TMCnet News
BRAMPTON CREST INTERNATIONAL INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) The following is management's discussion and analysis of certain significant factors that have affected our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited consolidated financial statements. This discussion should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for its fiscal year ended December 31, 2010. Special Note Regarding Forward Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact, that we make in this Quarterly Report on Form 10-Q are forward-looking. The words "anticipates," "believes," "expects," "intends," "will continue," "estimates," "plans," "projects," the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking. Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K. Examples of forward looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our ability to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements can be found in the Risk Factors under "Item 1.A" of our Form 10-K for the fiscal year ended December 31, 2010. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them in light of new information or future events. In this Quarterly Report on Form 10-Q, "Company," "the Company," "us," and "our" refer to Brampton Crest International, Inc., a Nevada corporation, and our subsidiaries, unless the context requires otherwise. General Company Description History America's Emergency Network, LLC was a Florida-registered limited liability company founded by Bryan Norcross and Max Mayfield in 2007 to implement AEN. On March 19, 2008, the LLC merged into a subsidiary of the publicly traded company, Brampton Crest International, Inc. (OTBB: BRCI), and became America's Emergency Network, Inc. ("AEN"), a Florida corporation. AEN is a wholly owned subsidiary of Brampton Crest International, Inc. Norcross and Mayfield are shareholders and the key strategic visionaries of the Company. Mr. Norcross previously served as Brampton's and AEN's President and Chief Executive Officer. 19 --------------------------------------------------------------------------------Services The AEN network design is a multi-part system that gathers, distributes, displays, and archives emergency information generated by local, state, and federal governmental agencies. The design does not allow AEN to alter or edit the content, nor provide any commentary or analysis. Each municipality or agency remains in full control of its information, and decides when (or under what conditions) to send out live video feeds. Analogous to C-SPAN's broadcasts of raw, unedited, live video of the House and Senate proceedings, the AEN design allows emergency news briefings from any subscribing governmental entity with instructions for the general public to be disseminated. The video feeds sent out by government agencies are distributed to multiple websites. On media sites (owned by newspapers, television stations, etc.), the public would be able to view the live news briefings free of charge. In addition, the design allows video feeds to be recorded so they can be viewed after the news conferences have concluded. With the AEN system widely deployed, members of the public will have access to the full set of emergency information and instructions for their area (free, for a reasonable time after the event) even if they miss the live coverage. The AEN design allows an agency to control its feeds by an easy-to-use switch control box. Each subscribing governmental entity, big and small, will be able to feed its emergency briefings to local-media websites for distribution to the public. AEN's business model calls for video feeds to be distributed for free to the public on the internet via media websites, while access to "premium" content (such as broadcast-resolution video streams - whether live, recently recorded, and/or archived) would be sold on a subscription basis to television outlets and other entities. Additional revenue would be generated by leveraging AEN's technology and distribution backbone for private business. Broadcasters and networks have a need for a new method for gathering video feeds and for providing "backhaul" video to reporters at remote locations that is less expensive than traditional video transmission and back-haul systems. Many private businesses and other entities would benefit from being able to distribute video of a special briefing or event to media outlets for broadcast. The AEN infrastructure's design can fill many of these needs. The Company requires additional financing as described under "Item -1A-Risk Factors" in our form 10-K for the fiscal year ended December 31, 2010, to sustain and grow the AEN business and to hire qualified management and employees to execute our business plan. We can provide no assurances that additional financing will be obtained to grow the AEN business on terms satisfactory to us, if at all. In the absence of such additional financing, the Company will seek to establish or acquire other business opportunities and to obtain financing for same. In such event, the Company may be required to sell or shut down the AEN operations. We can provide no assurances that a new business can be established or acquired or that additional financing for any such new business opportunity or acquisition will be available on terms satisfactory to us, if at all. In the event that the decision is made to sell the AEN business or to cease its operations, we can provide no assurances that the Company will realize any substantial sums of money from the sale of any such business. Recent Sales of Securities On May 13, 2011, the Company entered into an agreement with MRP Group LLC as described below which has resulted in a change in control. In December 2010 and May 2011, the Company's board approved an exchange for services rendered, the issuance of Series 1 Preferred Stock convertible into an aggregate of 12 million shares of Common Stock. In connection with this transaction, Janis Farnham, Bryan Janeczko, Robert Wildberger and Brad Hacker received Series 1 Preferred Stock convertible into 7,500,000 shares, 750,000 shares, 750,000 shares and 1,000,000 shares of Common Stock, respectively, subject to an increase in the authorized number of shares of Common Stock at the next stockholder meeting to at least 6 billion shares. Also, Joseph Emas agreed to exchange 1,949,124 shares of Common Stock for Series 1 Preferred Stock convertible into 1,949,124 shares. The Preferred Stock has the voting rights equal to the number of shares of Common Stock into which they are convertible. In May 2011, the Company issued 11 million shares of its Common Stock in exchange for the conversion of $220,000 in principal debt which was invested in the Company in December 2009. The change in control described below and the issuance of Series 1 Preferred Stock to the officers, directors and former officers and/or directors identified above is exempt under Section 4(2) and/or Rule 506 of the Securities Act of 1933, as amended. The transaction described in the immediately preceding paragraph is exempt under Section 3(a)(9) of the Securities Act as an exchange of securities of the same issuer with no commissions being paid. 20 --------------------------------------------------------------------------------Changes in Control of Registrant. On May 13, 2011, the Company entered into an agreement with MRP Group LLC ("MRP"), a newly formed company which is currently owned and controlled by Murray Bacal, Paul Michelin and J. Rod Martin. The Company and MRP have agreed that MRP would invest up to $250,000 in the Company. Of the $250,000, $10,000 shall represent the purchase of Series 3 Preferred Stock which shall have the right to vote the same as Common Stock (except as otherwise provided by applicable state law) equal to 5,278,982,480 shares of Common Stock and the right to convert into 5,278,982,480 shares of Common Stock equivalent to 95% of our current issued and outstanding shares of Common Stock on a fully diluted basis after due consideration for all outstanding notes, options, warrants, shares of Common Stock and preferred stock outstanding on May 13, 2011. The foregoing conversion right is subject to an increase in the authorized number of shares of Common Stock at the next stockholder meeting to at least 6 billion shares and is further subject to adjustments for any stock splits, stock dividends, combinations, reclassifications and the like. The remaining up to $240,000 funding commitment from the Lenders shall be in the form of non-interest bearing loans repayable upon demand and shall be made available to the Company on an as needed basis for its operations. The financing provided to the Company is expected to be provided to MRP (and in turn to the Company) from the personal funds of the members of MRP. Not reflected in MRP's 95% ownership interest is that Murray Bacal currently owns and controls 25,059,568 shares and Paul Michelin and his wife, Louisa Michelin, currently own and control notes which are convertible into Series 2 Preferred Stock which are further convertible into 50,000,000 common shares as described above. The agreement of May 13, 2011 also released the Michelins from any obligation to invest an additional $1,250,000 pursuant to a subscription agreement dated April 2010. As of June 30, 2011 approximately $18,000 has been paid to the Company. The offer and sale of shares of our securities were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were "accredited investors," as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education, and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act; and (f) no finder's fees were paid. RESULTS OF OPERATIONS Three and Six Months Ended June 30, 2011, Compared Three and Six Months Ended June 30, 2010 Sales increased to $2,024 for the six months nded June 30, 2011 as compared to $32 for the six months ended June 30, 2010. The increase was due to revenue received from contracts related to its AEN operations Selling, General, and Administrative Expenses decreased to $108,023 for the six months ended June 30, 2011 as compared to $533,478 for the six months ended June 30, 2010. The decrease is due to limited operations within the Company and reduction of personnel during the quarter. Sales increased to $813 for the three months ended June 30, 2011 as compared to $-0- for the three months ended June 30, 2010. The increase was due to revenue received from contracts related to its AEN operations Selling, General, and Administrative Expenses decreased to $31,131 for the three months ended June 30, 2011 as compared to $247,744 for the three months ended June 30, 2010. The decrease is due to limited operations within the Company and reduction of personnel during the quarter. Current Assets Cash and cash equivalents decreased to $477 on June 30, 2011 as compared to $1,693 on December 31, 2010, primarily as a result of lack of capital resources and the need to raise additional financing. Liabilities Current Liabilities changed to $619,049 at June 30, 2011 as compared to $620,553 at December 31, 2010. See Liquidity and Capital resources for further information on notes payable and private placements. Liquidity and Capital Resources We are financing our operations and other working capital requirements principally from the receipt of proceeds from private placements of our securities and from interest income as outlined below. On December 24, 2009, we accepted the final subscription arising from a December 7, 2009 private financing transactions with certain private investors, pursuant to a subscription agreement for an aggregate purchase price of Two Hundred and Twenty Thousand Dollars ($220,000) consisting of an aggregate of $220,000 in 10% Promissory Notes, due twelve months from the date of issuance and 11,000,000 shares of common stock. 21 --------------------------------------------------------------------------------Pursuant to the completed private financing transactions, we issued to U.S. Purchasers, in reliance upon the exemption provided by Sections 4(2) and 4(6) under the Securities Act of 1933, as amended, for a transaction not involving a public offering and pursuant to Rule 506 of Regulation D promulgated thereunder, consisting(a) an aggregate of $170,000 in 10% Promissory Notes, due twelve months from the date of issuance; and (b) an aggregate of 8,500,000 shares of common stock of our Company. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) each of the U.S. Purchasers was accredited within the meaning of Rule 501(a); (2) the transfer of the securities were restricted by the Company in accordance with Rule 502(d); (3) there were no non-accredited investors in any transaction within the meaning of Rule 506(b), after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction; and (4) none of the offers and sales were effected through any general solicitation or general advertising within the meaning of Rule 502(c). Pursuant to the completed private financing transactions, we issued to non-U.S. Purchasers, in reliance upon the exemption provided by Regulation S under the Securities Act of 1933, as amended, for a transaction not involving a public offering and consisting of (a) an aggregate of $50,000 in 10% Promissory Notes, due twelve months from the date of issuance; and (b) an aggregate of 2,500,000 shares of common stock of our Company. The non-U.S. Purchasers acknowledged the following: The non-U.S. Purchaser is not a United States Person, nor is the non-U.S. Purchaser acquiring the Securities hares directly or indirectly for the account or benefit of a United States Person. None of the funds used by the non-U.S. Purchaser to purchase the Securities have been obtained from United States Persons. For purposes of this Agreement, "United States Person" within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means: (i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts. We currently need additional financing to maintain our company as a going concern. We can provide no assurances that additional financing will be available to us on terms satisfactory to us, if at all. See "Risk Factors." In May 2011, we issued 11,000,000 shares to the note holder to retire the principal amount of $220,000 due under the aforementioned notes. On April 14, 2010 the Company agreed to a stock subscription agreement with an investor. The agreement states the Company will sell up to $1,500,000 in five-year convertible debentures (converting to an aggregate of 300,000,000 shares the Company's common stock ["Common Stock" or the "Shares"]), subject to certain terms and conditions. The Company will, subject to continuing confirmation of Accredited Subscriber Status accept subscriptions of $250,000 every ninety (90) days following the initial investment, until the full Offering amount is satisfied or the Company, in its sole discretion, terminates the Offering (each a "Tranche"); except that it is acknowledged that the initial investment shall be satisfied in two payments, one of $20,000 on April 14, 2010 and the remainder of the payment, consisting of $230,000, to be paid in the week of April 19, 2010. The agreement provided that the Company may, in its sole discretion, not accept a Tranche provided the Company provides written notice to the Subscriber, not less than five days prior to the expiration of the 90 day period of a Tranche, of not accepting the Tranche. Unaccepted Tranches are not cumulative unless agreed to in writing by the Subscriber. In May 2011, the Company agreed to cancel the balance of this subscription agreement and it agreed to have the notes convertible into 500 shares of Series 2 Preferred Stock which would be further convertible into 50,000,000 shares of Common Stock upon stockholder approval of an increase in the authorized number of shares of Common Stock to at least 6 billion. In December 2010 and May 2011, the Company's board approved an exchange for services rendered, the issuance of Series 1 Preferred Stock convertible into an aggregate of 12 million shares of Common Stock. In connection with this transaction, Janis Farnham, Bryan Janeczko, Robert Wildberger and Brad Hacker received Series 1 Preferred Stock convertible into 9,500,000 shares, 750,000 shares, 750,000 shares and 1,000,000 shares of Common Stock, respectively, subject to an increase in the authorized number of shares of Common Stock at the next stockholder meeting to at least 6 billion shares. Also, Joseph Emas agreed to exchange 1,949,124 shares of Common Stock for Series 1 Preferred Stock convertible into 1,949,124 shares. The Preferred Stock has the voting rights equal to the number of shares of Common Stock into which they are convertible. 22 --------------------------------------------------------------------------------On May 13, 2011, the Company entered into an agreement with MRP Group LLC ("MRP"), a newly formed company which is currently owned and controlled by Murray Bacal, Paul Michelin and J. Rod Martin. The Company and MRP have agreed that MRP would invest up to $250,000 in the Company. Of the $250,000, $10,000 shall represent the purchase of Series 3 Preferred Stock which shall have the right to vote the same as Common Stock (except as otherwise provided by applicable state law) equal to 5,278,982,480 shares of Common Stock and the right to convert into 5,278,982,480 shares of Common Stock equivalent to 95% of our current issued and outstanding shares of Common Stock on a fully diluted basis after due consideration for all outstanding notes, options, warrants, shares of Common Stock and preferred stock outstanding on May 13, 2011. The foregoing conversion right is subject to an increase in the authorized number of shares of Common Stock at the next stockholder meeting to at least 6 billion shares and is further subject to adjustments for any stock splits, stock dividends, combinations, reclassifications and the like. The remaining up to $240,000 funding commitment from the Lenders shall be in the form of non-interest bearing loans repayable upon demand and shall be made available to the Company on an as needed for its operations. The financing provided to the Company is expected to be provided to MRP (and in turn to the Company) from the personal funds of the members of MRP. Not reflected in MRP's 95% ownership interest is that Murray Bacal currently owns and controls 25,059,568 shares and Paul Michelin and his wife, Louisa Michelin, currently own and control notes which are convertible into Series 2 Preferred Stock which are further convertible into 50,000,000 common shares as described above. Critical Accounting Policies Accounting Policies and Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain 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 period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management's initial estimates as reported. A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing. Revenue Recognition The Company recognizes revenue in accordance with the Securities and Exchange Commission, Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition" ("SAB No. 104"). SAB 104 clarifies application of generally accepted accounting principles related to revenue transactions. The Company also follows the guidance in FASB Accounting Standards Codification (ASC) Topic 605-25, Revenue Arrangements with Multiple Deliverables (formerly "EITF Issue No. 00-08-1"), in arrangements with multiple deliverables. The Company recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company receives revenue for consulting services, video streaming services, equipment sales and leasing, installation, and maintenance agreements. Sales and leasing agreement terms generally are for one year, and are renewable year to year thereafter. Revenue for consulting services is recognized as the services are provided to customers. For upfront payments and licensing fees related to contract research or technology, the Company determines if these payments and fees represent the culmination of a separate earnings process or if they should be deferred and recognized as revenue as earned over the life of the related agreement. Milestone payments are recognized as revenue upon achievement of contract-specified events and when there are no remaining performance obligations. Revenues from monthly video streaming agreements, as well as equipment maintenance, are recorded when earned. Operating equipment lease revenues are recorded as they become due from customers. Revenues from equipment sales and installation are recognized when equipment delivery and installation have occurred, and when collectability is reasonably assured. In certain cases, the Company enters into agreements with customers that involve the delivery of more than one product or service. Revenue for such arrangements is allocated to the separate units of accounting using the relative fair value method in accordance with ASC Topic No. 605-25. The delivered item(s) is considered a separate unit of accounting if all of the following criteria are met: (1) the delivered item(s) has value to the customer on a standalone basis, (2) there is objective and reliable evidence of the fair value of the undelivered item(s) and (3) if the arrangement includes a general right of return, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor. If all the conditions above are met and there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on their relative fair values. 23 --------------------------------------------------------------------------------Explicit return rights are not offered to customers; however, the Company may accept returns in limited circumstances. There have been no returns through December 31, 2010. Therefore, a sales return allowance has not been established since management believes returns will be insignificant. |