This Quarterly Report includes
forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These
statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking
statements include the information concerning our possible or assumed future results of operations set forth under the heading:
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking
statements also include statements in which words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements
are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder
values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue
reliance on any forward-looking statements.
ITEM 2 Management’s Discussion
and Analysis of Financial Condition and Results of Operations
Our Management’s
Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking
statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local
general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to
successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing
government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the
loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy
or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology;
and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking
statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on
facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks
and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking
statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports
as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results
of operations and prospects.
The following discussion
and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with,
its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting
principles generally accepted in the United States.
Summary Overview
We were formed in December
2014. We are developing a cloud based software to detect advertising fraud on the internet. We had revenues of approximately $116,000
in the year ended December 31, 2015, approximately 85% of which was from a single customer. We had revenues of $41,250 for the
three months ended June 30, 2016, nearly all of which was from a single customer.
Going Concern
As a result of our financial
condition, we have received a report from our independent registered public accounting firm for our financial statements for the
period from inception (December 19, 2014) through December 31, 2014, and the year ended December 31, 2015, that includes an explanatory
paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern
we must effectively balance many factors and begin to generate revenue so that we can fund our operations from our sales and revenues.
If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, our
cash on hand will last less than one month, and thus we must raise capital by issuing debt or through the sale of our stock. However,
there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.
Results of Operations for the Three and Six Months Ended June
30, 2016 and 2015
Introduction
We had revenues of $41,250
for the three months ended June 30, 2016, compared to $34,800 for the three months ended June 30, 2015. Our operating expenses
were $105,675 for the three months ended June 30, 2016, compared to $142,216 for the three months ended June 30, 2015, a decrease
of $36,541, or 26%.
We had revenues of $80,250
for the six months ended June 30, 2016, compared to $45,400 for the six months ended June 30, 2015. Our operating expenses were
$464,350 for the six months ended June 30, 2016, compared to $175,059 for the six months ended June 30, 2015, an increase of $289,291,
or 165%.
Our operating expenses
consisted mostly of general and administrative expenses, including general and administrative expenses to a related party.
Revenues and Net Operating Loss
Our revenue, operating
expenses, net operating loss, and net loss for the three and six months ended June 30, 2016 and 2015 were as follows:
|
|
Three Months
|
|
Three Months
|
|
|
|
Six Months
|
|
Six Months
|
|
|
|
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June 30,
|
|
June 30,
|
|
Increase/
|
|
June 30,
|
|
June 30,
|
|
Increase /
|
|
|
2016
|
|
2015
|
|
(Decrease)
|
|
2016
|
|
2015
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
41,250
|
|
|
$
|
34,800
|
|
|
$
|
6,450
|
|
|
$
|
80,250
|
|
|
$
|
45,400
|
|
|
$
|
34,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of revenue
|
|
|
—
|
|
|
|
1,255
|
|
|
|
(1,255
|
)
|
|
|
11,603
|
|
|
|
1,255
|
|
|
|
10,348
|
|
General and administrative
|
|
|
62,675
|
|
|
|
71,709
|
|
|
|
(9,034
|
)
|
|
|
361,097
|
|
|
|
91,052
|
|
|
|
270,045
|
|
General and administrative - related party
|
|
|
43,000
|
|
|
|
69,252
|
|
|
|
(26,252
|
)
|
|
|
91,650
|
|
|
|
82,752
|
|
|
|
8,898
|
|
Total operating expenses
|
|
|
105,675
|
|
|
|
142,216
|
|
|
|
(36,541
|
)
|
|
|
464,350
|
|
|
|
175,059
|
|
|
|
289,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
64,425
|
|
|
|
107,416
|
|
|
|
(42,991
|
)
|
|
|
384,100
|
|
|
|
129,659
|
|
|
|
254,441
|
|
Interest income (expense)
|
|
|
(44,371
|
)
|
|
|
28
|
|
|
|
(44,399
|
)
|
|
|
(56,335
|
)
|
|
|
51
|
|
|
|
(56,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
108,796
|
|
|
$
|
107,388
|
|
|
$
|
1,408
|
|
|
$
|
440,435
|
|
|
$
|
129,608
|
|
|
$
|
310,827
|
|
Revenues
Revenues were $41,250 for
the three months ended June 30, 2016, compared to $34,800 for the three months ended June 30, 2015, an increase of $6,450, or 19%.
Nearly all of the total revenue came from a single customer.
Revenues were $80,250 for
the six months ended June 30, 2016, compared to $45,400 for the six months ended June 30, 2015, an increase of $34,850, or 77%.
Nearly all of the total revenue came from a single customer
Direct Cost of Revenue
Direct cost of revenue
expenses was $0 for the three months ended June 30, 2016, compared to $1,255 for the three months ended June 30, 2015.
Direct cost of revenue
expenses was $11,603 for the six months ended June 30, 2016, compared to $1,255 for the six months ended June 30, 2015.
General and Administrative
General and administrative
expenses were $62,675 for the three months ended June 30, 2016, compared to $71,709 for the three months ended June 30, 2015, a
decrease of $9,034, or 13%. General and administrative expenses – related party were $43,000 for the three months ended June
30, 2016, compared to $69,252 for the three months ended June 30, 2015, a decrease of $26,252, or 38%.
General and administrative
expenses were $361,097 for the six months ended June 30, 2016, compared to $91,052 for the six months ended June 30, 2015, an increase
of $270,045, or 296%. A significant increase was due to an increase in consulting fees related to the removal of the vesting provision
of the warrants and the amortization of the fair value of the warrants. General and administrative expenses – related party
were $91,650 for the six months ended June 30, 2016, compared to $82,752 for the six months ended June 30, 2015, an increase of
$8,898, or 11%.
Operating Loss
Net operating loss was
$64,425 for the three months ended June 30, 2016, compared to $107,416 for the three months ended June 30, 2015, a decrease of
$42,991. Net operating loss decreased, as set forth above, primarily due to a decrease in general and administrative expenses.
Net operating loss was
$384,100 for the six months ended June 30, 2016, compared to $129,659 for the six months ended June 30, 2015, an increase of $254,441.
Net operating loss increased, as set forth above, primarily due to an increase in general and administrative expenses.
Other Income (Expense)
Other expense was $44,371
for the three months ended June 30, 2016, compared to other income of $28 for the three months ended June 30, 2015, a decrease
of $44,399. Other expense consisted of interest expense, net of interest income. The decrease of other income (or increase in interest
expense) is attributable to new debt issuances.
Other expense was $56,335
for the six months ended June 30, 2016, compared to other income of $51 for the six months ended June 30, 2015, a decrease of $56,386.
Other expense consisted of interest expense, net of interest income. The decrease of other income (or increase in interest expense)
is attributable to new debt issuances.
Net Loss
Net loss was $108,796 for
the three months ended June 30, 2016, or $0.01 per share, compared to $107,388 for the three months ended June 30, 2015, or
$0.01 per share, an increase of $1,408. Net loss increased, as set forth above, primarily due to an increase in interest expense
from new debt issuances, offset by a decrease in general and administrative expenses.
Net loss was $440,435 for
the six months ended June 30, 2016, or $0.03 per share, compared to $129,608 for the six months ended June 30, 2015, or $0.01
per share, an increase of $310,827. Net loss increased, as set forth above, primarily due to an increase in general and administrative
expenses and interest expense from new debt issuances.
Liquidity and Capital Resources
Introduction
During the three months
ended June 30, 2016, because we generated only nominal revenues, we had negative operating cash flows. Our cash on hand as of June
30, 2016 was $26,019, which was derived from the exercise of warrants and the sale of stock, notes and convertible promissory notes
to investors. Our monthly cash flow burn rate for 2015 was approximately $39,500. Although we have moderate short term cash needs,
as our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied
through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash
flow needs.
Our cash, current assets,
total assets, current liabilities, and total liabilities as of June 30, 2016 and December 31, 2015, respectively, are as follows:
|
June 30,
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
Change
|
|
|
|
|
|
|
Cash
|
$
|
26,019
|
|
$
|
1,536
|
|
$
|
24,483
|
Total Current Assets
|
72,817
|
|
|
150,360
|
|
(77,543)
|
Total Assets
|
75,899
|
|
|
155,123
|
|
(79,224)
|
Total Current Liabilities
|
123,376
|
|
|
25,152
|
|
98,224
|
Total Liabilities
|
$
|
123,376
|
|
$
|
25,152
|
|
$
|
98,224
|
Our cash increased slightly
because we were able to raise capital from the sale of warrants, notes and convertible notes. Our total current assets decreased
primarily because of a reduction in prepaid expenses. Our total current liabilities increased primarily because of the sale of
notes and convertible notes. Our stockholders’ deficit increased by $440,435 to $1,190,807.
In order to repay our obligations
in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however,
that we will be successful in these efforts.
Cash Requirements
Our cash on hand as of
June 30, 2016 was $26,019. Based on our nominal revenues and current monthly burn rate of approximately $39,500 per month, we will
need to continue to fund operations by raising capital from the sale of our stock and debt financings.
Sources and Uses of Cash
Operating Activities
We had net cash used in
operating activities of $(175,436) for the six months ended June 30, 2016, compared to $(123,304) for the six months ended June
30, 2015. For the six months ended June 30, 2016, the net cash consisted primarily of our net loss of $(440,435), offset primarily
by warrants issued for services expenses of $209,448. For the six months ended June 30, 2015, the net cash used in operating activities
consisted primarily of our net loss of $(129,608), increased by an increase in accounts receivable of $(26,800) and offset by an
increase in accounts payable of $32,575.
Investing Activities
We had $1,581 net cash
used in investing activities for the six months ended June 30, 2016, and $6,350 net cash used in investing activities for the six
months ended June 30, 2015.
Financing Activities
Our net cash provided by
financing activities for the six months ended June 30, 2016 was $201,500, all of which was proceeds from notes payable, convertible
notes payable and the exercise of warrants, compared to $330,000 for the six months ended June 30, 2015, all of which was proceeds
from the issuance of common stock.