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MARKETKAST, INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis should be read in conjunction with our
financial statements and the related notes. This discussion contains
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as its plans, objectives, expectations and intentions.
Its actual results and the timing of certain events could differ materially from
those anticipated in these forward-looking statements.
Overview
We function as a provider of online video production, syndication and marketing
services for business owners. We assist business owners in using video to market
their products and services on their business website, including the production
or creation of video content, and the marketing and distribution of that video
on the internet for purposes of driving viewership to the video for the client.
We have a menu of products and services ranging from a $99 basic video product
up to a full professional video production and marketing package that would be
sold for several thousand dollars. Our $99 basic video product does not involve
any live production, rather it is a very simple short video that only includes
still images and text or voice over. We produce and sell this video as an
introduction service for clients that do not have video on their website, with
the intention that we have the opportunity to offer the client additional
products and services such as our video marketing services. Packages can be
customized for customers depending on the type of content the customer wishes to
create or publish on their website, and the nature and scope of the marketing
services that we provide. Marketing services can include such things as video
search engine optimization (VSEO), the creating of branded channels on video
sharing sites like YouTube and Vimeo, and the syndication of the content to all
video sharing sites and through social media.
We believe that the use of online video for business branding, marketing and
awareness is becoming more commonplace as more business owners are seeing that
online video is a powerful and effective medium for selling their products or
driving awareness to their business. Many businesses cannot afford to access
conventional broadcast media like television and radio, however online video is
a less costly means of reaching potential new customers and driving business
revenue, and more business owners are turning to online video as a means of
marketing their business and products.
We believe that there has been a proliferation of online video player
technologies and platforms in the past few years, and that has resulted in more
businesses having video as an ingredient of their business website, and that
number is continuing to grow. However, even though the ability to publish video
on a website has become commonplace, we believe that the ability to use that
video content to drive actual traffic and new customers to a business has not.
Business owners do not want video solely for entertainment or vanity sake, they
want to be able to marketing their business and drive customer awareness, and
that is what we offer. We view the process from the standpoint of marketing
first, with the actual creation and publishing of content being the secondary
focus. We focus on the use of online video to drive new business for the
customer, not on being a technology or production company.
In the period from inception (December 28, 2011) through September 30, 2012, we
had $5,939 revenue and our net loss was $78,921. As of September 30, 2012, we
had total current assets of $113,628 and total current liabilities of $2,049.
Plan of Operation
We are a development stage company. Our activities have been primarily limited
to business formation, strategic development, marketing, website and product
development, negotiations with third party sales and channel partners, and
capital raising activities. We have signed a contract for outsourced sales with
Veritas Consulting Group, as of May 29, 2012, and Veritas began offering our
products for sale in July 2012. We have performed sporadic video development and
marketing services for some clients since inception, and that has resulted in
some nominal revenue, however, we do not expect to begin realizing consistent
revenue until 2013. Accordingly, our operations have been minimal. As of
December 2012, we have taken the following steps to become an operating company:
1. We finished and launched our website www.marketkast.com, and
created our e-commerce platform to facilitate online sales of our
products and services. We also created and published a number of
marketing and informational videos regarding our products and
services.
2. We engaged the services of Veritas Consulting Group as an outsourced sales
organization and they began marketing our products and services for sale in
July 2012. We have a revenue share agreement with Veritas pursuant to which
they receive between 35% and 50% of gross sales proceeds from a sale
depending upon who generates the sales lead.
3. We created and launched a $99 video product in July 2012, and began
marketing that product in August 2012. We began using pay per click
to market this product during the second half of August 2012. We
are marketing this product through Google, Bing and Yahoo by
purchasing search keywords that we believe will attract potential
customers for our $99 product. We began to experience sales of that
product in September 2012. The cost of the pay per click marketing
efforts is between $1,000 and $2,000 per month. The $99 basic video
is an entry-level video that involves no live production but
instead uses text and still images in a short (30 to 60 seconds)
video format. We also sell customized packages that are more
comprehensive and expensive than the $99 video product. These
packages can range from several hundred dollars to several thousand
dollars depending on the amount of customization in the production
or editing of the video content, or whether there are any marketing
services included. We are currently fulfilling the sale of these
products and services internally, and plan to fulfill the sales of
these products and services internally until such time as we are
not able to fulfill internally due to volume of sales, at which
time we will begin to fulfill some of these products and services
through outsourced fulfillment resources like Franshella
Productions.
7--------------------------------------------------------------------------------
4. We created our branded YouTube channels www.youtube.com/marketkast
and www.youtube.com/newskast and published our own marketing and
informational videos on those channels beginning in September 2012.
We began to use our Video SEO (VSEO) process to drive traffic and
viewership to that content, resulting in over 80,000 video views on
our YouTube/MarketKast channel in the first 10 days following its
launch, and over 90,000 views on our YouTube/NewsKast channel in
the first 3 days following launch.
5. We launched our NewsKast video press release product in July 2012,
and we began marketing that product both online and through our
outsourced sales company Veritas Consulting Group in July 2012.
NewsKast is a follow on video news release service, meaning that we
do not issue or distribute corporate news over conventional news
wires, but rather we will take news that has been released through
conventional means and further distribute that news in video form
through the various video sharing sites, or through our own
NewsKastVideo channel. If the client has the news in video format,
we may use the client's content, or we may assist the client in
creating a video about the news, such as through our $99 basic
video, or a more customized video production. As of September 30,
2012 we have not experienced any sales of our NewsKast product or
service. We plan to fulfill the sales of these products and
services internally until such time as we are not able to fulfill
internally due to volume of sales, at which time we will begin to
fulfill some of these products and services through outsourced
fulfillment resources like Franshella Productions.
6. We launched our Performance Based Marketing System during the
period ended September 30, 2012. This is a system that allows our
clients to utilize our services on our performance or results only
basis. Within this system we have launched two primary products,
our Pay Per Call and Pay Per View marketing plans. Under our Pay
Per Call plan we assist our clients in setting up a branded video
channel on either YouTube or Vimeo, and we use our marketing
efforts and methodology to drive inbound telephone calls from
potential customers for our client. We are then paid a fee based on
the number, length and type of inbound call that we generate. Our
Pay Per View plan is similar to our Pay Per Call plan with the
exception that we are paid a fee by our client each time that the
video content we market is viewed. Our Performance Based Marketing
System was launched in October, 2012, and we are in the process of
marketing the system to potential clients and customers.
During the next 12 months we intend, subject to availability of capital, to take
the following additional steps to market our products and services:
1. In the 1st calendar quarter of 2013 we intend to hire between 1 and
2 internal salespeople to sell our products and services to
potential clients. We intend to generate sales leads for these
internal salespeople through a variety of means such as e-mail and
internet marketing.. The cost of hiring sales people is anticipated
to be between $1,500 and $3,000 per month, per person, as a draw
against commission.
2. We will continue to work with Veritas and potentially other
outsourced sales organizations to sell our products and services on
a revenue share basis. We do not anticipate any significant direct
expense associated with such efforts, however we do expect to share
revenue from such sales at the rate of between 35% and 50% of gross
sales.
3. We will continue to produce and publish our own marketing videos and will
use our own internal marketing efforts to drive viewership to that video
content with the intent of driving traffic to our website and the
associated sales of our products and services. The cost associated with
such production and marketing efforts is expected to be between $1,500 and
$2,000 per month.
We have a current burn rate, as of December 2012, of approximately $15,000 to
$18,000 per month. It includes $10,000 of office rental expenses, payroll,
insurance, marketing, travel, telephone, internet and other office expenses and
miscellaneous expenses. The additional $5,000 to $8,000 per month are due to
legal, accounting, printing, filing, transfer agent and other miscellaneous
expenses associated with being public.
Therefore, if we do not experience any income or obtain additional financing, we
could expect to run out of capital sometime between August 2013 and December
2013. For this reason, if we do not experience any income in the first half of
2013, we will need to raise additional capital of between $15,000 and $18,000
per month, in order to continue our business. In addition, in order to fully
implement our business plan, we will need to raise an additional $200,000 to
$400,000 of capital for the purpose of initiating and ramping up marketing and
sales efforts, hiring of sales personnel and for general working capital. This
additional $200,000 to $400,000 of financing will need to be raised between
January 2013 and December 2013 in order to effectively implement our business
plan. It is not necessary that we receive such a capital infusion at any one
time, we could effectively implement our plan through the raising of between
$50,000 and $100,000 per quarter in calendar 2013. However, there is no
assurance that we will be able to raise any capital in the future.
8
--------------------------------------------------------------------------------We raised approximately $126,500 in gross proceeds in the private placement
closed in June 2012. In addition, our founders James Byrd, Jr. and Douglas
Hackett purchased $25,000 of founders stock each, resulting in $50,000 of
capital to our company. Finally, we raised $20,000 in a private loan borrowing
from a lender.
We expect to finance our operations primarily through our existing cash, our
operations and any future financing. If we do not obtain additional funding, we
will continue to operate on a reduced budget until such time as more capital is
raised. We believe that we could operate with our current cash on hand while
satisfying any shortfall in cash flow with income that will be generated after
the launch of our sales and marketing programs. However, as stated above, to
effectively implement our business plan, we will need to obtain additional
financing in the future. In order to fully implement our business plan, we
anticipate that we will need between $200,000 and $400,000 of additional
financing during 2013, or $50,000 to $100,000 per quarter during calendar 2013.
There can be no assurance that such financing will be available to us on terms
that are acceptable to us, and if such financing is not available on acceptable
terms our business could suffer or fail.
Results of Operations
We have conducted minimal operations during the three months ended September 30,
2012, and we have generated only nominal revenues during this period. We had net
losses of $47,512 for the three months ended September 30, 2012. Our auditor has
expressed doubt as to whether we will be able to continue to operate as a "going
concern" due to the fact that the Company has had no material revenues since
inception and will need to raise capital to further its operations.
During the three months ended September 30, 2012, we experienced general and
administrative expenses of $47,027. These general and administrative expenses
consist of rent, insurance, professional fees, travel, employee compensation and
other miscellaneous items.
Liquidity and Capital Resources
As of September 30, 2012, we had cash of $113,628. Our primary uses of cash were
for marketing expenses, employee compensation, and working capital. The main
sources of cash were from the proceeds from the sale of common stock to our
founders, in a private placement and a note payable. The following trends are
reasonably likely to result in a material decrease in our liquidity over the
near to long term:
An increase in working capital requirements,
Addition of administrative and sales personnel as the business grows,
Increases in advertising, public relations and sales promotions as
we commence operations,
Development of new customers and market initiation, and
The cost of being a public company and the continued increase in
costs due to governmental compliance activities.
The following summarizes the key components of the Company's cash
flows for the period ended September 30, 2012:
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