April 30, 2013, comprised primarily of notes payable of $300,000 due investors, accounts payable of $72,040, and an advance from our Chief Executive Officer of $35,123 as of April 30, 2013.

On November 8, 2011, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 250,000 shares of common stock for an aggregate purchase price of $250,000. The proceeds were for general administrative purposes.

On December 27, 2011, the Company entered into a second securities purchase agreement with the same investor pursuant to which the Company issued the investor 150,000 shares of common stock for an aggregate purchase price of $150,000. The proceeds were for general administrative purposes.

On September 11 and September 20, 2012, the Company entered into two separate securities purchase agreements with two accredited investors, pursuant to which the Company agreed to issue an aggregate of 275,000 shares of its common stock for an aggregate purchase price of $275,000.

On November 15, 2012, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 100,000 shares of common stock for an aggregate purchase price of $100,000.

On December 13, 2012, the Company entered into a Stock Purchase Agreement with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 200,000 shares of its common stock for an aggregate purchase price of $200,000.

On February 6, 2013, the Company entered into a Stock Purchase Agreement with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 50,000 shares of its common stock for an aggregate purchase price of $50,000.

On August 28, 2013, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 250,000 shares of common stock for an aggregate purchase price of $250,000.

On September 19, 2013, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 300,000 shares of common stock for an aggregate purchase price of $300,000.

On October 7, 2013, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 400,000 shares of common stock for an aggregate purchase price of $400,000.

On October 8, 2013, the Company entered into a securities purchase agreement with an investor pursuant to which the Company agreed to issue the investor 1,000,000 shares of common stock for an aggregate purchase price of $1,000,000. As of the date of this Quarterly Report, this transaction has not closed because the investor has not made timely payment under the agreement.

On October 30, 2013, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued the investor 300,000 shares of common stock for an aggregate purchase price of $300,000.

On April 2, 2012, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $150,000, with interest at 6% per annum, and principal due on April 1, 2013, and the maturity date of the note was subsequently extended to November 1, 2014.

On May 13, 2013, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $10,000, with interest at 6% per annum, and principal due on May 13, 2014.

On June 21, 2012, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $150,000, with interest at 6% per annum, and principal due on June 20, 2013, and the maturity date of the note was subsequently extended to November 1, 2014.

On May 23, 2013, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $50,000, with interest at 6% per annum, and principal due on May 23, 2014.

On June 17, 2013, the Company signed a promissory note with the Trinad Capital Master Fund for the amount of $100,000, with interest at 6% per annum, with principal due on June 17, 2014.

On July 2, 2013, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $10,000, with interest at 6% per annum, and principal due on July 2, 2014.

On July 3, 2013, the Company signed a promissory note with Trinad Capital Master Fund for the amount of $30,000, with interest at 6% per annum, and principal due on July 3, 2014.

The total aggregate accrued interest on the promissory notes with Trinad Capital Master Fund set forth above was $31,113 as of October 31, 2013.

The Company has nominal assets and has generated no revenues since inception. The Company is dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. If continued funding and capital resources are unavailable on reasonable terms, the Company may not be able to implement its plan of operations. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.

We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures. We intend to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding.

Results of Operations

No revenue has been generated by the Company from December 28, 2009 (Inception) through October 31, 2013. It is unlikely the Company will have any significant revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. These circumstances may hinder the Company's ability to continue as a going concern. The Company's plan of operation for the next twelve months is to continue its efforts to locate suitable acquisition candidates.

For the six months ended October 31, 2013, the Company had a net loss of $1,011,977, including consulting fees and professional fees, management fees and salaries of $788,908, travel expenses of $61,209, general and administrative expenses of $98,155 and an impairment loss on notes receivable of $50,000.

For the six months ended October 31, 2012, the Company had a net loss of $518,297, including consulting fees and professional fees, management fees and salaries of $469,981, travel expenses of $34,469 and general administrative expenses of $5,365.

For the three months ended October 31, 2013, the Company had a net loss of $634,520, including consulting fees and professional fees, management fees and salaries of $473,228, travel expenses of $61,209, general and administrative expenses of $42,521 and an impairment loss on notes receivable of $50,000.

For the three months ended October 31, 2012, the Company had a net loss of $283,658, including consulting fees and professional fees, management fees and salaries of $253,181, travel expenses of $21,646 and general administrative expenses of $4,294.

For the period from December 28, 2009 (Inception) through October 31, 2013, the Company had a deficit accumulated of $3,285,671, including consulting fees, professional fees and general administrative expenses incurred in relation to the formation of the Company, the filing of the Company's Registration Statement on Form S-1, the filing of the Company's periodic reports, consulting fees, and management services fees.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Going Concern

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have a history of recurring losses that are likely to continue in the future. Our financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We may be required to cease operations which could result in our stockholders losing almost all of their investment.

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