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VIZCONNECT, INC. - 10-K - Management's Discussion and Analysis of Financial Conditions and Results Of Operations.(Edgar Glimpses Via Acquire Media NewsEdge) The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section 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 which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions. Overview of our Business VizConnect is a cloud-based, video marketing services provider that assists companies across a wide array of industries in utilizing mobile devices and technologies to create targeted branding and advertising campaigns. Our proprietary video marketing platform (the "Platform") allows companies to integrate traditional print media with mobile Text-to-Video messages, activate and optimize their web portals, and build mobile marketing databases. Our Platform utilizes unique keyword-activated campaigns that engage mobile users with video and automated call-to-action prompts. This dynamic, cloud-based marketing tool has small business applications, enterprise solutions for large companies, and white-label opportunities for marketing and communications firms. 10 --------------------------------------------------------------------------------We mainly provide our Platform to business entrepreneurs/corporations within the B2B marketplace on a month-to-month subscription that can help our customers: · Enhance their Brand Image through traditional print marketing mediums that utilize keyword-activated Text-to Video messaging · Establish, manage, and utilize targeted mobile data for Brand Imaging and Opt-In Push Marketing campaigns VizConnect's Platform gives businesses of all sizes the capability to build a bridge from a traditional print media right to the cutting-edge, minute to minute world of mobile marketing. On February 13, 2013 (the "Closing Date"), we entered into a Share Exchange Agreement (the "Exchange Agreement") with (i) VizConnect LLC ("VizConnect"), (ii) all of the members of VizConnect (the "Members") and (iv) our former principal shareholder pursuant to which we acquired all of the outstanding units of VizConnect in exchange for the issuance of 6,250,000 shares of our common stock to the Members (the "Share Exchange"). The shares issued to the Members in the Share Exchange constituted approximately 61.46% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Share Exchange. In connection with the closing, 10,000,000 shares of our common stock held by our former principal shareholder have been cancelled. As a result of the Share Exchange, VizConnect became our wholly owned subsidiary. The acquisition is being accounted for as a "reverse merger," and VizConnect is deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the acquisition will be those of VizConnect and will be recorded at the historical cost, and the consolidated financial statements after completion of the acquisition will include the assets, liabilities and operation of VB Clothing and VizConnect from the closing date of the acquisition. As a result of the issuance of the shares of common stock pursuant to the Exchange Agreement, a change in control of occurred as a result of the acquisition. In connection with the closing of the Exchange Agreement, Mr. Anthony Pasquale, VB Clothing, Inc.'s principal shareholder, agreed to cancel his 10,000,000 shares of common stock that he owned in VB Clothing and we issued 6,250,000 shares to members of VizConnect. Additionally, the existing officers and directors from VB Clothing resigned from its board of directors and all officer positions effective immediately after the closing of the reverse merger. Accordingly, our Board of Directors appointed Mr. Paul Cooleen as our President, Mr. Brian Dee as our Secretary, and Mr. James Henderson as our Treasurer, effective upon the closing of the Share Exchange. VB Clothing's directors approved the Exchange Agreement and the transactions contemplated thereby. Simultaneously, the Members of VizConnect also approved the Exchange Agreement and the transactions contemplated thereby. Prior to the Exchange Agreement, VB Clothing, Inc. was in the business of selling active/leisure lines of women's clothing. VB Clothing, Inc. was incorporated in the State of Nevada on October 15, 2010. As a result of the Exchange Agreement, VB Clothing, Inc. ceased its prior business and acquired 100% of the mobile marketing operations of VizConnect, the business and operations of which now constitutes its primary business and operations. Specifically, as a result of the Exchange Agreement on February 13, 2013: - VB Clothing acquired and now owns 100% of the issued and outstanding units of VizConnect LLC, a Massachusetts limited liability company and their mobile marketing business; and - VB Clothing issued 6,250,000 shares of common stock to the Members of VizConnect, constituting approximately 61.46% of the issued and outstanding common stock. 11--------------------------------------------------------------------------------As a result of VB Clothing's reverse acquisition of VizConnect, VB Clothing has assumed the business and operations of VizConnect with its principal activities engaged in the mobile marketing platform business. Results of Operations The following table summarizes changes in selected operating indicators of the Company, illustrating the relationship of various income and expense items to net sales for the respective periods presented (components may not add or subtract to totals due to rounding): Period Ended December 31, 2013 December 31, 2012 Revenue $ 335,768 $ 23,531 Expenses $ 921,067 $ 282,684 Loss from Operations $ (585,299 ) $ (259,153 ) Other (Expense) Income $ 107,235 $ (14,306 ) Net Loss $ (462,084 ) $ (273,459 ) Twelve Months Ended December 31, 2013 Compared with Twelve Months Ended December 31, 2012 Revenue: Revenues for the twelve-month period ending December 31, 2013 were $335,768, compared with $23,531 for the twelve month period ending December 31, 2012, reflecting an increase of 1,326.9%. The increase in revenues during the periods was primarily attributable to the growth of the network marketing sales model. Operating Expenses: Operating expenses for the twelve-month period ending December 31, 2013 were $921,067 compared with $282,684 for the twelve month period ending December 31, 2012, reflecting an increase of 225.8%. The increase in operating expenses was primarily attributable to large professional fees, enhancement to the platform and running the network marketing sales model. Loss from Operations: We incurred losses from operations totaling $585,299 for the twelve-month period ending December 31, 2013, compared to losses from operations totaling $259,153 for the twelve-month period ending December 31, 2012, reflecting an increase of 125.9% The increase in losses from operations was primarily attributable to professional fees and sales expenses. Other Expense (Income): The Company had other income for the twelve-month period ending December 31, 2013 in the amount of $107,235, which is composed of a gain on the change in derivative liability of $259,082 net of interest expense of $151,847 compared with $14,306 of interest expense for the twelve-month period ending December 31, 2012, reflecting an decrease of 849.58%. The increase in interest expense was due to the increase in notes payable and increase in the interest rate of the new notes. The gain in the change of the derivative liability was due to a decrease in the values of the derivatives. Net loss: We incurred a net loss of $462,084 or 137.3% of revenues, for the twelve-month period ending December 31, 2013, compared to a net loss of $273,459 or 1,162.12% of revenues, for the twelve-month period ending December 31, 2012. The decrease in loss is attributable to the increase in sales and growth of the company. 12 --------------------------------------------------------------------------------Plan of Operations VizConnect is a cloud-based, video marketing services provider that assists companies across a wide array of industries in utilizing mobile devices and technologies to create targeted branding and advertising campaigns. Our proprietary video marketing platform (the "Platform") allows companies to integrate traditional print media with mobile Text-to-Video messages, activate and optimize their web portals, and build mobile marketing databases. Our Platform utilizes unique keyword-activated campaigns that engage mobile users with video and automated call-to-action prompts. This dynamic, cloud-based marketing tool has small business applications, enterprise solutions for large companies, and white-label opportunities for marketing and communications firms. By the end of fiscal year 2014, we plan to begin expanding our customer reach internationally. Critical Accounting Policies and Estimates Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2013 and December 31, 2012, the Company had no cash equivalents. Advertising Costs Advertising Costs are expensed in the period when the advertisements have reached their intended users. Advertising expense the periods ended December 31, 2012 and December 31, 2013 were $403 and $1,115 respectively. 13 --------------------------------------------------------------------------------Software Development Costs We expense software development costs to be marketed to external users, before technological feasibility of such products is reached. We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products were not material, and accordingly, were expensed as incurred. Software development costs totaled $102,809 and $108,834 for the periods ended December 31, 2013 and December 31, 2012 respectively. Revenue Recognition The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, "Revenue Recognition". In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue from monthly subscriptions fees in the month in which services are used. Because a portion of the fees are earned over a month period, any fees collect in which the services are not provided are recorded as deferred revenue. Recent Accounting Pronouncements In July 2012, FASB issued Accounting Standards Update 2012-02, Balance Sheet- Intangibles- Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment is an Amendment to FASB Accounting Standards Update 2011-08. The objective of the amendments in this Update is to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles- Goodwill and Other-General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for non-public entities, have not yet been made available for issuance. The adoption of this pronouncement did not have any effect on the Company. The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant effect on its financial statements. 14 --------------------------------------------------------------------------------Liquidity and Capital Resources Our cash and cash equivalents is $34,904 as of December 31, 2013. Despite capital contributions and sales, and both related party and third party loan commitments, we may experience cash flow shortages that can slow our expected growth. We have primarily financed our activities from sales of our capital stock and from loans from related and third parties. A significant portion of the funds raised from the sale of capital stock will be used to cover working capital needs such as office expenses and various professional fees. Our cash flow requirements during this period have been met by contributions of capital and debt financing. We anticipate that financing will be required until such time as we are able to generate adequate cash flow from operations to support both our cash needs for normal operations, and to support the cash needs for our investment into additional resources and assets to support our growth. Currently we cannot determine when either will occur and as such we will need to obtain financing to cover our costs for the foreseeable future. No assurance can be given that these sources of financing will continue to be available. If we are unable to generate profits, or unable to obtain additional funds for its working capital needs, we may have to curtail normal operations, or cease operations completely. Off-balance Sheet Commitments and Arrangements We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources |