TMCnet News
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.(Edgar Glimpses Via Acquire Media NewsEdge) SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS. Overview & Plan of Operation Ecrypt Technologies, Inc., a Colorado corporation, was incorporated in the State of Colorado, on April 19, 2007. The Company provides security, defense, and information security solutions, which assist corporate entities, governments and individuals in protecting their organizations and/or critical infrastructures against error, and physical and cyber attack. The Company's business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services. Currently, the Company's primary business operations are focused on establishing a strategic marketing program of allied products and services of which the Company is designated as the exclusive, or non-exclusive, marketing and distribution agent within the USA and abroad. Additionally, the Company has developed and plans to sell an enterprise-level secure email software appliance named Ecrypt One. Ecrypt One is an email server with integrated security technology. It was designed to protect email and attachments in transit and at rest. It incorporates multiple security technologies and techniques, such as encryption, role based access controls, server rules that enforce security, and multi-factor authentication. It was designed to assist organizations and governments to meet and maintain compliance with information security regulations such as HIPAA. The Company filed a patent application for multiple processes in Ecrypt One, with a request for non-publication, on April 22, 2014. Page 15 of 22 --------------------------------------------------------------------------------In addition to the foregoing, in an effort to advance the business operations of the Company, over the next twelve (12) months the Company plans to undertake the following actions in the order in which they are listed: 1. Continue developing its strategic marketing alliance program; 2. Commence distribution of allied products and services; 3. Complete development of Ecrypt One; 4. Complete testing of Ecrypt One; 5. Commence distribution on Ecrypt One. The foregoing business actions are goals of the Company. There is no assurance that the Company will be able to complete any, or all, of the foregoing actions. Results of Operations The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Form 10-Q. Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principles of the United States ("GAAP"). Results of Operations for Ecrypt Technologies, Inc. for the Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013. Revenue During the three months ended June 30, 2014, the Company had revenues of $0 as compared to revenues of $1,213 during the three months ended June 30, 2013, a decrease of $1,213, or approximately 100%. The decrease in revenue experienced by the Company was primarily attributable to the fact that the Company discontinued sales of One on One and Ecrypt Me on June 30, 2013. Operating Expenses During the three months ended June 30, 2014 the Company had operating expenses of $231,044 as compared to operating expenses of $155,666 during the three months ended June 30, 2013, an increase of $75,378 or approximately 48.423%. The increase in operating expenses experienced by the Company was primarily attributable to an increase in amortization and depreciation expenses, an increase in general and administrative expenses, and an increase in professional fees. Net Loss The Company had a net loss of $(265,221) for the three months ended June 30, 2014, as compared to a net loss of $(182,667) for the three months ended June 30, 2013, a change of $82,554 or approximately 45.194%. The change in net loss experienced by the Company was primarily attributable to the fact that the Company experienced an increase in operating expenses, and an increase in interest expense during the three months ended June 30, 2014. Page 16 of 22 --------------------------------------------------------------------------------Liquidity and Capital Resources Currently, we have limited operating capital. The Company anticipates that it will require approximately $5,000,000 of working capital to complete all of its desired business activity during the next twelve months. The Company has earned limited revenue from its business operations. Our current capital and our other existing resources will be sufficient only to provide a limited amount of working capital, and, to date, the revenues generated from our business operations have not been sufficient to fund our operations or planned growth. As noted above, we will likely require additional capital to continue to operate our business, and to further expand our business. We may be unable to obtain the additional capital required. Our inability to generate capital or raise additional funds when required will have a negative impact on our operations, business development and financial results. During the next twelve months, we plan to seek to generate the necessary capital to fund our business operations and complete our desired business activity through sales Ecrypt One and strategic marketing affiliate products and services. If we are unable to generate the necessary capital through the sales of these products, we may conduct a private placement offering to seek to raise the necessary working capital to fund our business operations, or continue to rely on related party loans to fund our business operations. The following discussion outlines the state of our liquidity and capital resources as of June 30, 2014: Total Current Assets & Total Assets Our unaudited balance sheet reflects that: i) as of June 30, 2014, we have total current assets of $29,408 as compared to total current assets of $15,504 at March 31, 2014, an increase of $13,904, or approximately 89.68%; and ii) as of June 30, 2014, we have total assets of $36,300, compared to total assets of $23,330 as of March 31, 2014, an increase of $12,970, or approximately 55.594%. The increase in the Company's total current assets and total assets from June 30, 2014 to March 31, 2014 was primarily attributable to the fact that the Company obtained more cash via loans from third parties during the period ended June 30, 2014. Cash: As of June 30, 2014, our unaudited balance sheet reflects that we have cash of $29,408 as compared to $15,504 at March 31, 2014, an increase of $13,904, or approximately 89.68%. The increase in the Company's cash from March 31, 2014 to June 30, 2014 to was primarily attributable to the fact that the Company obtained more cash via loans from third parties during the period ended June 30, 2014. Total Current Liabilities Our unaudited balance sheet reflects that: i) as of June 30, 2014, we have total current liabilities of $1,657,045 as compared to total current liabilities of $1,531,814 at March 31, 2014, an increase of $125,231 or approximately 8.18%; and ii) as of June 30, 2014, we have total liabilities of $1,774,418 as compared to total liabilities of $1,646,644 at March 31, 2014, an increase of $127,774 or approximately 7.76%. The increase in the Company's total current liabilities and total liabilities from June 30, 2014 to March 31, 2014 was primarily attributable to the fact that the Company received loans from a third party, realized an increase in the accrued interest on loans payable to related and third parties, and realized an increase in accounts payable and accrued liabilities. Cash Flow for the Company for the Three Month Period Ended June 30, 2014 as Compared to the Three Month Period Ended June 30, 2013 Page 17 of 22 --------------------------------------------------------------------------------Operating Activities During the three month period ended June 30, 2014, the net cash used by the Company in operating activities was $(71,096) as compared to net cash used in operating activities of $(100,942) during the three month period ended June 30, 2013, a change of $29,846 or approximately 29.57%. The decrease in our net cash used in operating activities was primarily attributable to net loss adjusted by a decrease in amortization and depreciation, a decrease in accounts payable and accrued liabilities, and a decrease in accounts payable due to a related party. Financing Activities During the three month period ended June 30, 2014, the net cash provided by financing activities was $85,000 as compared to net cash provided by financing activities of $105,500 during the three month period ended June 30, 2013, a decrease of $20,500, or approximately 19.431%. The change in net cash provided by financing activities was primarily attributable to the fact that the Company received less cash via loans from third and related parties. Investing Activities During the three month period ended June 30, 2014, and the three month period ended June 30, 2013, the net cash used in investing activities was $nil. Off Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. Subsequent Events Subsequent to the three months ended June 30, 2014, the Company sold a total of 580,000 units for a total of $58,000, or $0.10 per unit. Each unit consists of one (1) share of the Company's common stock, and one-half (1/2) common stock purchase Warrant. One full warrant entitles the holder to purchase one (1) share of the Corporation's common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing. The securities were sold to a total of five (5) different purchasers as part of a private placement offering being conducted by the Company. The sales of securities were made in reliance upon exemptions for registration provided by Regulation S under the Securities Act of 1933. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. ITEM 4. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures The Securities and Exchange Commission defines the term "disclosure controls and procedures" to mean the company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely Page 18 of 22 --------------------------------------------------------------------------------decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives. Based on that evaluation, our management has concluded that, as of June 30, 2014, the Company's internal control over financial reporting contained a material weakness due to a failure by the Company to properly value a stock transaction issued by the Company, and as a result of such material weakness, our internal controls over financial reporting were not effective as of June 30, 2014. To remediate the weakness in our internal controls over financial reporting, we intend to: i) reconcile stock issuance transactions against the agreements underlying such stock issuance transactions to ensure that equity issuances are properly accounted for; and ii) implement a review board to review the stock issuance transactions to ensure that they are properly valued and accounted for. Changes in Internal Control over Financial Reporting There was no change in the Company's internal control over financial reporting during the period ended June 30, 2014, that has materially affected, or is likely to materially affect, the Company's internal control over financial reporting. |