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ALPHAPOINT TECHNOLOGY, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD LOOKING STATEMENTS This section of the prospectus includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: "believe", "expect", "estimate", "anticipate", "intend", "project" and similar expressions, or words that, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Our financial statements are stated in United States Dollars (USD or US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to "common shares" refer to the common shares in our capital stock. Overview We are a company, incorporated in the State of Delaware on November 13, 2008 as a for-profit company, and have an established fiscal year of December 31. Our auditor has issued a going concerned opinion. This means there is doubt that we can continue as an on-going business unless we obtain additional capital through the sale of our common shares or other traditional financing, in order to meet our obligations. From inception through 2009, our business operations consisted of the development of our software product, which included research and development, executing our business and marketing plan, and financing activities, in which to fund the operations. We introduced our software and product offerings in late 2009. RESULTS OF OPERATIONS Three Months Ended March 31, 2012 and 2011 During the three months ended March 31, 2012, we generated revenues in the amount of $16,421, compared to $22,797 for the three months ending March 31, 2011. Our unrecognized revenue, deferred to future periods that our services (based on existing maintenance contracts) extend is $26,492 and $42,913 as of March 31, 2012 and December 31, 2011, respectively. Revenues decreased due to less amortization of existing contracts. Operating expenses were $63,533 and $93,914 for the three months ended March 31, 2012 and 2011, respectively. The decrease in the comparative expenses, in the amount of approximately $30,000 was due to expense categories: · Compensation costs decreased as the business model took effect. · Research and development is down since the product needs only minor refinements. Net losses incurred in the periods presented have been primarily due revenues not reaching the break-even point yet. The Company incurred net losses of $(49,733) and $(75,535) for the three months ended March 31, 2012 and 2011, respectively. The decrease in the loss for the current period was due in part from an increase in revenues and in part by a reduction in operating costs. LIQUIDITY AND CAPITAL RESOURCES As reflected in the financial statements we have an accumulated deficit from inception of $(937,737) and have a negative cash flow from operations of $(54,393) for the three months ended March 31, 2012. This raises doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and execution of its business plan. Our independent auditor has expressed doubt about our ability to continue as a going concern. See Note 2 of our financial statements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. - 13 - -------------------------------------------------------------------------------- We spent approximately $8,375 and $26,260 in research and development costs for the three months ended March 31, 2012 and 2011. Our sales offerings are customer specific, based on contract. Generally, our installation projects are short term. Our invoicing and credit terms are standard, with a negotiated amount as a down payment, generally 33-50%, to be received by the installation date, balance payable within 30 days. The significance of our requested down payment is weighted in our revenue recognition considerations, as is our contracts. We do not have a long history of sales and therefore consider creditworthiness of our customer in our revenue recognition (when collections are reasonably assured). We have not experienced any bad debts or allowances on our contracted pricings. At March 31, 2012, the Company had $1,435 in cash resources to meet current obligations. Management does not consider our current cash position sufficient to sustain our operations. We estimate that our current available cash will satisfy approximately one month of our operating cash flow requirements. We have depended and continue to depend on monthly cash contributions from our majority shareholder, Gary Macleod, to meet any shortfall in meeting our obligations. We expect to generate increasing revenue during rest of the year, minimizing our need for support; however we will require capital to market our product and achieve our operating plan. In the absence of generating revenue, we anticipate that over the next twelve months we will require cash contributions from Mr. Macleod or other related parties and to sell more shares. However, there is no guarantee that these parties will make any contributions or we will find a market for our stock. We have not identified any other source of funding to meet the shortfall; thus, without their support, we may go out of business. Completion of our plan of operation is subject to attaining adequate revenue. We cannot assure investors that adequate revenues will be generated. Without adequate revenues, we may be unable to proceed with our plan of operations. In the event we are not successful in reaching our revenue targets, additional funds may be required, and we would then not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we would incur operating losses in the foreseeable future. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit from our services to cover our operating expenses. Consequently, there is doubt about the Company's ability to continue to operate as a going concern. To date, the Company has managed to keep our monthly cash flow requirement low, primarily due to the fact that our sole officer does not draw a salary at this time. Management believes that actions presently being taken to obtain additional funding and execution of its strategic plans provide the opportunity for the Company to continue as a going concern. Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Our Board of Directors is comprised of one individual who is also our executive officer. Our executive officer makes decisions on all significant corporate matters such as the approval of terms of the compensation of our executive officer and the oversight of the accounting functions. Although the Company has adopted a Code of Ethics and Business Conduct the Company has not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange, the Company is not required to do so. The Company has not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently do not have any independent directors. If we expand our board membership in future periods to include additional independent directors, the Company may seek to establish an audit and other committees of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. - 14 - -------------------------------------------------------------------------------- RECENT ACCOUNTING PRONOUNCEMENTS We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effective dates during the periods reported. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have a material impact our financial position or results of operations. 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 our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders. MANAGEMENT CONSIDERATION OF ALTERNATIVE BUSINESS STRATEGIES In order to continue to protect and increase shareholder value management believes that it may, from time to time, consider alternative management strategies to create value for the company or additional revenues. Strategies to be reviewed may include acquisitions, roll-ups, strategic alliances, joint ventures on large projects, and/or mergers. Management will only consider these options where it believes the result would be to increase shareholder value while continuing the viability of the company. INFLATION The effect of inflation on our revenues and operating results has not been significant. CRITICAL ACCOUNTING POLICIES Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete listing of these policies is included in Note 1 of the notes to our financial statements for the three-month period ended March 31, 2012. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Actual results could differ from those estimates. SOFTWARE DEVELOPMENT COSTS - The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research and Development, FASB ASC 350-40, Internal-Use Software, FASB 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and FASB ASC 350-50, Website Development Costs. - 15 - -------------------------------------------------------------------------------- · Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for use internal and external, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development. · The Company has capitalized certain costs in the development of our proprietary software (computer software to be sold, leased or licensed) for the period after technological feasibility was determined and prior to our marketing and initial sales; · Website development costs have been capitalized, using the same criteria as our marketed software. Capitalized software costs are stated at cost. The estimated useful life of costs capitalized is evaluated for each specific project and is currently being amortized over three to five years. Amortization is computed on a straight line basis, which should approximate a per unit method over the total estimated units projected for sale (estimated program life is approximately five years). The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of the proprietary software existed at March 31, 2012. REVENUE RECOGNITION - Our revenue is derived from multiple element arrangements, generally software, training, asset tagging and maintenance. We recognize our revenue in accordance with FASB ASC 985-605, which requires establishment of vendor specific objective evidence (VSOE) for our software and our maintenance (post contract service or PCS). We have limited sales history and therefore management has determined that we are unable, at the current time, to statistically support the establishment of VSOE for the fair value for certain elements of our offering arrangements. Software sales are recorded as receivable when installed or delivered. As of December 31, 2010 we had not sold our product without a maintenance component, nor had we sold our maintenance as a separate component. The maintenance contract, which does not involve significant production, modification, or customization, is the only undelivered element at the time of installation or delivery. Currently, the entire fee (software, services and maintenance) is recognized ratably over the period during which the post contract service support (maintenance period) is expected to be performed. The unrecognized portion for contracts is charged to deferred revenue and will be recognized in future periods, generally over the course of one year. RESEARCH AND DEVELOPMENT EXPENSES - The Company expenses research and development costs when incurred. Research and development costs include engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. We spent $8,375 and $26,260 in research and development costs for the three months ended March 31, 2012 and 2011, respectively. EARNINGS (LOSS) PER SHARE - Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common share equivalents. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common share equivalents are considered anti-dilutive and thus are excluded from the calculation. At March 31, 2012 and March 31, 2011 the Company did not have any potentially dilutive common share equivalents. |