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[August 12, 2014]
SUPERDIRECTORIES INC. - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) The financial data presented below should be read in conjunction with the more detailed financial statements and related notes, which are included elsewhere in this report. Information discussed herein, as well as elsewhere in this quarterly report on Form 10-Q, includes forward-looking statements or opinions regarding future events or the future financial performance of the Company, and are subject to a number of risks and other factors which could cause the actual results to differ materially from those contained in forward-looking statements.
Among such factors are general business and economic conditions, and risk factors as listed in its Annual Report on Form 10-K or listed from time to time in documents filed by the Company with the Securities and Exchange Commission.
Results of Operations - Q3 FY2013 For the three and nine months ended June 30, 2013, we incurred a net operating losses of $26,571 and $109,938 respectively, as compared with a net operating losses of $59,349 and $176,543 for the comparable periods last year.
Our net operating losses consist primarily of ongoing costs of operating our website, as well as legal and accounting fees incurred in connection with ongoing SEC filing requirements.
Since inception, we have not generated revenue. We intend for our service directory to go "live" around the fourth quarter of this fiscal year or the first quarter of next fiscal year, at which time we expect to begin generating revenue.
Liquidity and Capital Resources - Q3 FY2013 Our cash at June 30, 2013 was $8,418. Our cash on hand is unlikely to be sufficient capital, in and of itself, to finance our bare administrative costs, let alone our proposed operations, during the next 12 months. No assurance can be given that funding will be available to us, on reasonable terms, if at all.
Net cash used in operating activities in the nine months ended June 30, 2013 was $104,052, compared with $131,361 for the same period last fiscal year. The drop-off in the amount of cash used during the first nine months of this fiscal year as compared with last fiscal year, is due primarily to the lower operating loss, which in turn traces back primarily to reduced software costs partially offset by increased SEC reporting costs.
Net cash used in operating activities from inception through March 31, 2013 was $3,616,894. Net cash provided by financing activities for the nine months ended June 30, 2013 was $87,828, which is marginally lower than the figure for the same period last year of $91,940 due to the loans from our sole officer and director, Luke LaLonde, totaling $68,828 during the first nine months of this fiscal year plus issuance of a convertible debenture to an unrelated third party in the amount of $25,000, versus $86,940 from the sale of common stock during the first nine months of the prior fiscal year. Net cash provided by financing activities from inception through June 30, 2013 was $4,000,131.
Plan of Operation - FY2013 The following discussion of our plan of operation for the next 12 months and our discussion of our liquidity and capital resources should be read in conjunction with our financial statements and notes thereto, and the other financial data included in our previously filed annual report. We are including this Plan of Operation in recognition of the fact that we are a development stage company and have yet to achieve operating revenues.
8 Plan of Operation - FY2013 (continued) Our plan of operation for the next twelve months is dependent upon our raising additional capital. As of June 30, 201, we only had $8,418 in cash available; however, we still believe we can satisfy our basic capital requirements for the fiscal year ending September 30, 2013 from cash on hand, so long as we augment that with private placements of our common stock and/or loans from management or other sources. No assurance can be given however, that we will be able to sell shares of our common stock, and no member of our management is under any obligation to loan money to us. During the fiscal year ending September 30, 2013, we will continue to engage consultants to perform "human" editing services, expanding the quality and size of our searchable directory. As expansion occurs, and as increased user activity places greater demand on the system, more hardware (servers and routers) will be added to manage the increased volume of data stored in the database and presented by the online directory. Except for one or more servers and routers as may be occasioned by large demand for our directory, we do not expect to purchase any significant equipment or make any other capital expenditure. Our major expenditures, should we be successful in raising sufficient capital, will be in human resources as we describe below.
We have been successful in financing our operational and developmental activities to date by selling shares of our common stock, from convertible debenture sales, and from advances from our President. However, we have no assurance that we will be able to continue in this way, and our current available cash balance as of June 30, 2013 is insufficient to continue development, and will require a significant stock offering, slae of convertible debetnures, and/or continued advances from our President in order to have sufficient capital to continue development until income producing business operations are commenced. We have no plans for other business activities if we are unable to raise required funds. We believe we will need to raise additional capital of approximately $500,000 in order to continue operations for the fiscal year ending September 30, 2013 and beyond, as well as fully implement our entire business and marketing strategy at all planned levels of activity. Our activities to date have been limited to building our database. The information available through our directory comes from ever changing and growing sources.
We have recently experienced delays in meeting certain target dates related to our business operations. The delays were principally caused by our need to synchronize the capabilities of our existing servers and to install fiber optic lines in our Gatineau, Quebec facilities. Also, early in fiscal 2012, our sole full-time employee, officer and director, Luke LaLonde, had an illness which incapacitated him for several weeks. As of the date of this filing, he has resumed his fill time activities.
We believe that in late 2013, we will have a sufficient database to make our website marketable. We currently have 9 directory editors who work on a contract basis, research subjects for our directory, create new categories and add websites to our directory. Our average cost per directory consultant is approximately $1,200 per month. We are currently conducting a training program for our editors to help us to reach the desired efficiency of each editor being able to add approximately 1,800 new links per day into our database.
We currently have five servers in operation - two in Watertown, New York at facilities operated by Westelcom, two in Gatineau, Quebec, and one at facilities operated by MCI in Montreal. We plan to install a sixth server at a Westelcom facility in Plattsburgh, New York in the fall of 2013.
In 2013, contingent on available funding, we intend to start building an administrative staff that will be needed to manage our business as we prepare to move from a developmental to operational mode. In this regard, we plan to add approximately six administrative personnel and expect to begin to incur related payroll costs of approximately $15,000 per month.
9 Plan of Operation - FY2013 (continued) By late 2013, we anticipate that we will have sufficiently developed our database to the point where we can offer a product that will be receptive to potential customers. At that time, although we will continue to add to our database, we intend to start adding marketing personnel to develop and implement a plan to bring our product into the marketplace. We plan to add 2 marketing personnel per month beginning in late 2013 until we reach a total of 10 at an approximate monthly payroll cost of $2,750 per such employee.
We expect that our marketing team will be fully assembled by the third quarter of 2013. At that point, much of the effort of our marketing team will be directed to developing a national marketing effort and formulating a plan and cost projection to carry it out. Our national marketing effort is not expected to commence until after September 2013. The feasibility of our national marketing plan will be dependent on our ability to raise additional capital and we have no assurances that this can be accomplished. However, it is not vital to our operations and we will implement it only when and if we have sufficient funds. We have no present plans for any other business.
A major portion of our anticipated revenues is expected to come from Pay Per Click fees which we expect will commence in late 2013. We are presently generating 245,000 clicks per month and we have no agreements in place at this time to convert clicks to cash. Our rate structure will be a flat $0.25 per click compared to an average of $0.92 per click for Google and Yahoo, the most measurable in our industry who generate more than 2,000,000 clicks per day. We expect to increase our monthly click rate as our marketing activities increase.
Banners will be sold on an annual basis, starting as soon as possible after June 2013 when we will attempt to convert all present (trial basis) free-banner sites to paid sites. The program has not commenced, no transactions have been recorded and no sums raised or fees received.
We intend to introduce a fixed "price per click" (as opposed to the highest bid strategy employed by all known competitors) which we expect to yield a following dedicated to true content matching rather than a ranking based on price. This plan will be modified to offer discounts to sites producing the highest click ratings. We believe this strategy is not yet in wide use and will require a series of modifications to test and prove the concept. In the opinion of management, the bidding concept for key words is not the proper, customer-centric way to determine the priority order of websites to be shown in search results. We believe that showing the most frequently accessed sites at the top of the results list produces a more practical result for users/searchers.
10 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements.
Critical Accounting Policies We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
Development Stage Activities The Company was incorporated in the state of Delaware on November 15, 1999, and re-domiciled in the state of Wyoming on August 25, 2010. Activities to date have been directed at developing a searchable directory of selected contents from the Internet and raising capital through the issuance of the Company's capital stock.
Stock-Based Compensation The Company measures and recognizes compensation expense for all share-based payment awards made to employees, consultants and directors based on their grant-date estimated fair values over the period in which the share-based awards are expected to vest.
Use of Estimates The preparation of financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates, including those related to reserves; impairment of website development cost, value of our stock issued to consultants for services and deferred taxes. We base our estimates on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items are reasonable.
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