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WWA GROUP INC - 10-Q/A - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) This Management's Discussion and Analysis of Financial Condition and Results of Operations and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as "anticipates," "expects," "believes," "plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to those discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below. The following discussion should be read in conjunction with our financial statements and notes hereto included in this report. Our fiscal year end is December 31. Discussion and Analysis WWA Group's business strategy is to develop Asset Forum LLC ("Asset Forum"), and assist in the growth of Infrastructure Developments Corp. ("Infrastructure"), and acquire or merge with an operating business. Effective October 31, 2010, WWA Group concluded a Share Purchase Agreement to sell World Wide Auctioneers, Ltd. ("World Wide") to Seven International Holdings, Ltd. WWA Group will assist in the management of World Wide during an ongoing transitional period. WWA Group will (i) train new management, (ii) promote operating efficiencies at the primary auction location in Dubai, UAE, and (iii) consult as to the use of lower cost venues including on-line auctions and smaller equipment auctions. The disposition of World Wide did not affect WWA Group's interest in Asset Forum, its ownership of proprietary on-line auction software, or its equity interest or debt position in Infrastructure in which it currently holds an unconsolidated 17.75% equity position. WWA Group intends to focus its efforts on marketing and building Asset Forum's business. We also expect to expand the application of our proprietary on-line auction system software to other asset segments. Infrastructure is currently pursuing larger projects with greater returns in expanded markets which we anticipate will provide a return of on our investment. We are also targeting operating businesses and assets that will provide us an opportunity for development into near term revenues. Our financial condition and results of operations will depend primarily on prospective income generated from Asset Forum and any return on our investment in Infrastructure. Meanwhile, our continued operation is tied to our ability to realize debt or equity financing. Since WWA Group is currently without income it can provide no assurance that income will be forthcoming or in the event revenue is realized that such return will provide sufficient cash flows to sustain our operations. WWA Group has no commitments for additional debt or equity financing at this time. WWA Group's business development strategy is prone to significant risks and uncertainties which are having an immediate impact on our efforts to realize net cash flow. We have a limited history of generating income from our equity investments and are yet to generate income from the operations of Asset Forum. Should we be unable to generate income or reduce expenses to the point where we meet operating expenses, WWA Group's ability to continue its business operations will be in jeopardy. 12 -------------------------------------------------------------------------------- Results of Operations During the six month period ended June 30, 2011, WWA Group (i) continued early development of Asset Forum, (ii) sought construction management projects for the benefit of Infrastructure, (iii) began the search for a business opportunity for development, merger or acquisition, (iv) continued discussion with Office of Foreign Assets Control regarding International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq. in connection with the facilitation of auction related services to Iran and Sudan (see Legal Proceedings, below), and (v) satisfied continuous public disclosure requirements. Net Loss Net loss for the three months ended June 30, 2011 increased to $393,702 from $68,964 for the period ended June 30, 2010. Net loss for the six months ended June 30, 2011 increased to $2,110,539 from $1,329,163 for the period ended June 30, 2010. The increase in net loss over the comparative three month periods can be attributed to losses from our equity investment in Infrastructure. The increase in net loss over the comparative six month periods can be primarily attributed to the impairment of notes receivable from Infrastructure's subsidiary and our Australian associates as well as losses from our equity investment in Infrastructure. WWA Group anticipates that it will continue to realize net losses through 2011 or until such time as Asset Forum realizes revenue or WWA Group realizes a return on its equity investment in Infrastructure. Revenue Revenue for the three months ended June 30, 2011 was $0 as compared to $10,920,284 for the three months ended June 30, 2010. Revenue for the six months ended June 30, 2011 decreased to $0 from $16,722,364 for the six months ended June 30, 2010.The decrease in revenues over the comparative periods can be attributed to the sale of World Wide at October 31, 2010. WWA Group expects revenue to remain at $0 until such time as it realizes revenue from Asset Forum. Gross Profit Gross profit for the three months ended June 30, 2011 was $0 as compared to $1,470,343 for the three months ended June 30, 2010. Gross profit for the six months ended June 30, 2011 decreased to $0 from 1,898,080 for the six months ended June 30, 2010. The decrease in gross profit over the comparative periods can be attributed to the sale of World Wide at October 31, 2010. WWA Group does not expect gross profit in the near term. Operating Expenses Operating expenses for the three months ended June 30, 2011 was $8,853 as compared to operating expenses of $1,206,955 for the three months ended June 30, 2010. Operating expenses for the six months ended June 30, 2011 decreased to 14,685 from $2,512,321 for the six months ended June 30 2010. The decrease in expenses over the comparative periods is attributed to the sale of World Wide at October 31, 2010. The major components of operating expenses are (i) general and administrative expenses, including professional fees, rent expense, travel and entertainment, representation expense, insurance, bank charges, and maintenance expenses, (ii) salaries and wages, (iii) selling expenses, and (iv) depreciation and amortization. WWA Group anticipates that operating expenses may increase if capital becomes available to focus on the activities of Asset Forum. 13 -------------------------------------------------------------------------------- Depreciation and amortization expenses decreased to $0 from $213,974 over the comparable three months period ended June 30, 2011 and 2010. Depreciation and amortization expenses for the six months ended June 30, 2011 decreased to $0 from $430,398 for the six months ended June 30, 2010. Depreciation and amortization expenses are expected to continue to remain at $0 through 2011. Other Expenses Other expenses for the three months ended June 30, 2011 increased to $384,850 from $332,351 for the three months ended June 30, 2010. Other expenses for the six months ended June 30, 2011 increased to $2,095,854 from $714,921 for the six months ended June 30, 2010. The increase in other expenses over the comparative three month periods can be attributed to losses from our equity investment in Infrastructure. The increase in other expenses over the comparative six month periods can be primarily attributed to the impairment of notes receivable from Infrastructure's subsidiary Intelspec and our Australian associates as well as losses from our equity investment in Infrastructure. Income Tax Expense (Benefit) WWA Group has a prospective income tax benefit resulting from a net operating loss carry-forward and start up costs that will offset any future operating profit. Impact of Inflation WWA Group believes that inflation has had a negligible effect on operations over the past three years. Liquidity and Capital Resources We had a working capital surplus of $185,958 as of June 30, 2011. At June 30, 2011, our current assets were $264,835, which consisted of $1,805 in cash and $264,835 in other current assets. Our total assets were $2,289,010 which included current assets, non-current notes receivable, and investments in equity interests. Our current and total liabilities were $78,877. Our total stockholders' equity at June 30, 2011, was $2,210,133 Cash flows used in operating activities for the six months ended June 30, 2011 was $36,199 as compared to $1,770,378 for the period ended June 30, 2010. The difference in cash flow provided by operating activities between the periods can be attributed to the sale of World Wide which made up the bulk of our operating activities in the prior period. We do not expect to provide cash flows from operations in 2011. Cash flows provided by investing activities for the six months ended June 30, 2011 were $33,000 as compared to cash flow used in investing activities $1,005,654 for the six months ended June 30, 2010. Investing activities in the current period relate to a decrease in note receivable amounts. We do expect to use cash flows in investing activities going forward as funds become available to expand the operations of Asset Forum. Cash flows provided by financing activities were $1,169 for the six months ended June 30, 2011 as compared to cash flow used in financing activities of $1,276,545 for the six months ended June 30, 2010. Financing activities in the current period relate to payments on short-term notes. We do not expect to generate cash flows provided by financing activities in the near term. 14 -------------------------------------------------------------------------------- Our current assets are insufficient to conduct business over the next 12 months. We will have to seek at least $250,000 in debt or equity financing over the next twelve months to fund the development of Asset Forum. WWA Group has no current commitments or arrangements with respect to, or immediate sources of this funding. Further, no assurances can be given that funding is available. Our shareholders are the most likely source of new funding in the form of loans or equity placements though none have made any commitment for future investment and we have no agreement formal or otherwise. Our inability to obtain sufficient funding to develop Asset Forum will have a material adverse affect on our ability to generate revenue and our ability to continue operations. WWA Group does not intend to pay cash dividends in the foreseeable future. WWA Group had no commitments for future capital expenditures that were material at June 30, 2011 WWA Group has no defined benefit plan or contractual commitment with any of its officers or directors. WWA Group had no lines of credit or other bank financing arrangements as of June 30, 2011. WWA Group has no current plans for the purchase or sale of any plant or equipment. WWA Group has no current plans to make any changes in the number of employees. Off Balance Sheet Arrangements As of June 30, 2011, WWA Group has no significant 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 is material to stockholders. Critical Accounting Policies In Note B to the audited consolidated financial statements for the years ended December 31, 2010 and 2009 included in WWA Group's Form 10-K, we discuss those accounting policies that are considered to be significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, WWA Group evaluates its estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions. With respect to revenue recognition, we apply the following critical accounting policies in the preparation of its financial statements 15 -------------------------------------------------------------------------------- Forward Looking Statements and Factors That May Affect Future Results and Financial Condition The statements contained in the section titled Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this current report, are forward looking statements. Forward looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning: † our anticipated financial performance; † the sufficiency of existing capital resources; † uncertainties related to the growth of our business and the acceptance of our products and services; † our ability to achieve and maintain an adequate customer base to generate sufficient revenues to maintain and expand operations; † the volatility of the stock market and; † general economic conditions. We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated; including the factors set forth in the section entitled "Risk Factors" included elsewhere in this report. We also wish to advise readers not to place any undue reliance on the forward looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other than as required by law. Going Concern WWA Group's auditors have expressed an opinion as to its ability to continue as a going concern as a result of recurring losses from operations. WWA Group's ability to continue as a going concern is subject to its ability to realize a profit from operations and /or obtain funding from outside sources. Management's plan to address WWA Group's ability to continue as a going concern includes: (i) obtaining funding from the private placement of debt or equity; (ii) realizing revenues from the activities of Asset Forum; and (iii) obtaining loans and grants from financial or government institutions. Management believes that it will be able to obtain funding to enable WWA Group to continue as a going concern through the methods discussed above, though there can be no assurances that such methods will prove successful. Recent Accounting Pronouncements Please see Note C to our consolidated financial statements for recent accounting pronouncements. Stock-Based Compensation We have adopted Accounting Standards Codification Topic ("ASC") 718, Share-Based Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. 16 -------------------------------------------------------------------------------- We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services. |