果冻APP传媒

Quarterly report pursuant to sections 13 or 15(d)

2. Significant Accounting Policies (Policies)

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2. Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
Principles of Consolidation

 Principles of Consolidation

 

The consolidated financial statements include the accounts of 果冻APP传媒 Group, Inc. and its wholly-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates

 

Use of Estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements.  Actual results could differ from those estimates.  Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.
Restricted Cash

 

Restricted Cash

 

Restricted cash represents amounts pledged as security for transactions involving Title IV programs.  Upon the DOE’s completion of its review of the Company’s application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.

 

Consistent with the Higher Education Act, 果冻APP传媒’s certification to participate in Title IV programs terminated after closing of the reverse merger, and 果冻APP传媒 must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs.  However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like 果冻APP传媒, under certain circumstances while the DOE reviews the institution’s application.  On March 15, 2012 the DOE asked 果冻APP传媒 to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of 果冻APP传媒’s Title IV receipts in 2011.  On March 27, 2012, the Company opened a 12-month money market account, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit.  The Company shall consider $105,932 (includes accrued interest of $67) as restricted cash until such letter of credit expires.  As of June 30, 2012, the account bears interest of 0.25%.
Fair Value Measurements

 

Fair Value Measurements

 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

 

● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

 

● Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

 

● Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 
Net Loss Per Share

 

Net Loss Per Share

 

Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 1,925,000 and 0 stock options, 882,500 and 400,000 stock warrants, and a variable amount of shares underlying $2,255,825 (a minimum of 2,255,825 common shares as of June 30, 2012) and $15,000 of convertible notes payable for the six months ended June 30, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.
Recent Accounting Pronouncements

 

Recent Accounting Pronouncements

 

In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires 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.  It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity.  The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.  This ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.