Item
2.
Management’s Discussion and Analysis or Plan of Operation.
The following discussion of our financial condition, changes in
financial condition and results of operations for the three month period ended
December 31, 2007 should be read in conjunction with our unaudited consolidated
interim financial statements and related notes for the three month period ended
December 31, 2007.
Overview
MobiVentures Inc. (“we”, “us”, “our” or the “Company”) is
engaged in the business of providing multi-media mobile content, applications
and services. We were originally engaged in the business of commercializing our
MobileMail software. In 2007, we identified an opportunity to grow through the
strategic consolidation of fast growing companies operating within the mobile
content and service industry. In line with this strategy, we acquired Oy
Tracebit AB (“Tracebit”), a Finnish mobile games and content company, and held
discussions with a number of other companies as acquisition targets in the U.S.,
Europe and South East Asia. We are continuing discussions with certain of these
companies at the present time, although no definitive acquisition agreements
have been executed to date. Our plan is to develop our existing business through
acquisitions and internal growth in order to become an established provider of
leading edge multi-media mobile content, applications and services with clients
across the United Kingdom, Europe, Asia and North America. Tracebit has
developed more than 30 original games and applications for mobile phones and
simultaneously created a global network of customers consisting of over 150
agreements including sales channels with global mobile carriers, service
providers and content distributors, ensuring delivery to a global audience.
Tracebit licenses well-known brands to attach to the products it makes in order
to differentiate from other products in the marketplace.
We believe we have assembled a strong management team both
through the acquisition of Tracebit and by engaging with seasoned executives
from the mobile industry who have a proven track record in creating sustainable
and profitable ventures within the mobile sector, both in Europe and the U.S.
We are also the owner of a suite of software applications that
we refer to as the MobileMail software which provide a platform for enabling
users to send Short Message Service (“SMS”) messaging traffic to wireless
devices using the Internet and to, in turn, receive SMS messages from wireless
devices through the Internet. The SMS short message service refers to an
industry adopted standard for sending and receiving text messages to and from
mobile telephones. Our MobileMail messaging solutions allow network operators
and enterprises to offer their customers SMS messaging on their Internet home
pages and the ability to send SMS messages from their personal computers.
The MobileMail SMS messaging technology is no longer the core
product in relation to our current and future operational plans. As such, we do
not envisage proceeding with any further developments of the messaging
technology. Support will continue to current customers but no resources will be
allocated to extend the sales and marketing of the current SMS messaging
platform.
Acquisition of OY Tracebit AB
On February 6, 2007, we completed the acquisition (the
“Acquisition”) of all of the issued and outstanding shares in the capital of
Tracebit pursuant to an Equity Share Purchase Agreement dated January 31, 2007
among the Company and Capella Capital OU, Pollux OU and Tracebit Holding OY
(collectively, the “Vendors”) and Tracebit in consideration for the issuance of
an aggregate of 8,224,650 shares of our common stock to the Vendors.
- 2 -
We appointed three new directors to our board of directors upon
the completion of the Acquisition, each of whom was a principal shareholder of
Tracebit. The business of Tracebit has been our primary business subsequent to
the completion of the Acquisition.
Our Corporate Organization
We were incorporated on April 1, 2005 under the laws of the
State of Nevada. We carry out our business operations through our wholly owned
subsidiaries, Tracebit and Mobilemail Limited (“Mobilemail UK”). MobileMail UK
is incorporated and headquartered in the United Kingdom. Tracebit is
incorporated and headquartered in Finland. Our principal office is located at
Sunnyside, Brinkworth, Chippenham, Wiltshire, England SN15 5BY. Our telephone
number is +44 (0)7740 611413 and our fax number is +44 (0) 845 2 99 1729.
Effective July 30, 2007, we increased our authorized capital
from 100,000,000 shares to 300,000,000 shares with a par value of $0.001 per
share. Effective August 2, 2007, we completed a change of our corporate name
from “Mobilemail (US) Inc.” to “MobiVentures Inc.”.
Tracebit was incorporated under the laws of Finland in October
1996. Initially, the core business of Tracebit was IT consulting. However, in
2001, Tracebit divested its IT consulting business and entered the mobile
sector, first by selling ring tone and logo editor products created by it and
later the same year focusing on emerging J2ME mobile games market.
Froggie S.L. and Norris Marketing S.L.
Partnership Agreement
We entered into a partnership agreement with Froggie S.L.
(“Froggie”) and Move2Mobile Limited (“M2M”) on October 31, 2007. The partnership
agreement contemplates the creation of a business to be operated in partnership
between us and Froggie pursuant to which the net income derived from the
business will be split equally between us and Froggie on a 50/50 basis. In
addition, Froggie has agreed to provide “bridge financing” to us to an agreed
maximum of 120,000 Euros.
Letter of Intent
The execution of the partnership agreement follows the
execution of a letter of intent with Froggie, Norris Marketing S.L. (“Norris”)
and Tom Horsey dated July 17, 2007 and a further letter of intent between us and
M2M, Nigel Nicholas and Danny Wootton dated August 13, 2007.
Froggie is a provider of mobile telephony marketing systems
with operations in Argentina and Spain. Norris is a company incorporated in the
BVI which provides premium SMS and bulk SMS solutions into Spain. Tom Horsey is
the principal shareholder of Froggie and Norris. The letter of intent
contemplates the Company’s acquisition of up to 100% of the shares of Froggie
and Norris from Tom Horsey. To date, no definitive agreement has been executed
for the acquisition contemplated in the letter of intent. The parties have
entered into the partnership agreement pending the continuation of negotiations
on a definitive acquisition agreement. There is no assurance that any definitive
agreement for the acquisition by us of an interest in Froggie or Norris will be
executed.
M2M is a UK-based consulting business that specializes in
assisting businesses and entrepreneurs to develop wireless applications for
their existing or proposed business applications. Nigel Nicholas and Danny
Wootton are the principal shareholders of M2M. The letter of intent contemplates
our potential acquisition of up to 100% of the shares of M2M from Nigel
Nicholas, Danny Wootton and the other shareholders of M2M. To date, no
definitive agreement has been executed for the acquisition
- 3 -
contemplated in the letter of intent. The parties have entered
into the partnership agreement pending the continuation of negotiations on a
definitive acquisition agreement. There is no assurance that any definitive
agreement for the acquisition by us of an interest in M2M will be executed.
Planned Business
Under the partnership agreement, we, Froggie and M2M have
agreed to actively work together to grow our current mobile phone applications
business that provides content, applications and services to customers via their
mobile phones.
The objective of the parties is to generate revenues using
content and services through the live channels that each party has generated.
We, Froggie and M2M have agreed on a management team that will be devoted to the
launching of the business.
Bridge Financing
Froggie has agreed to provide to us the following maximum
bridging finance until January 31, 2008:
-
30,000 Euros at November 1, 2007;
-
30,000 Euros at December 1, 2007 provided deals have been signed by the
partnership between November 1, 2007 and December 1, 2007 with a cumulative
margin value equal or greater than 120,000 Euros on an annualized basis. For
every 10,000 Euros below this figure the bridging finance will be reduced by
2,500 Euros;
-
30,000 Euros at January 1, 2008 provided deals have been signed by the
partnership between 1
st
November 1, 2007 and January 1, 2008 with a
cumulative margin value equal or greater than 240,000 Euros on an annualized
basis. For every 10,000 Euros below this figure the bridging finance will be
reduced by 2,500 Euros; and
-
30,000 Euros at February 1, 2008 provided deals have been signed by the
partnership between November 1, 2007 and February 1, 2008 with a cumulative
margin value equal or greater than 360,000 Euros on an annualized basis. For
every 10,000 Euros below this figure the bridging finance will be reduced by
2,500 Euros.
In consideration for providing this financing, Froggie will be
issued shares of our common stock calculated based on a per share price equal to
the average of the 5 days preceding the date of the investment in each case. In
the event that we complete the acquisition of Froggie, as contemplated in the
letter of intent, the shares acquired by Froggie will be transferred to the
shareholder of Froggie and will be reflected in the share exchange agreement as
an additional “payment” in shares.
Move2Mobile
We entered into a letter of intent with Move2Mobile Limited,
Nigel Nicholas and Danny Wootton dated August 13, 2007. M2M is a UK-based
consulting business that specializes in assisting businesses and entrepreneurs
to develop wireless applications for their existing or proposed business
applications. Nigel Nicholas and Danny Wootton are the principal shareholders of
M2M. Nigel Nicholas is presently a director of the Company.
The letter of intent contemplates the Company’s acquisition of
up to 100% of the shares of M2M from Nigel Nicholas, Danny Wootton and the other
shareholders of M2M, for consideration comprised of cash and shares of the
Company’s common stock over a period of two years. In addition, further payments
- 4 -
would be payable over an earn-out period of two years from the
date of closing based on the profit generated by M2M and the value of the
shareholdings of M2M at the end of the earn-out period. The earn-out agreement
will be predicated on the Company providing agreed upon working capital to M2M
after completion of the acquisition. The letter of intent contemplates that
closing of the acquisition of M2M would follow within five business days of the
satisfaction of all conditions precedent to closing and, in any event, by no
later than October 31, 2007. It will be a condition of closing that M2M will
have delivered to the Company financial statements of M2M in the form required
to be filed by the Company with the United States Securities and Exchange
Commission in accordance with its reporting obligations under the Securities
Exchange Act of 1934. A partnership agreement among the Company, M2M and Froggie
was subsequently executed on October 31, 2007, as described above. No definitive
agreement has been executed to date and there is no assurance that any
definitive agreement will be executed.
Plan of Operations
Tracebit
We plan to expand Tracebit’s current product offering to
include:
-
mobile music services such as ring tones, ring back tones, video ring
tones, streamed music, and full track music,
-
infotainment (mobile sport, leisure and information data services) such as
video clips, streamed video, wallpapers and graphics, and picture messaging,
and
-
games.
Our strategy is focused on:
-
the pursuit of complimentary technologies and additional mobile content to
sell through our sales channels; and
-
the creation of an aggregated content provision service managed through an
interactive community based web-portal through the pursuit of a number of
acquisitions of established mobile service providers to add to our portfolio
of mobile applications.
We plan to pursue the achievement of the following milestones
in 2008, subject to achieving the necessary financings:
Phase 1-until Q2 2007/2008
-
attempt to negotiate and conclude definitive agreements for the acquisition
of Froggie, Norris and M2M and, if such definitive agreements are concluded,
to complete these acquisitions;
-
raise the required funding to complete the above transactions and any further
acquisitions;
-
expand Tracebit’s current product offering to include
-
mobile music services such as ring tones, ring back tones, video ring
tones, streamed music, and full track music
-
infotainment (mobile sport, leisure and information data services) such
as video clips, streamed video, wallpapers and graphics, and picture messaging,
and
-
games;
- 5 -
-
enter into negotiations and continue to negotiate further acquisitions;
-
expand our management team, particularly through the involvement of
management of companies that we may acquire;
-
grow sales of Tracebit through the completion of further partnership deals
with leading mobile content providers, adding gaming titles and the latest
video and audio content to sell additional content through current sales
channels to enhance possibilities when selling content to new customers.
Phase II – until Q4 2007/2008
-
establish an operational centre in the United States and expand the South
American offices acquired through the Froggie acquisition, if completed;
-
expand into North America by signing up partnership deals with US and
Canadian based mobile service providers to capture opportunities in the
growing mobile content market in US and Canada;
-
identify and complete further acquisition targets within the mobile
community;
-
initiate online and mobile marketing campaigns through affiliate marketing
agencies and pay per click campaigns; online search engines to increase
traffic to and the user base of the portal;
-
establish an operational centre in Asia and expand the existing European
sales offices;
-
fund raise to support further growth;
-
update and distribute marketing material to reflect additional product
offerings to support sales efforts.
Phase III – 2008/2009
-
achieve full operation of and revenue generation from North American and
Asian sales offices;
-
complete full launch of branded multimedia content and messaging portal in
Europe;
-
sign contracts with a number of large media agencies to source advertising
inventory;
-
complete a new multi-interaction mobile application, to attract new users
as this application enhances the product offering of the portal.
We had cash of $29,282 and a working capital deficit of
$791,142 at December 31, 2007. Our planned expenditures over the next twelve
months in the amount of $500,000 will exceed our cash reserves and working
capital. We presently does not have sufficient cash to fund our operations for
more than the next month. We anticipate that we will require additional
financing in the amount of approximately $1,000,000 in order to enable us to
sustain our operations for the next twelve months in view of our plan of
operations and our account deficit. We will also require additional financing to
fund our contemplated acquisitions if we are able to execute definitive
agreement for these acquisitions. We are currently seeking additional financing,
however, there can be no assurance that we will obtain such financing in the
amount required or on terms favorable to us. If we are unable to obtain
additional financing, we may have to abandon our business activities and plan of
operations and we may not be able to proceed with our planned acquisitions
Beyond the next twelve months, we will be required to obtain
additional financing in order to continue our plan of operations as we
anticipate that we will not earn any substantial revenues in the foreseeable
future. We believe that debt financing will not be an alternative for funding
our plan of operations as we do not have tangible assets to secure any debt
financing. We anticipate that additional funding will be in
- 6 -
the form of equity financing from the sale of our common stock.
However, we do not have any financing arranged and we cannot provide investors
with any assurance that we will be able to raise sufficient funding from the
sale of our common stock to fund our plan of operations. Even if we are
successful in obtaining equity financing to fund our plan of operations, there
is no assurance that we will obtain the funding necessary to pursue the plan of
operations. If we do not obtain additional financing, we may be forced to
abandon our business activities and plan of operations.
Presentation of Financial Information
Effective August 31, 2005, we acquired 100% of the issued and
outstanding shares of MobileMail UK by issuing 12,000,000 shares of our common
stock. Notwithstanding its legal form, our acquisition of MobileMail UK has been
accounted for as a reverse take-over, since the acquisition resulted in the
former shareholders of MobileMail UK owning the majority of our issued and
outstanding shares. Because Maxtor Holdings Inc. (now MobiVentures Inc.) was a
newly incorporated company with nominal net non-monetary assets, the acquisition
has been accounted for as an issuance of stock by MobileMail UK accompanied by a
recapitalization. Under the rules governing reverse takeover accounting, the
results of operations of MobiVentures Inc. are included in our consolidated
financial statements effective August 31, 2005. Our date of inception is the
date of inception of MobileMail UK, being August 21, 2003, and our financial
statements are presented with reference to the date of inception of MobileMail
UK. Financial information relating to periods prior to August 31, 2005 is that
of MobileMail UK.
On February 6, 2007, we completed the acquisition of Tracebit.
Our financial statements for the year ended September 30, 2007 include the
results of operations of Tracebit from February 6, 2007 to September 30,
2007.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with US
GAAP requires management to make certain estimates and assumptions that affect
the reported amounts and timing of revenues and expenses, the reported amounts
and classification of assets and liabilities, and disclosure of contingent
assets and liabilities. The Company’s actual results could vary materially from
management’s estimates and assumptions.
Revenue Recognition
Revenues are recognized when all of the following criteria have
been met: persuasive evidence for an arrangement exists; delivery has occurred;
the fee is fixed or determinable; and collection is reasonably assured. Revenue
derived from the sale of services is initially recorded as deferred revenue on
the balance sheet. The amount is recognized as income over the term of the
contract.
Revenue from time and material service contracts is recognized
as the services are provided. Revenue from fixed price, long-term service or
development contracts is recognized over the contract term based on the
percentage of services that are provided during the period compared with the
total estimated services to be provided over the entire contract. Losses on
fixed price contracts are recognized during the period in which the loss first
becomes apparent. Payment terms vary by contract.
Mobile Games
In accordance with Emerging Issues Task Force, or EITF, No.
99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent, the
Company recognizes as revenues the net amount the carrier reports
- 7 -
as payable upon the sale of its games, which is net of any
service or other fees earned and deducted by the carriers. The Company may
estimate some revenues from mobile operators/VARs in the current period when
reasonable estimates of these amounts can be made. Some mobile operators/VARs
provide reliable interim preliminary reporting and others report sales data
within a reasonable time frame following the end of each month, both of which
allow the Company to make reasonable estimates of revenues and therefore to
recognize revenues during the reporting period when the end user licenses the
game. Determination of the appropriate amount of revenue recognized involves
judgments and estimates that the Company believes are reasonable, but it is
possible that actual results may differ from the Company’s estimates. If the
Company is unable to reasonably estimate the amount of revenues to be recognized
in the current period, the Company recognizes revenues upon the receipt of a
mobile operator/VAR revenue report and when the Company’s portion of the game
licensed revenues are fixed or determinable and collection is probable. If the
Company deems a mobile operator/VAR not to be creditworthy, the Company defers
all revenues from the arrangement until the Company receives payment and all
other revenue recognition criteria have been met.
The Company recognizes the cost of payments to the content
providers or brand owners/license holders as a cost of revenues, these costs are
usually a fixed percentage of the revenue of the related games. Mobiles games
cost of revenues includes all third-party hosting and testing, these costs are
incurred on a monthly basis and are primarily fixed in nature regardless of the
revenue generated by the related games.
Foreign Currency Translations
The Company’s functional currencies are the British Pound
Sterling (“GBP”) and the Euro (“EUR”). The Company’s reporting currency is the
U.S. dollar. All transactions initiated in other currencies are re-measured into
the functional currency as follows:
-
Monetary assets and liabilities at the rate of exchange in effect at the
balance sheet date,
-
Non-monetary assets and liabilities, and equity at historical rates, and
-
Revenue and expense items at the average rate of exchange prevailing during
the period.
Gains and losses on re-measurement are included in determining
net income for the period.
Translation of balances from the functional currency into the
reporting currency is conducted as follows:
-
Assets and liabilities at the rate of exchange in effect at the balance
sheet date,
-
Equity at historical rates, and
-
Revenue and expense items at the average rate of exchange prevailing during
the period.
Translation adjustments resulting from translation of balances
from functional to reporting currency are accumulated as a separate component of
shareholders’ equity as a component of comprehensive income or loss. Upon sale
or liquidation of the net investment in the foreign entity the amount deferred
will be recognized in income.
- 8 -
Results Of Operations – Three month period ended December
31, 2007 and 2006
References to the discussion below to fiscal 2008 are to our
current fiscal year which will end on September 30, 2008. References to fiscal
2007 and fiscal 2006 are to our fiscal years ended September 30, 2007 and
September 30, 2006 respectively.
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
Incorporation
|
|
|
|
|
For the Three
|
|
|
For the Three
|
|
|
August 21,
|
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
2003 to
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
56,282
|
|
$
|
3,481
|
|
$
|
159,274
|
|
|
Direct
Costs
|
|
(11,003
|
)
|
|
-
|
|
|
(36,004
|
)
|
|
Gross Profit
|
|
45,279
|
|
|
3,481
|
|
|
123,270
|
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
Accounting and auditing
|
|
50,307
|
|
|
29,679
|
|
|
419,287
|
|
|
Bad debt
|
|
-
|
|
|
-
|
|
|
6,712
|
|
|
Bank charges
|
|
748
|
|
|
501
|
|
|
2,831
|
|
|
Depreciation
|
|
-
|
|
|
175
|
|
|
2,124
|
|
|
Filing fees
|
|
1,263
|
|
|
668
|
|
|
19,138
|
|
|
Intellectual property
|
|
-
|
|
|
-
|
|
|
2,500,000
|
|
|
Investor relations
|
|
5,370
|
|
|
4,694
|
|
|
65,737
|
|
|
Legal
|
|
13,248
|
|
|
5,399
|
|
|
135,494
|
|
|
Management and
consulting
|
|
215,409
|
|
|
97,442
|
|
|
1,130,043
|
|
|
Office and information technology
|
|
1,889
|
|
|
725
|
|
|
29,072
|
|
|
Rent
|
|
-
|
|
|
2,874
|
|
|
34,621
|
|
|
Research and development costs
|
|
10,314
|
|
|
-
|
|
|
92,290
|
|
|
Salaries and wages
|
|
-
|
|
|
5,113
|
|
|
126,804
|
|
|
Sales and marketing
|
|
6,238
|
|
|
-
|
|
|
70,824
|
|
|
Shareholder information
|
|
-
|
|
|
-
|
|
|
5,581
|
|
|
Transfer agent fees
|
|
25
|
|
|
160
|
|
|
2,688
|
|
|
Travel and promotion
|
|
3,236
|
|
|
-
|
|
|
36,434
|
|
|
Total General
and Administrative Expenses
|
|
308,047
|
|
|
147,430
|
|
|
4,679,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(262,768
|
)
|
|
(143,949
|
)
|
|
(4,556,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement of
debt
|
|
-
|
|
|
5,109
|
|
|
6,250
|
|
|
Interest expense
|
|
842
|
|
|
(596
|
)
|
|
(9,728
|
)
|
|
Write-down of goodwill
|
|
-
|
|
|
-
|
|
|
(77,953
|
)
|
|
Foreign exchange loss
|
|
(4,845
|
)
|
|
(1,080
|
)
|
|
(28,176
|
)
|
|
Net Loss
|
$
|
(266,771
|
)
|
$
|
(140,516
|
)
|
$
|
(4,666,017
|
)
|
Sales
We generated our sales from sales of games developed by
Tracebit of $56,282 during the first three month period of fiscal 2008 compared
to $3,481 during the first three month period of fiscal 2007. Sales
- 9 -
for the first quarter of fiscal 2008 were comprised primarily
of sales attributable to our Tracebit business, whereas sales in the first
quarter of fiscal 2007 were attributable to sales from our MobileMail business.
These revenues were comprised of royalty fees and licenses fees earned for the
sales of games through Tracebit’s distribution and re-seller agreements.
Direct Costs
Direct costs are comprised of license fees paid to brand owners
for the sale of games with their brand attached.
Direct costs were $11,003 during the first three month period
of fiscal 2008, representing 19.55% of our sales.
Accounting and Auditing
Accounting and auditing expenses are attributable to the
preparation and audit of our financial statements.
Accounting and auditing expenses increased to $50,307 during
the first three month period of fiscal 2008 from $29,679 during the first three
month period of fiscal 2007. These fees are attributable mainly to auditing,
accounting and regulatory compliance expenses.
Intellectual Property
We have not incurred any expenses on any intellectual property
during the first three month period of fiscal 2008 nor during fiscal 2007. We
have determined that the cost of the intellectual property purchased during our
fiscal 2006 does not meet the criteria for capitalization as set out in SFAS No.
86.
Investor relations
Investor relations expenses are primarily comprised of fees
paid to PR firms for writing press releases and of costs for releasing them and
other public relation activities.
Investor relations expenses increased to $5,370 during the
first three month period of fiscal 2008 from $4,694 during the first three month
period of fiscal 2007, which increase reflects our increased investor relation
activity during the first three month period of fiscal 2008.
Legal
Legal expenses are attributable to legal fees paid to our legal
counsel in connection with the Company’s statutory obligations as a reporting
company under the Exchange Act including the preparations and filings of our
quarterly and annual reports with the SEC.
Legal expenses increased significantly to $13,248 during the
first three month period of fiscal 2008 from $5,399 during the first three month
period of fiscal 2007 as a result of legal expenses incurred in connection with
our potential acquisitions.
Management and Consulting
Management and consulting expenses are primarily comprised of
consulting fees that we pay to Nigel Nicholas, Gary Flint, Peter Ahman and to
other consultants on account of consulting services and expensed stock, warrant
and option issues. Management and consulting expenses increased significantly
to $215,409 during the first three month period of fiscal 2008 from $97,442
during the first three month period of fiscal 2007.
- 10 -
Office and Information Technology
Office and information technology expenses include expenses
associated with the development and testing of the MobileMail software and rent
for Tracebit Office.
Rent
We did not incur any rent expenses during the first three month
period of fiscal 2008 compared to rent expenses of $2,874 incurred during the
first three month period of fiscal 2007. The company has moved its main office
address to Sunnyside, Brinkworth, Chippeham< Wiltshire in the UK and there
are no rent charges for this office address.
Research and Development Costs
Research and development costs are primarily comprised of
salaries paid to Tracebit’s development personnel and contract developers which
relates to the development of games by Tracebit.
Research and development costs increased significantly to
$10,314 during the first three month period of fiscal 2008 from $Nil during the
first three month period of fiscal 2007, which increase reflects the salaries
paid to Tracebit’s development personnel, consultant fees to contract developers
and other expenses related to the Tracebit’s development.
Salaries and Wages
Our salaries and wages decreased to $Nil during the first three
month period of fiscal 2008, from $5,113 during the first three month period of
fiscal 2007, as we no longer pay any salaries and wages.
Sales and Marketing
We incurred $6,238 in sales and marketing expenses during the
first three month period of fiscal 2008 as a result of salaries paid to
Tracebit’s sales and marketing personnel and other expenses related to Tracebit
sales and marketing.
Net Loss
We incurred a net loss of $266,771 during the first three month
period of fiscal 2008, compared to $140,516 during the first three month period
of fiscal 2007 and a net loss of $4,666,017 from inception to the first three
month period of fiscal 2008
Liquidity and Financial Resources
We had cash of $29,282 and a working capital deficit of
$791,142 as at December 31, 2007. We had cash of $27,123 and a working capital
deficit of $1,085,799 as at our fiscal year ended September 30, 2007.
Plan of Operations
We estimate that our total expenditures over the next twelve
months will be approximately $500,000. While this amount will be offset by any
gross profits that we earn from sales of our MobileMail messaging solutions and
Tracebit’s mobile content consisting primarily of mobile games, we anticipate
that our cash and working capital will not be sufficient to enable us to
undertake our plan of operations
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over the next twelve months without our obtaining additional
financing. We presently do not have sufficient cash to fund our operations for
the next month and we anticipate that we will require additional financing in
the approximate amount of $1,000,000 in order to enable us to sustain our
operations for the next twelve months. There can be no assurance that we will be
able to obtain such financing on terms favourable to us or at all.
Beyond the next twelve months, we will be required to obtain
additional financing in order to continue our plan of operations as we
anticipate that we will not earn any substantial revenues in the foreseeable
future. We believe that debt financing will not be an alternative for funding
our plan of operations as we do not have tangible assets to secure any debt
financing. We anticipate that additional funding will be in the form of equity
financing from the sale of our common stock. However, we do not have any
financing arranged and we cannot provide investors with any assurance that we
will be able to raise sufficient funding from the sale of our common stock to
fund our plan of operations. Even if we are successful in obtaining equity
financing to fund our plan of operations, there is no assurance that we will
obtain the funding necessary to pursue the plan of operations.
Cash used in Operating Activities
We used cash of $78,376 in operating activities during the
first three month period of fiscal 2008 compared to cash used of $68,330 during
the three month period of fiscal 2007.
We have applied cash generated from financing activities to
fund cash used in operating activities.
Cash from Investing Activities
We did not generate any cash in investing activities during the
first three month period of fiscal 2008 nor during the first three month period
of fiscal 2007.
Cash from Financing Activities
We generated cash of $83,556 from financing activities during
the first three month period of fiscal 2008 compared to cash of $79,092
generated from financing activities during the first three month period of
fiscal 2007. Cash generated from financing activities during these periods was
primarily attributable to advanced from related parties and shares issued for
cash.
Going Concern
We have not attained profitable operations and are dependent
upon obtaining financing to pursue any extensive business activities. For these
reasons our auditors stated in their report that they have substantial doubt we
will be able to continue as a going concern.
Future Financings
We anticipate continuing to rely on equity sales of our common
shares in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing stockholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our planned activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
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