|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge)
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited annual financial
statements and the notes to those financial statements included elsewhere in
this Annual Report on Form 10-K.
Overview
Media Exchange Group, Inc., formerly known as China Wireless Communications,
Inc. (the"Company") is a Nevada corporation formed in March 1999. The Company
operated as AVL Sys International Inc. (between March 1999 and March 2000),
I-Track, Inc. (between March 2000 and March 2003, and as China Wireless
Communications, Inc. between March 2003 and May 2010. As China Wireless
Communications, the Company marketed information technology systems integration
and internet protocol services to customers. It also provided IP routing
equipment and network cabling and its customers are principally in the People's
Republic of China ("China"). In March 2008, the Company discontinued its
operations in China.
The Company's current plan of operations consists of acquiring an operating
business. The Company identified certain acquisition target(s) but as not
reached any final agreements. The Company's current plan of business is to seek
merger or acquisition opportunities. The Company's information technology
systems business operations are accounted for as discontinued operations in the
accompanying financial statements.
We currently license certain rights from a related party (Malibu Entertainment
Group, Inc.) an affiliate by means of common ownership and management, to market
a youth sports social network under the following brand:
www.myespnhighlights.com
Among other things, this website allows young sports participant to personalize,
showcase and share their passion for a professional sport. We work with various
national youth sports league to help build their the player database through
registrations. The profile control the management and sharing of sport profiles,
statistics and content. We use the Capsa platform to ensure support across
significant carriers and handset.
9
--------------------------------------------------------------------------------2009 and 2008 results of operations
RESULTS OF OPERATIONS
Increase/ Increase/
Year Ended (Decrease) (Decrease)
December 31, in $ 2009 in % 2009
2009 2008 vs 2008 vs 2008
Operating expenses:
Selling, general and administrative $679,414 $1,046,325 $(366,911 ) -35.1 %
Total operating expenses 679,414 1,046,325 (366,911 ) -35.1 %
Operating loss (679,414 ) (1,046,325 ) (366,911 ) -35.1 %
Other income (expense):
Change in fair value of derivative
liabilities (8,825 ) 75,543 (84,368 ) NM
Interest expense-related parties (28,795 ) (12,070 ) (16,725 ) 138.6 %
Interest expense, net (53,171 ) (85,046 ) (31,875 ) -37.5 %
(90,791 ) (21,573 ) 69,218 NM
Net loss before discontinued
operations (770,205 ) (1,067,898 ) (297,693 ) -27.9 %
-
Income from discontinued operations - 43,195 43,195 NM
Net loss $(770,205 ) $(1,024,703 ) $(254,498 ) -24.8 %
NM: Not Meaningful
10--------------------------------------------------------------------------------Selling, general and administrative expenses
Selling, general, and administrative expenses primarily consists of compensation
to officers and consultants incurred in connection with researching and
identifying strategic transactions and being a publicly-traded company.
The decrease in selling, general, and administrative expenses during 2009 when
compared to the prior year is primarily due to incremental compensation of our
chief executive officer during the first quarter of 2008 earned pursuant to
certain milestones as well as additional compensation for consultants to
effectuate the change in our management team during the same period.
Interest expense and interest expense to related parties
Interest expense primarily consists of the amortization of debt discount
resulting from beneficial conversion features of $390,000 associated with
convertible promissory notes issued during 2007, the excess of fair value of
shares of our common stock issued to satisfy certain obligations resulting from
our operating activities and, to a lesser extent, interest on debt.
The decrease in interest expense during 2009 when compared to the prior year is
primarily due to the aforementioned amortization of debt discount which was
recognized during the first three-month period ended March 31, 2008, offset by
our weighted-average debt higher during 2009 when compared to the comparable
prior year period.
Income from discontinued operations
Income from discontinued operations consists of the difference between revenues
and operating expenses associated with our information technology systems
integration and internet protocol services to customers discontinued in March
2008. The decrease in loss from discontinued operations during 2009 is primarily
due to the fact that we did not have discontinued operations during 2009.
Going Concern
The Company has experienced substantial losses since its inception as well as
negative cash flows from its current operations. These matters raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
ability to continue in existence as a going concern, is dependent upon its
ability to obtain equity or debt financing and to merge with a company which
will generate cash flows from operating activities. Management is unable to
determine whether it will be successful in obtaining such equity or debt
financing and whether it will be successful in completing a merger with a
company generating cash flows.
Liquidity
Our cash balance amounted to approximately $200 at December 31, 2009. We are
unable to ascertain that our cash balance will be sufficient meet our
obligations for the next twelve months.
During 2009, we used cash flows of approximately $170,000 in our operating
activities. This is primarily due to our net loss of approximately $770,000,
adjusted by the following non-cash transactions or changes in operating
activities:
• Increase of accrued compensation of approximately $472,000, of which $100,000
was satisfied by issuing a convertible promissory note, and accrued interest of
$82,000;
11--------------------------------------------------------------------------------During 2009, we generated proceeds of approximately $170,000 by issuing notes
payable.
During 2008, we used cash flows of approximately $97,000 in our operating
activities. This is primarily due to our net loss of approximately $1 million,
adjusted by the following non-cash transactions or changes in operating
activities:
• Fair value of shares issued for services of approximately $125,000;
• Income from discontinued operations of approximately $43,000;
• Amortization of debt discount of approximately $49,000;
• Fair value of derivative liability contracts of approximately $90,000 offset by
an a decrease in fair value of such derivative liabilities of approximately
$76,000;
• Increase of accounts payable and accrued expenses of approximately $734,000, of
which $410,000 were satisfied with the issuance of convertible promissory
notes- the remainder of the increase in accounts payable and accrued expenses
is due to our lack of liquidity to satisfy our obligations;
During 2008, we generated proceeds of approximately $95,000 by issuing two notes
payable, one of which amounted to $40,000 issued to a relative of our chief
executive officer, Joseph Cellura.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect 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 revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not
limited to the realization of accounts receivables. Actual results will differ
from these estimates. Present below are those accounting policies that we
believe require subjective and complex judgments that could affect reported
results:
Allocation of operating expenses between continuing and discontinued operations-
Our operating expenses from continuing operations consists of expenses we incur
based on our current activities, which are identifying strategic transactions
and costs associated with being a publicly traded company. We used judgment in
determining the nature of our expenses associated with our efforts similar to
our current activity and those devoted to our operations in China.
Income Tax
We account for income taxes under the asset and liability approach for the
financial accounting and reporting of income taxes. Deferred taxes are recorded
based upon the tax impact of items affecting financial reporting and tax filings
in different periods. A valuation allowance is provided against net deferred tax
assets when we determine realization is not currently judged to be more likely
than not.
We follow the provisions of the Financial Accounting Standards Board Accounting
Standards Codification ("ASC") No. 740, Income Taxes ("ASC 740"). ASC 740
contains a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition
purposes by determining if the weight of available evidence indicates it is more
likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount which is more than 50%
likely of being realized upon ultimate settlement. We consider many factors when
evaluating and estimating its tax positions and tax benefits, which may require
periodic adjustments and which may not accurately anticipate actual outcomes.
Accordingly, we report a liability for unrecognized tax benefits resulting from
the uncertain tax positions taken or expected to be taken on a tax return and
recognizes interest and penalties, if any, related to uncertain tax positions as
an as interest expense.
12--------------------------------------------------------------------------------Impact of Recently Issued Accounting Standards
None.
[ Back To TMCnet.com's Homepage ]
|
TMCnet LOGIN
Webinars
