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FIRST AMERICAN GROUP INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.(Edgar Glimpses Via Acquire Media NewsEdge) The following information should be read in conjunction with (i) the condensed consolidated financial statements of First American Group Inc., a Nevada corporation and development stage company, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the September 30, 2012 audited financial statements and related notes included in the Company's Annual Report on Form 10-K (File No. 333-171091; the "September 30, 2012 Form 10-K"), as filed with the SEC on December 28, 2012. Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute "forward-looking" statements OVERVIEW First American Group Inc. (the "Company") was incorporated in the State of Nevada on March 11, 2010 and established a fiscal year end of September 30. It is a development stage Company. We are a development stage company which is engaged in the development, sales and marketing of voice-over-Internet-protocol ("VoIP") telephone services to enable end-users to place free phone calls over the Internet in return for viewing and listening to advertising. Our product is planned to consist of: (i) one or more telephony servers, (ii) a software phone which allow customers to place calls, view and/or listen to advertising, and (iii) a server to store customer information and to keep customer records, call, credits and payment history, and which server will also contains our web site, support center and customer account portal. We anticipate that our revenue will come from two primary sources: first, from the placement of advertising on our website and phone software, and second, from paid calls by our customers. We anticipate that our operations will begin to generate revenue approximately 10 to 16 months following the date of this Quarterly Report on Form 10-Q. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities. Our original development schedule is significantly behind schedule and our cash has largely been depleted. GOING CONCERN To date the Company has no operations or revenues and consequently has incurred recurring losses from operations. No revenues are anticipated until we complete the financing we endeavor to obtain, as described in our in the Company's Registration Statement on Form S-1, as amended (File No. 333-171091)(the "Form S-1"), as filed with the SEC on March 8, 2011 and declared effective by the SEC on March 25, 2011, and implement our initial business plan. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. Our activities have been financed from the proceeds of share subscriptions. From our inception to June 30, 2014, we have (i) raised a total of $16,000 from private offerings of 100,000,000 shares of common stock to our two officers and directors, and (ii) offered and sold 26,063,200 shares of common stock registered under our currently effective Form S-1 for aggregate proceeds of approximately $65,296. The Board of Directors of First American Group and 2 stockholders holding an aggregate of 100,000,000 shares of common stock issued and outstanding as of December 7, 2013, have approved and consented in writing in lieu of a special meeting of the Board of Directors and a special meeting of the stockholders to the following actions: An amendment to our Articles of Incorporation to increase the number of shares of authorized common stock from 50,000,000 to 250,000,000; and (2) The approval of a 50-for-1 forward stock split of the issued and outstanding shares of our common Stock. The shares issued have been adjusted retroactively. 7 --------------------------------------------------------------------------------CRITICAL ACCOUNTING POLICIES The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results: BASIS OF PRESENTATION The Company reports revenues and expenses using the accrual method of accounting in accordance with accounting principles generally accepted in the United States ("US GAAP") for financial and tax reporting purposes. CASH AND CASH EQUIVALENT The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. FOREIGN CURRENCY TRANSLATION The financial statements are presented in United States dollars. In accordance with Accounting Standards Codification "ASC 830", "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' equity (deficit), whereas gains or losses resulting from foreign currency transactions are included in results of operations. BASIC AND DILUTED NET LOSS PER SHARE Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share. PLAN OF OPERATION We have started the development of the content of our informational web site, interview web designers to commence the implementation. We estimated earlier that this task be completed by June 30, 2012. This has been delayed till the end of October or November 2012 since we decided to include more substantial content and ability for customers to sign for a basic version of the product. This was postponed till December 2013. However, our Directors could not dedicate the necessary time to completion of this task and we estimated that this will be completed till September 2014. We now do not expect that it will be possible to meet that timeline. We have also completed the evaluation of the VoIP platforms we will use to implement our product. We have decided to use the open source VoIP software called Asterisk (www.asterisk.org) and the open source billing software called a2billing (www.asterisk2billing.org/). We have installed and integrated both software and are currently customizing them to meet our needs. This is currently being done by our Directors Zeeshan Sajid and Mazen Kouta. We have narrowed our selection of the programmers to implement our products and we expect that we will commence development as soon as new sources of funding are identified. As this point of time, we do not have the cash to hire any programmer. 8 --------------------------------------------------------------------------------Our business activities during the next 9 to 15 months will be to finish the development of our website, the development of our product, the development of a network of resellers and the establishment of our brand name. We do not expect to earn any sales revenue during the next 9 months. We anticipate that our revenue will come from two primary sources: first, from the placement of advertising on our website and phone software, second, from paid calls by our customers, and third from licensing or selling our software. We anticipate that our operations will begin to generate revenue approximately 10 to 16 months following the date of this Form 10-Q. We need additional funds to finish the development of the product as well as for sales and marketing. The first year after raising the funds will be spent on the development of our products and services and we expect revenue to materialize at the first quarter of the second year, as illustrated in the following chart: Our revenue estimates are based on current expectations, estimates and projections about our business based primarily on assumptions made by management. In making our revenue projections, we have assumed that we will be able to generate revenues from advertising based on our subjective view that our telephony services and products will be fully developed and that there will be a certain level of customer acceptance and demand for our telephony services and products. Therefore, actual revenue outcomes and results may differ materially from what is expressed or forecasted in our revenue estimates due primarily to factors that advertisers generally look to in deciding whether to advertise on a website. Some of these factors are: (i) monthly traffic and its repeat rate, (ii) the number of unique visitors, (iii) targeted marketing opportunities and demographics, (iv) how professionally designed the website is, and (v) how established the website is. We currently do not satisfy any of the aforementioned factors as they relate to our business, and the revenues we actually generate will depend primarily on our success in developing our business plan, and more specifically, our ability to attract potential advertisers based on potential advertisers' views about the quality of our business based on these factors. YEAR 1 YEAR 2 YEAR 3 # of Impressions 0 2,000,000 6,000,000 Average Revenue per impression $ -- $ 0.02 $ 0.02 # of Click 0 200,000 600,000 Average Revenue per Click $ -- $ 0.30 $ 0.30 # of Actions 0 50,000 150,000 Average Revenue per action $ -- $ 1.00 $ 1.00 # of chargeable minutes $ -- 750,000 2,000,000 Average per minute profit $ -- $ 0.005 $ 0.005 Impression Revenue $ -- $ 40,000.00 $ 120,000.00 Per click Revenue $ -- $ 60,000.00 $ 180,000.00 Per Action Revenue $ -- $ 50,000.00 $ 150,000.00 Long Distance net Revenue $ -- $ 3,750.00 $ 10,000.00 REVENUE SUBTOTAL $ -- $ 153,750.00 $ 460,000.00 9--------------------------------------------------------------------------------The revenue projections above contain a number of assumptions. Year 1 (starting April 1, 2014) will be spent on developing our products and services, and we project zero revenue during that period. In year 2, we project that we will start generating revenue in the first month of year 2. RESULTS OF OPERATIONS THREE- MONTH PERIODS ENDED JUNE 30, 2014 AND 2013 We recorded no revenues for the three months ended June 30, 2014 and 2013. General and administrative expenses were $845 and professional fees were $6,200 for the three months ending June 30, 2014. For the three months ending June 30, 2013, General and administrative expenses were $4,371 and professional fees were $1,200. Operating expenses consisted solely of general and administrative expenses for the three months ended June 30, 2014, and consisted primarily of filing fees, and accounting and legal fees. NINE- MONTH PERIODS ENDED JUNE 30, 2014 AND 2013 We recorded no revenues for the nine months ended June 30, 2014 and 2013. General and administrative expenses were $3,106 and professional fees were $10,445 for the nine months ending June 30, 2014. For the nine months ending June 30, 2013, General and administrative expenses were $5,479 and professional fees were $4,600. Operating expenses consisted solely of general and administrative expenses for the nine months ended June 30, 2014, and consisted primarily of filing fees, and accounting and legal fees. 10 --------------------------------------------------------------------------------LIQUIDITY AND CAPITAL RESOURCES At June 30, 2014, we had a cash balance of $3,559. We do not have sufficient cash on hand to commence our plan of operation or to fund our ongoing operational expenses beyond 2 months. We will need to raise funds to commence our business and fund our plan of operation. Additional funding will likely come from equity financing from the sale of our common stock registered in our Form S-1. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our development activities and ongoing operational expenses. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our development of our business and our business will fail. SUBSEQUENT EVENTS None through date of this filing. |