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DISCOUNT COUPONS CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.(Edgar Glimpses Via Acquire Media NewsEdge) As used in this Form 10-Q, references to "we," "our" or "us" refer to Discount Coupons Corporation unless the context otherwise indicates. Forward-Looking Statements The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the "Report"). This Report contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. This Form 10-Q for the three months ending March 31, 2014 should be reviewed in conjunction with our audited financial statements for our fiscal years ended December 31, 2013 and December 31, 2012 and Management's Discussion and Analysis of Financial Condition and Results of Operations for those same fiscal periods, which are available for review in our Form 10-K filing at www.sec.gov. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Overview We are a marketing firm that provides services to businesses on a cost per acquisition basis through the sale of discount vouchers to consumers. Our business operates in a similar manner to businesses that define themselves as "daily deal' websites. Additionally, we have acquired and plan to enter into additional agreements with "daily deal" websites to assist them to improve their internet presence and websites in return for a portion of their revenues as described in the Description of the Business. We were incorporated on August 16, 2010 in the State of Florida. Our domain name, discountcoupons.com, was contributed to the company by founding shareholder, Charles Zitsman, in exchange for 1,589,290 shares of common stock and $12,500. We immediately began to develop our business model, website, and internet mailing list to capitalize on the strength of our domain name. Limited Operating History We have a limited operating history. Our operations have been focused on establishing our business model, designing and constructing a website, acquiring subscribers, obtaining merchant agreements, testing marketing, advertising and sales channels, and exploring merger and acquisition opportunities within our industry and other closely related industries. Plan of Operations Our primary focus is offering discount coupons to individuals via the internet. We do this through e-mail and other mass marketing methods, directing consumers to our website, DiscountCoupons.com or other websites that we have under management. We also provide our knowledge of internet-based business models to other companies on a consulting basis. We have tested various marketing and advertising channels to determine their efficacy to both sell our vouchers and obtain new subscribers. We have primarily tested pay-per-click search engine marketing, organic search engine optimization, and social media. Through these tests we have learned which channels provide a return on investment (ROI) and which also provide a positive impact on sales and public knowledge. Recently, our operations have included a focus on acquiring management agreements from complementary and similar businesses, whereby we are able to manage their businesses on a revenue share basis. These management agreements provide us with additional marketing reach to promote our offers and also benefit from the increased revenue that results from the management of these properties. Since inception, the Company intended to enter into consulting agreements, whereby the Company would handle all aspects of website development and marketing for non-daily deal sites for a flat fee. Consulting revenue accounted for 32% and 46.5% of total revenue for the current and prior fiscal years, respectively. Although the Company does not consider this its main focus, potential consulting agreements will be entered into if considered lucrative by management. -17- Results of Operations Three Months Ended March 31, 2014 Compared with Three Months Ended March 31, 2013 Revenues Revenues for the three months ended March 31, 2014 and 2013 were $43,863 and $13,198, respectively, representing a $30,665 increase in our revenues. The increase is primarily attributable to an increase in our service revenues resulting from our HC Consulting acquisition. Cost of Sales Cost of sales for the three months ended March 31, 2014 and 2013 were $100 and $0, respectively. Gross Profit Gross profit for the three months ended March 31, 2014 and 2013 was $43,763 and $13,198, respectively, representing a $30,565 increase in our gross profit. The increase in gross profit is primarily attributable to an increase in our service revenues resulting from our HC Consulting acquisition. Total Expenses Total expenses for the three months ended March 31, 2014 and 2013 were $1,073,906 and $217,336, respectively, representing an $856,570 increase in total expenses. Our total expenses consist of research and development, professional fees, selling and general and administrative. The increase in our total expenses is primarily attributable to stock issued for services in the amount of $795,000. Net Operating Loss Net operating loss for the three months ended March 31, 2014 and 2013 was $1,030,143 and $204,138, respectively, representing an $826,005 increase. The increase in net operating loss is primarily attributable to an increase in total expenses related to stock issued for services. Other Income and Expenses Interest expense for the three months ended March 31, 2014 and 2013 was $33,375 and $57,752, respectively, representing a $24,377 decrease. The decrease in interest expense is primarily attributable to a decrease in the notes payable balances. For the three months ended March 31, 2014, the Company recorded a loss on extinguishment of debt in the amount of $18,213. Additionally, for the three months ended March 31, 2014 the Company recorded a gain related to the forgiveness of interest in the amount of $5,704. Net Loss The net operating loss for the three months ended March 31, 2014 and 2013 was $1,076,027 and $261,890, respectively, representing an $814,137 increase. The increase in net loss is primarily attributable to an increase in total expenses related to stock issued for services. Liquidity and Capital Resources The term "liquidity" as used herein refers to the ability of an enterprise to generate adequate amounts of cash to meet the enterprise's needs for cash. At the present time, our available cash is not sufficient to allow us to commence full execution of our business plan. We have minimal cash on hand and no ability to generate cash without the sale of equity or debt securities. Our growth strategy for the next 12 months is primarily focused on seeking strategic acquisitions or joint ventures to acquire their respective operations and mailing lists in our attempt to increase our revenues and increase our subscribers. There can be no assurances that we will be successful in this strategy. Our expansion program may require us to increase our payroll obligations, workers compensation premiums, and employer taxes if our revenues grow. Funds required to finance our expansion program are expected to come primarily from additional debt or equity financings during fiscal 2014; however, there are no assurances that we will be successful in obtaining any additional financing or that we will secure financing on terms that will be favorable to us. During the three months ended March 31, 2014, we used $52,770 net cash in operations, received net cash of $2,754 from investing activities and had $57,500 in net cash provided from the sale of debt and equity securities to investors after principal repayments. During the three months ended March 31, 2013, we used $162,923 net cash in operations and had $90,000 in cash provided from the sale of debt and equity securities to investors. -18- Going Concern Our financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has primarily devoted its efforts to the development and implementation of its web-based business. Operations have been funded through the private placement of equity securities and debt financing. These successful funding efforts have allowed the Company to reach its current state of development despite incurring losses typical with an emerging technology company. At March 31, 2014, the Company had $12,656 in cash and $966,911 in negative working capital. Additionally, for the three months ended March 31, 2014 and 2013, the Company incurred net losses of $1,076,027 and $261,890, respectively. Management anticipates incurring additional losses prior to reaching a positive operating cash flow and intends to finance its operations through additional notes payable and equity funding. Significant additional funding is needed. The Company is in the process of raising capital but there are no assurances such funding will be available. If adequate funding cannot be obtained, the Company may be unable 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 We have no off-balance sheet arrangements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rates We are not being exposed to market risks relating to changes in interest rates because all outstanding debt bears interest at a fixed rate. We currently do not engage in any interest rate hedging activity and have no intention of doing so in the foreseeable future. Foreign Exchange The company has no exposure to foreign exchange fluctuations. Inflation Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs. ITEM 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 240.15d-15 that occurred during our last fiscal quarter that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting. -19- Item 6. Exhibits Exhibit No. Description Rule 13a-14(a)/15d14(a) Certification of Pat Martin, Chief Executive 31.1 Officer (attached hereto) Rule 13a-14(a)/15d14(a) Certification of Pat Martin, the Chief 31.2 Financial Officer (attached hereto) Section 1350 Certification of Pat Martin, Chief Executive Officer 32.1 (attached hereto) Section 1350 Certification Pat Martin, Chief Financial Officer 32.2 (attached hereto) 101.INS XBRL INSTANCE DOCUMENT 101.SCH XBRL TAXONOMY EXTENSION SCHEMA 101.CAL XBRL TAXONOMY EXTENSION CALCULATION LINKBASE 101.DEF XBRL TAXONOMY EXTENSION DEFINITION LINKBASE 101.LAB XBRL TAXONOMY EXTENSION LABEL LINKBASE 101.PRE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE -------------------------------------------------------------------------------- -20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Discount Coupons Corporation Dated: August 29, 2014 By: /s/ Pat Martin Name Pat Martin Title: Principal Executive Officer President/Chief Executive Officer/ Chief Financial Officer/Principal Accounting Officer/Chairman of the Board of Directors -21- |