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EXPLORE ANYWHERE HOLDING CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.(Edgar Glimpses Via Acquire Media NewsEdge) This quarterly report contains forward-looking statements including statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "expects," "anticipates," "intends," "believes" or similar language. These forward-looking statements involve risks, uncertainties and other factors. All forward-looking statements included in this quarterly report are based on information available to us on the date hereof and speak only as of the date hereof. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. The factors discussed elsewhere in this quarterly report are among those factors that in some cases have affected our results and could cause the actual results to differ materially from those projected in the forward-looking statements. The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report. Overview Explore Anywhere Holding Corp. (the "Company") was incorporated on April 3, 1996. In March 2010, the Company purchased ExploreAnywhere Inc. in an all-stock acquisition. ExploreAnywhere, Inc. (herein after referred to as "Explore" or (ExploreAnywhere Inc.") became a wholly-owned subsidiary of the Company. Explore is in the business of selling computer monitoring software, specializing in offering computer monitoring solutions for parents, corporations and educational facilities. Principal Products SpyBuddy 2013 is an internet spy software and computer monitoring product that allows users to secretly monitor all areas of a PC, tracking every action down to the last keystroke and the last file deleted. Unlike other computer monitoring and Internet spy software products, SpyBuddy 2013 monitoring software is virtually undetectable and exceptionally easy-to-use. Keylogger Pro 2013 is the latest release of our award winning Keylogger. Keylogger Pro will silently record keystrokes typed on any keyboard layout (English, Russian, Chinese, Arabic, etc), as well as all passwords, emails, chats and social network activity typed by users of a computer. Keylogger Pro will also take high resolution screen shots of user activity allowing someone to see exactly what the user is seeing. Further, Keylogger Pro records all applications/programs used and how long the programs were used for. Both Spybuddy 2013 and Keylogger PRO 2013 share the same software code, this means that the two are technically the same product, but where Keylogger PRO 2013 is an "economy" version that does not have all of the Spybuddy 2013 features. Both Spybuddy 2013 and Keylogger PRO 2013 are only compatible with the Windows operating systems XP, Vista, and 7. We have a goal to continue development of the Spybuddy 2013 and Keylogger PRO 2013 code base in order to potentially offer more Company products that have different feature sets and different price points, including the current Windows 8 compatibility development. Both products are sold on a subscription basis with an upfront, one-year license fee. Spybuddy 2013 is offered at $69.99 and Keylogger PRO 2013 is offered at $39.99. At the time of purchase, customers must also agree to automatically be charged for the second year's license fee on the one year anniversary in order to continue using either product beyond the first year from their original purchase and activation date. The Company also offers a 7 day satisfaction guarantee or a full refund. We sell our software products in a digital download format. We get the majority of our sales through our website, exploreanywhere.com, we also get sales through a limited network of online affiliate websites. All direct website sales are processed through Explore's merchant processor Total Apps. Explore's merchant processor charges 3-5% per sale. Regnow.com an affiliate payment processor serves as a payment processor for all affiliate sales. When affiliates sell our products on their own individual websites, the payments are collected by Regnow, who then pay Explore minus a commission. 13 -------------------------------------------------------------------------------- Results of Operations Three Months Ended March 31, 2013 Compared With the Three Months Ended March 31, 2012. Revenue Revenue increased $5,753 to $6,348 during the three months ended March 31, 2013 compared to $595 during the three months ended March 31, 2012. The increase in revenue is the result of increasing market awareness of our products. Operating Expenses A summary of our operating expense for the three months ended March 31, 2013 and 2012 follows: Three Months Ended Increase / Percentage 2013 2012 (Decrease) Change Operating expense General and administrative 15,382 19,898 $ (4,516 ) -23 % Sales and marketing 4,382 6,087 (1,705 ) -28 % Research and development 14,502 16,511 (2,009 ) -12 % Total operating expense $ 34,266 $ 42,496 $ (8,230 ) -19 % General and Administrative General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, insurance and other office related costs. The $4,516 year-over-year decrease is primarily due to decrease in professional fees. Sales and Marketing Sales and marketing costs include costs to promote our products primarily via online methods. These costs decreased approximately $1,705 from 2012 to 2013 due to more focused marketing efforts in 2013 compared to 2012. Research and Development Research and development costs represent direct costs incurred in our efforts to maintain continuous development of the Spybuddy and Keylogger PRO products. These costs decreased $2,009 from 2012 to 2013 due to more focused development efforts in 2013 compared to 2012. Other Income (Expense) Interest expense decreased $7,473 to $8,087 during the three months ended March 31, 2013 compared to $15,560 during the three months ended March 31, 2012. Interest expense includes accretion of the debt discount associated with the beneficial conversion feature of our convertible promissory notes. The decrease is due primarily to the decrease in amortization of this debt discount in 2013 compared to 2012 offset by higher stated coupon interest as a result of maintaining higher loan balances in 2013 compared to 2012. 14 -------------------------------------------------------------------------------- Liquidity and Capital Resources Our available working capital and capital requirements will depend upon numerous factors, including the sale of Spybuddy and Keylogger PRO software, the timing and cost of commercialization efforts, the cost of further developing Spybuddy and Keylogger PRO, the status of our competitors, our ability to establish collaborative arrangements with other organizations, and our ability to attract and retain key employees. From inception to March 31, 2013, we have incurred an accumulated deficit of $2,844,456. This loss has been incurred through a combination intangible asset impairment of $1,341,884, professional fees and expenses supporting our plans to develop our business and brand our services as well as continued operating losses. At March 31, 2013, the Company had current assets of $15,346 compared to accounts payable and accrued expenses of $99,532. During the three months ended March 31, 2013, the Company had revenue of $6,348 and loss from operations of $27,918. The Company has incurred losses since inception and may not be able to generate sufficient net revenue from its business in the future to achieve or sustain profitability. To finance our operations, we are currently pursuing additional business opportunities and funds through equity or debt financing or a combination thereof. The Company currently has no commitments to obtain any such financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. Net cash used by operating activities was $23,589 during the three months ended March 31, 2013 as compared to $30,567 during the three months ended March 31, 2013. Net cash provided by financing activities was $24,402 during the three months ended March 31, 2013 as compared to $40,000 during the three months ended March 31, 2013. Plan of Operation for the Next Twelve (12) Months Our ability to continue operations will be dependent upon the successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to be successful in our business plan. If not, we will likely be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements. As of March 31, 2013, the company owed $495,607 in principal and accrued interest under a series of unsecured promissory notes issued to two (2) lenders. Interest accrues on these notes at the rate of 8% per annum. The notes do not require us to make any interim interest payments. As of the date of the filing of this annual report, notes totaling $270,750 in principal, have already matured but have not been repaid. We therefore are technically in default on these notes, although neither of the lenders have sent us a notice of default. The remaining notes mature at various dates. We currently do not have the resources to repay any of these notes. Failure to acquire the resources to repay these notes could result in either or both of the lenders taking legal action against us for repayment of the notes. This debt could therefore result in the company going out of business. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. 15 -------------------------------------------------------------------------------- Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that have a significant impact on the results that we report in our consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain Note B of the Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies require us to make critical accounting estimates, as defined below. A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: · we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and · different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations. Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. Our most critical accounting estimates include: · the assessment of recoverability of long-lived assets, which impacts operating expenses when we record impairments or accelerate depreciation; and · the recognition and measurement of current and deferred income taxes, which impact our provision for taxes. Below, we discuss these policies further, as well as the estimates and judgments involved. Long-lived Assets Long-lived assets, comprised of equipment, and identifiable intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that may cause an impairment review include significant changes in technology that make current computer-related assets that we use in our operations obsolete or less useful and significant changes in the way we use these assets in our operations. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. The new cost basis will be depreciated (amortized) over the remaining useful life of that asset. Using the impairment evaluation methodology described herein, there have been no long-lived asset impairment charges for each of the last two years. 16 -------------------------------------------------------------------------------- Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We have not made any material changes in our impairment loss assessment methodology during the past two fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company underwent a change of control for income tax purposes on October 8, 2003 according to Section 381 of the Internal Revenue Code. The Company's utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Recently Issued Accounting Pronouncements We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our consolidated financial statements. 17 -------------------------------------------------------------------------------- Off-Balance Sheet Arrangements We have no material off-balance sheet transactions. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 4. Controls and Procedures. Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2013 that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the "SEC") reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 18 -------------------------------------------------------------------------------- PART II -- OTHER INFORMATION Item 3. Defaults Upon Senior Securities. Please refer to the financial statement footnotes, "Note E - Promissory Notes". The Company is currently in default on $270,750 of principal and $64,341 of interest payable. During the three months ended March 31, 2013, $40,000 of notes payable matured and fell into default. Item 6. Exhibits. Exhibit No. Identification of Exhibit 31.1* Certification of Bryan Hammond, Chief Executive Officer of Explore Anywhere Holding Corp., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Justin Frere, Chief Financial Officer of Explore Anywhere Holding Corp., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Bryan Hammond, Chief Executive Officer of Explore Anywhere Holding Corp., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Justin Frere, Chief Financial Officer of Explore Anywhere Holding Corp., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. 101.INS ** XBRL Instance Document 101.SCH ** XBRL Taxonomy Extension Schema Document 101.CAL ** XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF ** XBRL Taxonomy Extension Definition Linkbase Document 101.LAB ** XBRL Taxonomy Extension Label Linkbase Document 101.PRE ** XBRL Taxonomy Extension Presentation Linkbase Document ___________* Filed Herewith ** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. 19 -------------------------------------------------------------------------------- SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EXPLORE ANYWHERE HOLDING CORP. Date: May 14, 2013 By: /s/ Bryan Hammond Bryan Hammond, Chief Executive Officer (Principal Executive Officer) By: /s/ Justin Frere Justin Frere, Chief Financial Officer (Principal Financial Officer, and Principal Accounting Officer) 20-------------------------------------------------------------------------------- |