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[November 19, 2012]
BUSINESS MARKETING SERVICES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) Forward Looking Statements The SEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project," "seek," "will" and words and terms of similar substance used in connection with any discussion of future events, operating or financial performance, financing sources, product development, capital requirements, market growth and the like, identify forward-looking statements. Forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors which could cause the actual results to differ materially from the forward-looking statement. These forward-looking statements include, among others: projections of revenues and other financial items; statements of strategies and objectives for future operations; statements concerning proposed applications or services; statements regarding future economic conditions, performance or business prospects; statements regarding competitors or competitive actions; and statements of assumptions underlying any of the foregoing.
All forward-looking statements are present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks related to the Company's business discussed under "Risk Factors" of this Quarterly Report on Form 10-Q, among others, could cause actual results to differ materially from those described in the forward-looking statements. Such risks include, among others: the competitive environment; unexpected technical and marketing difficulties inherent in development efforts; the potential need for changes in our long-term strategy in response to future developments; as well as potential changes in government regulations and laws, both of which could adversely affect the economics of the products we plan to offer; and rapid changes in the technology industry.
The Company makes no representation as to whether any projected or estimated information or results contained in any forward-looking statements will be obtained or achieved. Shareholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. The Company is under no obligation, and it expressly disclaims any obligation, to update or alter any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise.
2 --------------------------------------------------------------------------------Overview Historically, Business Marketing Services, Inc.'s ("BMSV" or the "Company") plan of business was to publish and distribute 13-month calendars that would be marketed to businesses of all industries to hand out to their customer's as a promotional tool and to publish and distribute industry and profession specific wall planners, initially implementing its business plan in Wenatchee and greater Seattle in the State of Washington.
Recent Developments and Changes to Business Plan On January 19, 2010, Hans Pandeya, our current CEO and director, acquired the majority of the issued and outstanding common stock of the Company, from Doug Black, in accordance with a common stock purchase agreement (the "Stock Purchase Agreement") between Hans Pandeya, Doug Black and the Company. On the Closing Date, pursuant to the terms of the Stock Purchase Agreement, Hans Pandeya acquired fifteen million (15,000,000) shares of the Company's issued and outstanding common stock representing approximately 77% of the Company's issued and outstanding common stock, for a total purchase price of Three Hundred Twenty-Five Thousand dollars ($325,000).
On February 5, 2010, we entered into a Consulting Agreement with TAG Strategic.
The agreement calls for TAG Strategic to perform general business advisory services. The term of the agreement is for a twelve month period. The compensation for this agreement is in the form of monthly payments of $20,000.
On March 12, 2010, the Company acquired source code and other software assets of gTrade, a company organized under the laws of Australia ("gTrade") from the Emil Koutanov, Guy Havenstein, and Tony Fle-Danijelovich (the "Sellers") pursuant to the Asset Transfer Agreement (the "Asset Transfer Agreement") between the Company and the Sellers. On the Closing Date, pursuant to the terms of the Asset Transfer Agreement, the Company delivered a promissory note in the principal amount of $300,000 (the "Note"), with a maturity date of May 31, 2010. The Note was to be paid, at our option, in cash or by delivery of the number of shares of Company's common stock based on the daily average closing price of the Company's common stock from the Closing Date until the date of issuance of the stock. On May 31, 2010 the Note was satisfied by the issuance of 300,000 shares of our common stock at an agreed value of $300,000. On March 12, 2010, we entered into a Consulting Agreement with the Sellers. The agreement calls for the Sellers to perform software technical advisory services at the times and the locations specified by us. The term of the agreement is for a twelve month period. The compensation for this agreement is in the form of cash compensation of AUD 100 plus GST per hour, inclusive of any and all applicable taxes and benefits, including payroll tax and superannuation, in Australia and other jurisdictions.
We intend to use the acquired source code to develop new marketing services for businesses.
On February 3, 2011, the Company had entered into Shareholders-, Company Formation and Capital Increase Agreement between Smartlaunch A/S, Rainmaking Holding 1 ApS, Perfect Best International Ltd, and Hans Pandeya. whereby pursuant to the terms and conditions of the Agreement, the Company jointly with other parties should buy or form the Company under the laws of Denmark as a jointly owned company with a nominal share capital of DKK 81,000, of which 55.56% ownership belongs to Business Marketing Services, Inc. Immediately after formation of the Company, Smartlaunch A/S shall subscribe for 9,000 new shares in the Company against injecting the Software as a substance capital injection.
Following SL's subscription for shares, the ownership shall be as follows: Nominal Shareholder Shareholding Percentage RM 18,000 20 % SL 9,000 10 % PBI 18,000 20 % BMSV 45,000 50 % Total: 90,000 100 % 3--------------------------------------------------------------------------------BMSV will assist the newly formed Company in developing the business in the US and India and be responsible for innovation and product development of the Company; whereby, the Company shall pay 50% of the Company's net revenues in return on a quarterly basis.
BMSV is also granted a call option to buy 9,000 shares from each of RM and PBI corresponding to 50% of RM's and PBI's ownerships at nominal price if the following milestones are not achieved: - Turnover 2012 minimum DKK five (5) million. The share call option based in this milestone must be executed before April 1, 2013.
- "SL Free" software completed by June 1, 2011. The share call option based in this milestone must be executed before June 20, 2011.
On February 25, 2011, BMSV bought 9,000 shares of the newly formed Company -Adcore Aps from Smartlaunch Systems A/S for SEK 654,648.
We might alter our plans if we do not succeed in raising funds to start the projects or if we do not succeed in obtaining license agreements that are essential for the business we envisage. We currently have a team of 5 people working part-time with business development, legal and accounting work in the US and 3 people working part-time in Australia. In addition, we are working with researchers and developers in Norway, Denmark, Israel, UK, the US and Egypt to design services and develop our business model.
An overview of our plans follows here.
Fundamental view We believe that a user's social experience in interactions with users with similar interests and tastes are a key factor that drives the emergence of networks, and that system designs that enhance this experience and harness the capabilities of a network of like-minded users, add significant value to a business model.
Each of our plans is based on this fundamental principal. All systems we intend to create are user-centric and identify clusters of similar users in some respect to create optimum solutions.
Transaction module plan We are planning to use gTrade's technology to develop marketing services for businesses and to develop marketplaces for intellectual property rights and copyright where consumers and investors can invest in and transact with businesses. An example is a marketplace for mobile apps where consumers and investors can invest in and transact with creators and developers to realize their creations. Another example is a marketplace for digital entertainment that acts as a link between traditional record companies, the publishers and artists on one side and the music fans on the other. Music fans are the consumers or investors in this example.
Recommendation module plan We are creating partnerships to access state-of-the-art technology for matching consumers and investors with businesses to transact in our marketplaces with minimum information asymmetry and optimum allocation of financial resources. For example, we intend to use the technology to design systems that match consumers of digital entertainment who most likely will invest in and transact with content providers, rights holders and artists to create maximum value for all parties.
4 --------------------------------------------------------------------------------Distribution module plan Intellectual property rights laws and copyright laws are difficult to enforce on the Internet. We believe that the main reason for this is that technology used today for transactions on the Internet is not up to date and in fact is so outdated that efficient enforcement of intellectual property rights laws and copyright laws is not possible. As outdated technology is the de-facto standard, it prevents outdated architectures from being replaced. This problem provides impetus to new policies being introduced to increase surveillance of users and strike against infringement of property rights, which in turn raises privacy issues. We believe that we can create value for businesses by making enforcement of property rights more efficient and by lowering distribution costs to a minimum with new technology. We believe that we can create value for consumers by lowering costs and improving the quality of service.
We are creating partnerships to access state-of-the-art technology for storage and delivery of digital content to consumers with maximum efficiency. As mentioned above, technologies and architectures that are widely used are the de-facto standard and thus difficult to replace with systems that are superior from a technical point of view. We intend to make certain strategic acquisitions to facilitate the introduction of our technologies.
Rewards module plan We intend to create systems to identify networks of like-minded people within certain communities, for example, within a file-sharing community, and encourage sharing of resources to create a cooperative environment by rewarding them. When users contribute their unused resources to a common pool, the opportunity to monetize idle capacity is created. Revenues created in this cooperative environment can then be passed on to the users in the form of credits. Rewarding users with credits for sharing resources is similar to traditional rewards programs such as frequent flier programs. A user in a file-sharing community thus becomes a service provider with our technology and earns an income from his file-sharing activities, which he can spend on his consumption of digital content.
Strategic acquisitions plan As mentioned earlier, we intend to make certain strategic acquisitions to facilitate the introduction of technologies we will use. However, a successful acquisition and a successful introduction of next generation file-sharing technology for storage and distribution of digital content will not necessarily give intended results as licensing agreements for content delivered with next generation file-sharing technology are not yet available from many content providers and rights-holders.
While our plans are broad, they are modular and inter-independent to reduce our business risks. A failure in a module, for example, failure in our plan to make certain acquisitions to facilitate the introduction of the technologies will not affect the transaction module plan. While the business activities in the different modules reinforce each other to increase the overall business's profitability and sustainability, the modules are not a pre-requisite for each others' existence or essential for the overall business.
This "Management's Discussion and Analysis of Financial Condition and Results of Operations" section should be read in conjunction with the accompanying unaudited interim financial statements which have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our recurring losses from operations and net capital deficiency raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is substantially dependent on the successful execution of our strategic plan and otherwise discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and in Note 1, "Liquidity" to our interim financial statements filed as part of this Quarterly Report, on the timeline contemplated by our plans and our ability to obtain additional financing. The uncertainty of successful execution of our plans, among other factors, raises substantial doubt as to our ability to continue as a going concern. The accompanying unaudited interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations Revenues The Company generated $239,781 revenues for the nine months ended September 30, 2012 as compared to $90,474 for the nine months ended September 30, 2011.
5 --------------------------------------------------------------------------------Compensation Officer The Company had no officer compensation for the nine months ended September 30, 2012. The Company incurred $100,148 of officer compensation for the nine months ended September 30, 2011.
Professional Fees The Company incurred $175,607 in professional fees for the nine months ended September 30, 2012, as compared to $44,726 for the nine months ended September 30, 2011.
General and Administrative Expenses The company incurred general and administrative expenses of $12,990 for the nine months ended September 30, 2012, as compared to $11,371 for the nine months ended September 30, 2011.
Liquidity and Capital Resources As of September 30, 2012 we had $112,661 in cash. While we are reviewing our operations and business plan to determine the most effective way to produce revenues, our cash position cannot support our daily operations. Any shortfall is currently funded by our majority shareholder and Chief Executive officer, Hans Pandeya. Management intends to raise additional funds by way of a public or private offering. Management believes that the recent change in our business plan will generate revenues and provide the opportunity for us to continue as a going concern. While we believe in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement its business plan and generate revenues.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
The following table summarizes the Company's Consolidated Statement of Cash Flows: Nine Months Ended September 30, Net cash provided (used) by operating activities 2012 2011 Operating Activities 80,549 27,604 ) Investing Activities - - Financing Activities (11,293) 37,432 Critical Accounting Policies and Estimates Management's discussion and analysis of the Company's financial condition and results of operations are based upon the consolidated financial statements contained in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements: 6 --------------------------------------------------------------------------------Cash and Cash Equivalents The Company considers cash on hand and amounts on deposit with financial institutions which have original maturities of three months or less to be cash and cash equivalents.
Basis of Accounting The Company's financial statements are prepared in accordance with U.S.
generally accepted accounting principles.
Income Taxes The Company utilizes the asset and liability method to measure and record deferred income tax assets and liabilities. Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when in the opinion of management; it is more likely than not that some portion or all of the deferred tax assets will not be realized. At this time, the Company has set up an allowance for deferred taxes as there is no company history to indicate the usage of deferred tax assets and liabilities.
Fair Value of Financial Instruments The Company's financial instruments may include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and liabilities to banks and shareholders. The carrying amount of long-term debt to banks approximates fair value based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.
The carrying amounts of other financial instruments approximate their fair value because of short-term maturities.
Concentrations of Credit Risk Financial instruments which potentially expose The Company to concentrations of credit risk consist principally of operating demand deposit accounts. The Company's policy is to place its operating demand deposit accounts with high credit quality financial institutions. At this time The Company has no deposits that are at risk.
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