18-Apr-2012
Annual Report
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and our subsidiaries and our results of operations should be read together with the consolidated financial statements and related notes that are included later in this Annual Report on Form 10- K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Risk Factors or in other parts of this Annual Report on Form 10-K.
Year ended December 31, 2011 compared with year ended December 31, 2010
Results of Operations
For the year ended December 31, 2011, net sales was $142,132 as compared to the prior year of $59,730, representing an increase of about 138%. This sales increase was due mainly to the increase in the sale of advertising services.
For the year ended December 31, 2011, the cost of goods sold was $40,185 as compared to the prior year of $25,479, making our gross profit of $101,947 (2010: $34,251) for the year.
For the year ended December 31, 2011 operating expenses were $213,754 as compared $686,053, a decrease of $472,299 or about 69% from the prior year which was mainly attributable to i) the loss on disposal of subsidiary $nil (2010:
$119,890), and ii) option expenses of $34,328 (2010: $240,368) in respect of stock options issued to employees and stock based payments. In 2011, the other major components in the operating expenses were consulting services of $67,396 (2010: $78,981), and salaries of $28,876 (2010: $133,210). Overall the remaining operating expenses of $83,154 were similar in other respects once the above factors are taken into account.
In 2011, the Company incurred an impairment of goodwill loss of $nil (2010:
$4,791,676) relating to the Beijing Ren Ren goodwill as the Group de-focus from the BRR advertising business.
In 2011, the Company incurred an impairment of distribution right of $68,800 (2010: nil) relating to the advance payment for the distribution rights for the M.A.G.I.C. Convergent Communications Device for the territories of China and Hong Kong.
The operating loss decreased to $111,807 for the year ended December 31, 2011 from the prior year loss of $5,443,478.
During the year the interest expenses increased to $183,785 as compared to $176,885 in the prior year.
For the three months ended December 31, 2011, our revenue was $39,717, and a cost of revenue of $8,974, achieving a gross profit of $30,743. For the three month period ended December 31, 2010, our revenue was $15,517, and a cost of revenue of $3,248, achieving a gross profit of $12,269. For the three months ended December 31, 2011, our selling and general expenses were $66,379, and impairment of distribution right was $68,800 and our net interest expenses were $43,935 and gain on disposal of investment $161,700; thereby resulting an operating profit of $13,329. For the three months period ended December 31, 2010, our selling and general expenses were $244,416 and our net interest expenses were $46,049 and our impairment of goodwill was $4,791,676, so that our net loss for the three months period ended December 31, 2010 was $5,069,872. The decrease in selling, general and administration expenses from the prior period was mainly due to loss on sale of subsidiary $nil (2010: $119,890).
Liquidity and Capital Resources
Net cash used in operating activities was $173,183 during the year ended December 31, 2011 as compared to net cash used of $38,234 in the prior year, as there was no funding from stock issuing activities during the current year. The Company intends to monitor the monthly cash outlays in fiscal 2012 and conserve cash until additional financing can be received through other funding. The net loss for the year was $99,304 compared to $5,597,741 in the prior year.
Net cash provided by investing activities was $172,129 (2010: $nil) during the year ended December 31, 2011.
Net cash used in financing activities was $nil (2010: $nil) during the year ended December 31, 2011.
At present the Company does not have sufficient cash resources, receivables and cash flow to provide for all general corporate operations in the foreseeable future. In 2011, the Group disposed 100% of its short term investment in Jademan International Limited and raised about $421,000 to settle some of the Group's liabilities. The Company will be required to raise further funds to meet its other liabilities and operation requirements to continue to operation in 2012 by
i) selling its Common Stock ii) raise from the capital markets, iii) sell additional assets.
Going Concern
The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has experienced a significant loss from operations. For the years ended December 31, 2011 and 2010, the Company incurred net losses of $99,304 and $5,597,741, respectively.
The Company's ability to continue as a going concern is contingent upon its ability to secure additional financing and attain profitable operations. In addition, the Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in developing markets and the competitive environment in which the Company operates.
The Company is pursuing financing for its operations and seeking additional investments. In addition, the Company is seeking to expand its revenue base by adding new customers and start out its advertising business. Failure to secure such financing, to raise additional equity capital and to expand its revenue base may result in the Company depleting its available funds and not being able pay its obligations.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Off-Balance Sheet Arrangements.
There are no 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 are material to investors.
Capital Expenditure Commitments |
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