TMCnet News
MOUNT KNOWLEDGE HOLDINGS, INC. - 10-K -(Edgar Glimpses Via Acquire Media NewsEdge) Management's Discussion and Analysis of Financial Condition and Results of Operation. The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual 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 those discussed below and elsewhere in this annual report. Our audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. Company Overview Mount Knowledge Holdings, Inc. is a software development and sales company focused on providing innovative technology solutions to the global marketplace. For more details on the Company and its operations, please refer to "History" and "Company Overview" sections in Item 1. Business section, hereinabove in this filing. Plan of Operations Over the remaining 9-months of 2014 we must raise capital and complete certain milestones as described below. Milestones The Company anticipates identifying and completing one or more acquisitions and/or mergers over the next 6-12 months, beginning in the second quarter of 2014, for the purposes of obtaining operations and revenues. Requirements and Utilization of Funds To implement our plan of operations, including some or all of the above described milestones (objectives), we anticipate the need to continue to raise capital ("equity") in an amount between $500K and $2.5 million in equity from restricted stock sales or other acceptable financing options over the remaining 9 months of 2014 on terms and conditions to be determined. Management may elect to seek subsequent interim or "bridge" financing in the form of debt (corporate loans) as may be necessary. Proceed We foresee the proceeds from capital raised to be allocated as follows: (a) legal, audit, SEC filings and compliance fees; (b) working capital (general and administrative); (c) financing costs; (d) acquisition research and due diligence; (e) new business development and marketing; and (f) reserve capital for costs of acquisition and market expansion. Financial Condition, Liquidity and Capital Resources As of December 31, 2013, we had $8 cash and cash equivalents. We had limited operations to date and we did not have any revenues during the twelve-month period ended December 31, 2013. We are illiquid and need cash infusions from investors and/or current shareholders to support our proposed marketing and sales operations. 29 Management believes this amount will not satisfy our cash requirements for the next 12 months and as such we will need to either raise additional proceeds and/or our officers and/or directors will need to make additional financial commitments to our company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our objectives, including marketing and sales of our product, and to offset legal and accounting fees, through financial commitments from future debt/equity financings, if and when possible. Management believes that we may generate some revenues within the next twelve (12) months, from acquisitions, but that these sales revenues may not satisfy our cash requirements during that period. We have no committed source for funds as of this date. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail to satisfy our future cash requirements as a result of these uncertainties. If we are unsuccessful in raising the additional proceeds from officers and/or directors, we may then have to seek additional funds through debt financing, which would be extremely difficult for an early stage company to secure and may not be available to us. However, if such financing is available, we would likely have to pay additional costs associated with high-risk loans and be subject to above market interest rates. At such time as these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment. The staged development of our business will continue over the next 12 months. Other than engaging and/or retaining independent consultants to assist the Company in various administrative and marketing related needs, we do not anticipate a significant change in the number of our employees, if any, unless we are able to obtain adequate financing. 30 For The Development Year Ended Stage Period, December 31 From April 1, 2012 To December 31 2013 2012 2013 $ $ $ Sales revenue - - - Cost of goods sold - - - Gross profit - - - Operating expenses General and administrative expenses 588,103 231,385 689,981 Total operating expenses 588,103 231,385 689,981 Loss from operations (588,103) (231,385) (689,981) Interest expense (108,715) (89,440) (178,110) Change in fair value of derivative liability 1,670,103 2,852,455 3,487,332 Gain on debt extinguishment - 12,633 12,633 Net income from continuing operations 973,285 2,544,264 2,631,874 Discontinued operations Income from discontinued operations - 5,096 - Gain on disposal of subsidiary - 174,736 - Net Income 973,285 2,724,096 2,631,874 Net loss attributable to non-controlling interest - (3,004) - Net Income Attributable to $ $ $ Common Shareholders 973,285 2,727,100 2,631,874 Our auditors have issued a "going concern" opinion. This means that there is substantial doubt that we can continue as an on-going business for the next 12 months unless we obtain additional capital to pay our expenses. This is because we have not generated any revenues and no substantial revenues are anticipated in the near-term. Accordingly, we must raise cash from sources other than from the sale of our products. Results of Operations The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2013 which are included herein. Our operating results for the years ended December 31, 2013 and 2012, respectively are summarized as follows: Revenues We had marginal revenues to date, and do not anticipate increasing earning revenues in the immediate future. 31 Expenses Our expenses for the years ended December 31, 2013 and 2012 are outlined in the table below. All expenses for predecessor entity are included in income (loss) from discontinued operations. For The Development Year Ended Stage Period, December 31 From April 1, 2012 To December 31 2013 2012 2013 Operating expenses General and administrative expenses 588,103 231,385 689,981 Total operating expenses 588,103 231,385 689,981 Loss from operations (588,103) (231,385) (689,981) Interest expense (108,715) (89,440) (178,110) Change in fair value of derivative liability 1,670,103 2,852,455 3,487,332 Gain on debt extinguishment - 12,633 12,633 Net income from continuing operations 973,285 2,544,264 2,631,874 Discontinued operations Income from discontinued operations - 5,096 - Gain on disposal of subsidiary - 174,736 - Net Income 973,285 2,724,096 2,631,874 General and Administrative The increase in our general and administrative expenses for the year ended December 31, 2013 compared to December 31, 2012 was primarily due to extra-ordinary professional fees related to the completion of past due required SEC filings as a fully-reporting pubic company. For the purposes of this disclosure, general and administrative fees include the Company's professional fees. Professional fees include our accounting and auditing expenses incurred in connection with the preparation and audit of our financial statements and professional fees that we pay to our legal counsel. Our accounting and auditing expenses were incurred in connection with the preparation of our audited financial statements and unaudited interim financial statements and our preparation and filing of a registration statement with the SEC. Our legal expenses represent amounts paid to legal counsel in connection with our corporate organization. Legal expenses will be ongoing during fiscal 2014, as we are subject to the reporting obligations of the Securities Exchange Act of 1934, as amended. Year Ended December Year Ended December 31, 2013 30, 2012 Increase/Decrease Cash Flows from Operating $ $ Activities (82,325) (380,959) ( )% Cash Flows from Investing $ $ Activities 2,100 (2,100) ( )% Cash Flows from Financing $ $ Activities 80,000 322,000 ( )% $ $ Net change in cash (225) (63,221) ( )% 32 Liquidity and Capital Resources Working Capital December 31, December 31, Percentage 2013 2012 Increase/Decrease $ $ Current Assets 8 2,333 (99.66)% $ $ Current Liabilities 1,881,032 3,370,377 (44.19)% $ $ Working Capital Deficit (1,881,024) (3,368,044) (44.15)% Cash Flows We anticipate that we will incur approximately $250,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. Accordingly, we will need to obtain additional financing in order to complete our business plan. Cash Used in Operating Activities We used net cash in operating activities in the amount of $(82,325) during the year ended December 31, 2013 and $(380,954) during the year ended December 31, 2012. Cash used in operating activities was funded by cash from financing activities. The decrease in operating activities in 2012 compared to 2011 was due to the disposal of all the Company's operating subsidiaries. Cash Used in Investing Activities We used net cash in investing activities in the amount of $2,100 during the year ended December 31, 2013 and $(2,100) was used or provided in investing activities during the years ended December 31, 2012. Cash Provided by Financing Activities We generated $80,000 net cash from financing activities during the year ended December 31, 2013 compared to net cash from financing activities in the amount of $322,000 during the year ended December 31, 2012. Cash generated by financing activities during 2013 is attributable mainly to capital stock sales, issued notes, and related party borrowings of $80,000. The decrease in the net cash from financing activities in 2013 compared to 2012 was due to the disposal of all the Company's operating subsidiaries during 2012 and 2013. Disclosure of Outstanding Share Data As of December 31, 2013, we had 198,666,975 shares of common stock issued and outstanding. 33 Going Concern The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of December 31, 2013, we had accumulated losses of $9,066,574 since inception and a working capital deficit of $1,881,024. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern. Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended December 31, 2013, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Future Financings We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities. There is no assurance that the Company will able to obtain financing to carry on our legal, accounting and reporting needs. Off-Balance Sheet Arrangements We have 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 are material to stockholders. Application of Critical Accounting Estimates The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. The financial statements have been prepared within the framework of the significant accounting policies summarized below: 34 Mineral Property and Exploration Costs Until abandonment of its mineral property on January 23, 2009, we were an exploration stage mining company and had not realized any revenue from its operations. We were primarily engaged in the acquisition, exploration and development of mining properties. Exploration costs are expensed as incurred regardless of the stage of development or existence of reserves. Costs of acquisition are capitalized subject to impairment testing, in accordance with ASC Topic 360, "Property, Plant and Equipment - Subsequent Measurement", (formerly SFAS 144), when facts and circumstances indicate impairment may exist, as defined in Note 3 , Newly Adopted Accounting Policies And Recent Accounting Guidance . We regularly performed evaluations of any investment in mineral properties to assess the recoverability and/or the residual value of its investments in these assets. Also, long-lived assets were reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable. Management periodically reviewed the carrying value of its investments in mineral leases and claims with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project was based upon many factors including general and specific assessments of mineral deposits, anticipated future mineral prices, anticipated future costs of exploring, developing and operating a production mine, the expiration term and ongoing expenses of maintaining mineral properties and the general likelihood that the Company will continue exploration on such project. The Company did not set a pre-determined holding period for properties with unproven deposits; however, properties which had not demonstrated suitable metal concentrations at the conclusion of each phase of an exploration program were re-evaluated to determine if future exploration was warranted, whether there has been any impairment in value and that their carrying values was appropriate. If an area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the year of abandonment or determination of value. The amounts recorded as mineral leases and claims represent costs to date and do not necessarily reflect present or future values. Recent Accounting Pronouncements We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our financial position, results of operations or cash flows. |