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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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The following is management’s discussion and analysis of the consolidated financial condition and results of operations of Traqer Corp. (“Traqer”, the “Company”, “we”, and “our”) for the quarter ended February 28, 2017. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as its plans, objectives, expectations and intentions. Its actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements. The following information should be read in conjunction with the consolidated interim financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Report”).
Overview
We were
incorporated on April 4, 2014 under the laws of the state of Nevada. We are a provider of a cloud-based, volunteer tracking software solution aimed for organizations, non-profits and corporations. Our software will track employees and volunteers’ time specifically for time spent on volunteer activities. We will use innovative technologies and scalable platforms to give us the ability to offer a comprehensive solution to large and medium size organizations. Our Software-as-a-Service, or SaaS, platform will enable organizations to customize the activities and rewards available to their employees and volunteers. The software will be available on multiple devices including desktop computers, tablet computers and cell phones.
Our volunteer tracking software can be re-branded (white label) by organizations for their users. The users will have access on to the system on multiple digital platforms from any internet enabled location. By adapting the SaaS model we will offer our potential clients ease and speed of deployment, lower cost of ownership and the ability to grow and upgrade easily. Our cloud based platform also allows for easy scalability. Our solution facilitates the ability for the organization to show recognition and to award their employees/volunteers with points that can be redeemed for prizes. The awards and point values are totally customizable by the client.
Through our SaaS platform, our clients will benefit from a low cost of ownership, shorter implementation cycle and access to the latest version of our software. Additionally, our volunteer tracking solution will have intuitive web and mobile-based user interfaces that are easy for employees/volunteers to use across devices and environments. The easy new client signup and setup model and client-specific branding can lead to viral and organic adoption and our SaaS platform scales to support large, global implementations.
On December 15, 2015, the Company engaged Front Runner, Ltd., which specializes in online platforms and mobile applications, to complete the back-end and reporting aspects of the SaaS software. This technology was needed to finalize the software. The original agreement called for the Company to pay Front Runner, Ltd. total project fees of $120,000 consisting of an initial non-refundable deposit of $10,000 upon execution of the agreement, $10,000 to be paid upon the execution of each of ten (10) milestones, with the remaining $10,000 balance to be paid upon final sign-off. By October 1, 2016 Front Runner completed a sufficient amount of the project so that it was functional and marketing could commence and Front Runner has received an aggregate of $100,000. The parties have mutually agreed to delay work on the final milestone and payment therefore until a future date so that the Company can receive feedback from its clients and have that included in the final product.
As a result, we have a fully functional product that is available on the desktop browser, Android mobile platform and iPhone mobile platform. Two organizations are now using the product and signing up new individual chapters.
Target Market
We primarily focus on not-for-profit organizations that run volunteer programs, ideally, larger organizations with a national presence and multiple chapters. The low cost of the product per chapter makes it attractive to such organizations to enroll. A potential secondary market is large businesses that offer volunteering opportunities to their employees for some recognition or gain. Those companies usually track the volunteering activities on spreadsheets or as part of their HR system. However, most HR systems do not have proper support for these activities, especially not for self-reported activities. Management believes the Traqer system will be a good solution for both target markets.
Marketing and Sales
We plan to sell our social recognition solution through inside sales personnel based in the United States. Our sales organization is focused on establishing a client base. In addition, we plan to market our products using modern online marketing methods including display ads, search engine marketing, social media and target influencers such as celebrities and sports personalities. We anticipate that the online marketing efforts will target online sales through lead generation and social marketing. Marketing includes use of our corporate website to provide product and company information. Future efforts to begin a mailing campaign and social networking blogging are planned.
Intellectual Property
Our volunteer management system software has not been registered with the U.S. Patent and Trademark Office.
Limited Operating History
There is no historical financial information about us upon which to base an evaluation of our performance. We are a development stage company and have generated only minimal revenues to date. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.
Results of Operation
For the Three Months Ended February 28, 2017 as compared to the Three Months Ended February 28, 2016
Revenues
We had nominal revenue of $1,273 and $0 for the three months ended February 28, 2017 and 2016, respectively. Due to adding new customers at the end of 2016.
Operating Expenses
We incurred total operating expenses of $27,385 and $41,541 for the three months ended February 28, 2017 and 2016, respectively. For the three months ended February 28, 2017, $791 for general and administrative expenses. The remaining $26,594 is primarily for professional fees associated with public company reporting expenses.
Gain on settlement of accounts payable
During the three months ended February 28, 2017 the Company recorded an $11,682 gain on settlement of accounts payable
Net Loss
During the three months ended February 28, 2017 and 2016, we incurred a net loss of $14,430 and $41,539, respectively.
For the Six Months Ended February 28, 2017 as compared to the Six Months Ended February 28, 2016
Revenues
We had nominal revenue of $2,318 and $0 for the six months ended February 28, 2017 and 2016, respectively. Due to adding new customers at the end of 2016.
Operating Expenses
We incurred total operating expenses of $88,544 and $57,585 for the six months ended February 28, 2017 and 2016, respectively. For the six months ended February 28, 2017, $10,000 of these expenses were for software development costs to a related party and $14,521 for general and administrative expenses. The remaining $64,023 is primarily for professional fees associated with public company reporting expenses.
Gain on Settlement of Accounts Payable
During the six months ended February 28, 2017 the Company recorded an $11,682 gain on settlement of accounts payable.
Net Loss
During the six months ended February 28, 2017 and 2016, we incurred a net loss of $74,544 and $57,620, respectively.
Liquidity and Capital Resources
As of February 28, 2017, the Company had a working capital deficit of $38,631, an accumulated deficit of $256,296 and had earned only a
de minimis
amount of revenues which was insufficient to cover its operating costs. The Company intends to fund future operations through loans from shareholders and potential equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.
The ability of the Company to realize its business plan is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these issues, management intends to raise additional funds through loans from shareholders and potential equity offerings although it does not currently have any commitments to obtain such funds.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash Flows from Operating Activities
During the six months ended February 28, 2017 and 2016, the Company used cash in operating activities of $61,051 and $39,854, respectively. The cash used in operating activities during the six months ended February 28, 2017 and 2016, was primarily related to the Company’s net losses.
Cash Flows from Financing Activities
During the six months ended February 28, 2017 and 2016, the Company had cash provided by financing activities of $58,000 and $50,000, respectively. The cash provided by financing activities during the six months ended February 28, 2017 and 2016 was primarily related to proceeds from the issuance of notes payable to related parties.
Disclosure of Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting, as of February 28, 2017, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that the Company’s internal control over financial reporting was not effective as of February 28, 2017.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2017 and identified the following material weaknesses:
a)
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Lack of audit committee. The Company does not have a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
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b)
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Lack of proper segregation of duties due to limited personnel.
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c)
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Lack of a formal review process related to financial reporting that includes multiple levels of review.
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The Company’s management is committed to improving the Company’s internal controls and will: (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities; (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel; and (3) may consider appointing outside directors and audit committee members in the future.
The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, have discussed the material weakness noted above with the Company’s independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended February 28, 2017 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.