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[November 14, 2012]
YOUR INTERNET DEFENDER, INC - 10-Q - Management's Discussion and Analysis or Plan of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) As used in this Quarterly Report on Form 10-Q, references to the "Company," "YID", "we," "our" or "us" refer to Your Internet Defender Inc. unless the context otherwise indicates. The following presentation of management's discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's consolidated financial statements, the accompanying notes thereto and other financial information appearing elsewhere in this report.
Forward-Looking Statements Certain statements contained in this Report, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to our future operating performance and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.
All forward-looking statements speak only as of the date on which they are made and reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Overview Your Internet Defender Inc. was incorporated under the laws of the State of Nevada on May 4, 2011, to engage in the business of an online brand management specialist, focusing on offsite search engine optimization ("SEO"), social monitoring, and specialized brand reputation marketing. The Company intends to develop a full range of services, proprietary methodology and systems that will assist companies of various sizes, professionals and individuals to protect and promote their brands in the most favorable light, while attracting traffic to their desired web locations.
Plan of Operation YID has sought out new clients, both individual and corporate, by disseminating the description of its services to people with whom the management and our officers have previous established relationships. Using this "word of mouth" technique has efficiently allowed us to establish a YID relationship and initial track record and to demonstrate our capabilities. In addition, YID has begun approaching public relations and marketing firms, offering our brand of services to their respective clients, as a value-added service.
Our direct marketing approach has been successful to date. One example of the successful use of such approach was our contact with Marketsmith, Inc, a marketing company based in New Jersey, who has now added our name to their list of potential resources. Another example of the success of this approach is with Fox & Melofchik, a law firm based in New Jersey, who not only considered us as a valuable resource for their respective clients, but also themselves employed our services to improve their SEO/online optimization efforts and to build up their social media marketing presence.
12 --------------------------------------------------------------------------------To further exploit our direct marketing approach, we have recently entered into an agreement with Banner Marketing. Banner provides advertising solutions using print and digital platforms, and is a well-established staple in the Home Furnishings advertising and other industries. Banner Marketing has corporate relationships with such companies as Ashley Furniture Home Stores and many other well-known retail chains. Banner Marketing has sales presence and relationships in all 50 states and provides top-notch branding, concept, design, copy and media buying services to its clientele. Banner does not provide online marketing / optimization / reputation services, and they have chosen to partner with Your Internet Defender, Inc. to leverage our expertise in the online sphere as well as our technology solutions. In return, YID receives access to the entire client base of Banner Marketing.
YID is continuously seeking out new relationships with marketing and law firms, offering our services to their respective clients. In addition, we have begun self-marketing efforts, utilizing the same online optimization and social marketing techniques that we would normally offer to our clients, to promote our own business name and services.
In addition to SEO and marketing services, YID creates propriety technology and software to be utilized within our industry.
One example of proprietary technology developed by YID is the SEO Toaster 2.0, the most advanced SEO website builder software, which is available for download from our website www.yourinternetdefender.com. Any website developed or hosted on SEO Toaster 2.0 will have distinct SEO advantages in the organic search engine rankings and thus automatically improve online visibility for YID customers utilizing this platform. The platform has been developed with SEO Samba Corp. and became available in December 2011. We intend to provide further updates and improved software releases in the future.
Another example of proprietary technology developed by YID is SEO Nexus, an automated online marketing application, available as software delivered as a service (SaaS). SEO Nexus automatically executes SEO techniques and acts as a central command center that connects to an unlimited number of self-reliant remotely hosted websites. To the best of our knowledge of the industry, SEO Nexus is unique as it physically optimizes and automates all on-site SEO factors and includes time-saving automation routines. Other automated SEO applications typically only analyze and suggest the proper strategies. SEO Nexus is available to all customers on a subscription basis.
Day-to-day operations at YID are primarily directed toward servicing the ongoing project needs of our current clients. The Company's services which include, SEO, social marketing and reputation management (our core services) are all continuous processes and require ongoing attention and effort. At the same, we are directing our efforts to searching for new clients, as well as seeking out new potential technical resources that will be required as YID expands its customer base.
YID has added and will continue to add new features to its website www.yourinternetdefender.com. In particular we are now offering new downloadable proprietary software and adding features which will enable our current customers to self-manage numerous aspects of their ongoing projects. YID is also actively marketing our services directly to the general public and via new and existing relationships with public relations and marketing firms, attorneys and other sources of potential clients.
Over the course of the next 6-12 months, YID will actively work on establishing new business opportunities by searching for new clients and expanding the scope of work with our existing clients. Our plan is to continue to invest in the creation of new products and services, some of which may be mass-marketed to the general public, in order to attract clientele of lower-income levels (for example, job seekers looking to change their careers, etc.). On the higher-end of the spectrum, YID will look to participate in larger projects typically awarded to well-established public relations and marketing firms, and which are sub-contracted out to smaller firms.
13 --------------------------------------------------------------------------------YID will continue to actively search for new corporate and high-end individual clients. The Company's current services are priced at the high-end of the pricing spectrum and the Company believes that it has the ability to attract clients that grasp its unique understanding of the issues facing their web presence and ability to fix these issues. We are therefore currently focusing on individuals with higher incomes and corporations with budget allocations for these services. We will also aggressively establish relationships with numerous public relations and law firms, offering to provide our services to their existing and future customers and clients. We plan to invest in the expansion of our proprietary technology base, offering new automated services to online customers, thus enabling us to mass-market new product offerings in addition to our current consulting-type services. The Company has made numerous presentations and has been asked to submit contract proposals to some of these prospects. The Company has been receiving a great deal of requests for proposals through its own online marketing initiatives (Google organic visibility of YID's own website), and has increased its sales and marketing outreach to mid-size businesses and franchise operators. The Company also plans to expand its sales force to broaden the marketing exposure of its products and services.
Results of Operations for the period from May 4, 2011 (inception) to September 30, 2012 Revenues Revenues for the period from May 4, 2011 (inception) through September 30, 2012 were $206,512 Total operating expenses During the period from May 4, 2011 (inception) to September 30, 2012, total operating expenses were $344,298, which includes costs of revenues of $205,427, officers' compensation of $14,600 and general and administrative expenses of $124,271.
Net loss During the period from May 4, 2011 (inception) to September 30, 2012, we had a net loss of $137,786.
Results of Operations Comparison of Six Months Ended September 30, 2012 and from May 4, 2011 (Inception) to September 30, 2011 Revenues Revenues for the six month period ended September 30, 2012 were $55,382 compared to $44,400 for the period from May 4, 2011 through September 30, 2011. The increase/ was a result of our continued efforts in marketing and building our business. In addition, the latter period represents only five as opposed to six months.
Total operating expenses Operating expenses for the six month period ended September 30, 2012 totaled $141,346 compared to $69,224 for the period from May 4, 2011 through September 30, 2011. Operating expenses comprise costs of sales, officers' compensation and general and administrative expenses. The increasewas a result of increased costs associated with SEC reporting requirements and increased marketing efforts.
Net loss We had a net loss of $85,964 for the six months ended September 30, 2012 as compared to a net loss of $24,824 for the period from May 4, 2011 through September 30, 2011.
14 --------------------------------------------------------------------------------Liquidity and Capital Resources As of September 30, 2012, we had a cash balance of $1,155 and accounts receivable in the amount of $6,135. We do not believe that such funds will be sufficient to fund our expenses over the next twelve months. We will need to seek additional capital for the purpose of financing our development and marketing efforts. There are no limitations in the certificate of incorporation on the Company's ability to borrow funds or raise funds through the issuance of capital stock We have historically borrowed funds from both related and unrelated parties.
During the quarter ended September 30, 2012 we borrowed Ten Thousand Dollars ($10,000) from a related party, and on October 15th we borrowed another Two Thousand Five Hundred Dollars ($2,500) from a related party. Both of these loans have been repaid. On November 9, 2012 we borrowed an additional $27,000 from a related party.
During the six months ended September 30, 2012, one customer made up sales of 50%, and the remainder customers were each under 10%. Accordingly, our business would be greatly damaged if we were to lose our primary customer.
Two of our stockholders provided, without cost to the Company, services, valued at $2600 for the quarter end September 30, 2012. The total of these expenses was reflected in the statement of operations as general and administrative expenses with a corresponding contribution of paid-in capital.
We may not have sufficient resources to effectuate our business plan. We expect to incur a minimum of $275,000 in expenses during the next twelve months of operations. We estimate that this will be comprised mostly of industry unique expenses of approximately $105,000 towards salaries, programming and subcontractors, $108,000 towards marketing materials and sales. Additionally, approximately $62,000 will be needed for general overhead expenses such as for corporate legal and accounting fees, office overhead and general working capital. Accordingly, we may have to raise the funds to pay for these expenses.
We potentially will have to issue debt or equity or enter into a strategic arrangement with a third party.
There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable company.
The Company currently has no plans to conduct any research and development or to purchase or sell any significant equipment. The Company does not expect to hire any employees during the next 12 months.
Going Concern Consideration The Company has been in the development stage since its inception and continues to incur significant losses. We had a net loss since inception of $138,278 and used cash in operating activities from inception through September 30, 2012 of $79,335. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and generate additional revenues and profits from our business plan.
In the audit opinion for our year end March 31, 2012, our auditor included a statement that as a result of our significant losses since inception there is a substantial doubt as to the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements None 15 --------------------------------------------------------------------------------Critical Accounting Policies and Estimates Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that could effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At September 30, 2012 the Company did not have any balances that exceeded FDIC insurance limits.
Revenue Recognition The Company recognizes revenue in accordance with FASB ASC No. 985-605, "Revenue Recognition". In all cases, revenue is recognized as the services are performed and when the price is fixed and determinable, persuasive evidence of an arrangement exists, and collectability of the resulting receivable is reasonably assured. For services where we do not have a contract, revenue is generally recognized when the services are performed and accepted by the customer and the amounts are earned and collection is reasonably assured. We recognize revenue under contracts agreements where we have a fixed term of service using the straight line method over the term of the agreement.
Allowance for Doubtful Accounts Accounts receivable consist of trade receivables recorded at original invoice amount, less an estimated allowance for uncollectible accounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest, although finance charges may be applied to receivables that are past due. Trade receivables are periodically evaluated for collectability based on past credit history with customers and their current financial condition.
Changes in the estimated collectability of trade receivables are recorded in the results of operations for the period in which the estimate is revised. The Company does not generally require collateral for trade receivables.
At September 30, 2012 management considers all accounts receivable collectable and has not made a provision for doubtful accounts.
16 --------------------------------------------------------------------------------Website Development Costs The Company capitalizes its costs to develop its website and internal-use software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. Such costs are amortized on a straight-line basis over the estimated useful life of three years. Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred. As of September 30, 2012, the Company capitalized $26,950 of website development costs.
Amortization expense for the six months ended Septemebr 30, 2012 totaled $4,492.
Income Taxes The Company accounts for income taxes under FASB Codification Topic 740-10-25 ("ASC 740-10-25"). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Business Segments The Company operates in one segment and therefore segment information is not presented.
Fair Value of Financial Instruments The carrying amounts of the Company's accounts receivable, accounts payable and accrued expenses approximate fair value due to the relatively short period to maturity for these instruments.
Concentration of Credit Risk The Company's financial instruments that are exposed to the concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivables. The Company's places its cash with high quality institutions. At times, such investments may be in excess of the FDIC insurance limit. Cash and cash equivalents held in a bank may exceed federally insured limits at year end and at various points during the year.
The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade accounts receivable credit risk exposure is limited. During the six months ended September 30, 2012, one customer made up sales of 50%, and the remainder customers were each under 10%.
17 --------------------------------------------------------------------------------Loss Per Share Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, "Earnings Per Share." As of September 30, 2012 there were no common share equivalents outstanding.
Recent Accounting Pronouncements ASU No. 2011-02; A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring ("TDR"). In April, 2011, the FASB issued ASU No.
2011-02, intended to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. Early adoption is permitted. The Company adopted the methodologies prescribed by this ASU by the date required, and it did not have any impact upon adoption.
ASU No. 2011-03; Reconsideration of Effective Control for Repurchase Agreements.
In April, 2011, the FASB issued ASU No. 2011-03. The amendments in this ASU remove from the assessment of effective control the criterion relating to the transferor's ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.
The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May, 2011, the FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.
Early application by public entities is not permitted.
The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income. In June, 2011, the FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option 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. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Due to the recency of this pronouncement, the Company is evaluating its timing of adoption of ASU 2011-05, but will adopt the ASU retrospectively by the due date.
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