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GLOBAL GSM SOLUTIONS - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD LOOKING STATEMENTS This quarterly report contains forward-looking statements. These statements 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, which 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 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. Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report. Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to shares of our common stock. As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Global GSM Solutions, Inc., unless otherwise indicated. General Overview Global GSM Solutions Inc. was incorporated in the State of Nevada as a for-profit company on March 5, 2008 and established a fiscal year end of January 31. We do not have revenues, have minimal assets and have incurred losses since inception. We are a development-stage company formed to develop, manufacture, and distribute our product and services to the gaming and vending industry that allows remote monitoring of amusement and vending devices. Our product is intended to improve security, productivity, and profitability of devices such as arcade games, toy dispensing machines, redemption games and vending machines. To date, we have had limited operations. We have developed our business plan, and executed contract with XTEK, where we engage XTEK as an independent contractor for the specific purpose of developing a specialized Website and manufacture and supply GSM Devices for us. GSM Device GSM (Global System for Mobile Communications) is the most popular standard for mobile telephony systems in the world. Our GSM device is a hybrid of a wireless GSM modem and a proprietary electronic device capable of communicating and interpreting data coming from amusement or vending machine to the modem. The GSM device commutates to the vending/amusement machine, analyses the received data and communicates it to the GSM modem part of the device. The GSM modem, using existing wireless networks (the same networks that any cellular phone uses to transmit data), sends interpreted data in set intervals to the central server (website), where it is displayed in a form of useful information and charts (revenues, service interruptions, top earners, inventory remaining, service call alerts). 4 -------------------------------------------------------------------------------- Contracts We executed a product manufacture and supply agreement on February 25, 2010, with XTEK, a software/hardware developer, having a principal office in name Kusocinskiego 3 Street 87-100 Torun, Poland. According to the agreement, XTEK has agreed to develop a specialized website and manufacture and supply us with GSM devices. Such GSM devices will be capable to gather and transmit reading of data generated by amusement, vending and other types of devices. The website will be able to receive data from the GSM devices, sort it, analyze it and create reports. Website user will be able to securely log into the website and monitor the data. User will also be able to receive pre-determined alerts via email and SMS. XTEK will develop, and test the website as well as manufacture and supply the products under the terms and conditions contained in the agreement. Expenditures over the next 12 months are expected to exceed the sum of our cash on hand. We plan to commence activities to raise the funds required for the development program. There is no any assurance that we will be able to raise sufficient funds to proceed with any work or activities of the development program. We plan to raise additional funding for development by way of a private debt or equity financing, but have not commenced any activities to raise such funds and have no current plans on how to raise such funds. Management does not plan to hire additional employees at this time. Our president and director will be responsible for the initial product sourcing. We intend to hire sales representatives initially on a commission only basis to keep administrative overhead to a minimum. We do not expect to be purchasing or selling plant or significant equipment during the next twelve months. Results of Operations Our financial statements have been prepared assuming that we will continue as a going concern and accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. Three Month and Six Month Periods Ended July 31, 2011 Compared to the Three and Six Month Periods Ended July 31, 2010 and the Period from Inception (March 5, 2008) to July 31, 2011. Period from Three months Three months Six months Six months March 5, 2008 ended ended ended ended (Inception) to July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 July 31, 2011 Revenue $ Nil $ Nil $ Nil $ Nil $ Nil Operating $ 4,071 $ 2,225 $ 10,091 $ 2,486 $ 35,939 Expenses Net $ (4,071 ) $ (2,225 ) $ (10,091 ) $ (2,486 ) $ (35,939 ) Income (Loss) Our net loss for the three month period ended July 31, 2011 was $4,071 compared to a net loss of $2,225 for the period ended July 31, 2010 and our net loss for the six month period ended July 31, 2011 was $10,091 compared to a net loss of $2,486 for the period ended July 31, 2010 and $35,939 during the period from inception (March 5, 2008) to July 31, 2011. During the three and six month periods ended July 31, 2011, we did not generate any revenue. 5 -------------------------------------------------------------------------------- Period from Three months Three months Six months Six months March 5, 2008 ended ended ended ended (Inception) to July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 July 31, 2011 Incorporation $ Nil $ Nil $ Nil $ Nil $ 84 costs Professional $ 1,571 $ 2,225 $ 2,572 $ 2,486 $ 21,741 fees Transfer agent $ 2,500 $ Nil $ 5,200 $ Nil $ 9,280 expense General and $ Nil $ Nil $ 2,320 $ Nil $ 4,078 administrative Net Income $ (4,071 ) $ (2,225 ) $ (10,091 ) $ (2,486 ) $ (35,939 ) (Loss) During the three month period ended July 31, 2011, we incurred operating expenses of $4,071 compared to $2,225 for the three month period ended July 31, 2010 and during the six month period ended July 31, 2011, we incurred operating expenses of $10,091 compared to $2,486 for the six month period ended July 31, 2010 and $35,939 incurred during the period from inception (March 5, 2008) to July 31, 2011. The increase in our operating expenses was primarily due to increased transfer agent expenses. Liquidity and Capital Resources Working Capital As at As at July 31, January 31, 2011 2011 Current Assets $ 3,472 $ 15,742 Current Liabilities $ 2,571 $ 8,590 Working Capital $ 901 $ 7,152 Cash Flows Six months Six months Period from Ended Ended March 5, 2008 July 31, July 31, (Inception) to 2011 2010 July 31, 2011 Net cash used in operations $ (7,070 ) $ (6,361 ) $ (36,868 ) Net cash used in investing $ Nil $ Nil $ Nil activities Net cash provided by financing $ Nil $ Nil $ 36,840 activities Increase (decrease) in cash $ 972 $ 139 $ 972 As at July 31, 2011, our current assets were $3,472 compared to $15,742 in current assets as at January 31, 2011. As at the six month period ended July 31, 2011, current assets were comprised of $972 in cash and $2,500 in prepaid expenses. As at July 31, 2011, our current liabilities were $2,571 compared to $8,590 current liabilities as at January 31, 2011. Current liabilities were comprised of $2,571 in accrued expenses. Cash Flows from Operating Activities We have not generated positive cash flows from operating activities. For the six month period ended July 31, 2011, net cash flows used in operating activities was $7,070 consisting of a net loss of $10,091, a decrease in prepaid expenses of $5,200 and a decrease in accrued expenses of $2,179. Net cash flows used in operating activities was $35,868 for the period from March 5, 2008 (inception) to July 31, 2011. Cash Flows from Investing Activities For the six month period ended July 31, 2011, we did not generate any cash flows from investing activities. 6 -------------------------------------------------------------------------------- Cash Flows from Financing Activities We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the six month period ended July 31, 2011, net cash flows from financing activities was $Nil. For the period from inception (March 5, 2008) to July 31, 2011, net cash provided by financing activities was $36,840 received mainly from the sale of our securities as well as related party loans. Plan of Operation and Funding We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing. Off-Balance Sheet Arrangements We have 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 is material to stockholders. Going Concern The independent auditors' report accompanying our January 31, 2011 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. Critical Accounting Policies The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount 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. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. 7-------------------------------------------------------------------------------- Development Stage Company The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development-stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. Cash and Cash Equivalents For purposes of the Statement of Cash Flows, our company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Our company's bank accounts are deposited in insured institutions. The funds are insured up to $250,000. At July 31, 2011 our company's bank deposit did not exceed the insured amounts. Fair Value of Financial Instruments Our company's financial instruments consist of cash and cash equivalents, accrued expenses and loans payable to a related party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Advertising Costs Our company's policy regarding advertising is to expense advertising when incurred. Our company incurred advertising expense of $0 as of July 31, 2011and July 31, 2010. Dividends Our company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown. Basic Income (Loss) Per Share Basic income (loss) per share is calculated by dividing our company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of July 31, 2011. 8-------------------------------------------------------------------------------- Stock-Based Compensation Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718). To date, our company has not adopted a stock option plan and has not granted any stock options. As of July 31, 2011, our company has not issued any stock-based payments to its employees. Revenue Recognition Our company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |