UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended June 30, 2011 |
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¨ | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from _________ to _________ |
MY CATALOGS ONLINE, INC.
(Exact name of registrant as specified in its charter)
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Nevada | 5961 | 26-4170100 |
(State or other jurisdiction of incorporation or organization) | (Primary standard industrial classification code number) | (IRS employer identification number) |
6365 N.W. 6th Way, Suite 140
Fort Lauderdale, FL 33309
(954) 903-9373
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Kimberly L. Graus, Esq.
4949 SR 64 E, #141
Bradenton, Florida 34208
(941) 747-5290
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
| Outstanding at July 20, 2011 |
Common stock, $0.001 par value |
| 13,262,800 |
TABLE OF CONTENTS
| Page |
Part I. Financial Information |
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Item 1. Unaudited Condensed Consolidated Financial Statements | 1 |
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(a) Condensed Consolidated Balance Sheets at June 30, 2011 (unaudited) and September 30, 2010 | 1 |
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(b) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2011 and 2010 (unaudited) | 2 |
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(c) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2011 and 2010 (unaudited) | 3 |
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(d) Notes to Condensed Consolidated Financial Statements (unaudited) | 4 |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 8 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk | 10 |
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Item 4. Controls and Procedures | 10 |
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Part II. Other Information |
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Item 1. Legal Proceedings | 12 |
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Item 1A. Risk Factors | 12 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
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Item 3. Defaults Upon Senior Securities | 12 |
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Item 4. (Removed and Reserved) | 12 |
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Item 5. Other Information | 12 |
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Item 6. Exhibits | 12 |
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Signatures | 13 |
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
MY CATALOGS ONLINE, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
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| June 30, 2011 |
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| September 30, 2010 |
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| (Unaudited) |
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ASSETS |
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Current Assets |
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Cash |
| $ | 22,330 |
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| $ | 19,816 |
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Accounts receivable |
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| 5,760 |
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| 2,000 |
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Total current assets |
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| 28,090 |
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| 21,816 |
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Total Assets |
| $ | 28,090 |
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| $ | 21,816 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accrued expenses |
| $ | 3,300 |
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| $ | 3,808 |
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Accrued expenses - related parties |
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| 53,623 |
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| 39,737 |
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Accrued salary promissory notes |
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| 189,000 |
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| 136,000 |
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Notes Payable - related parties |
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| 98,692 |
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| 158,192 |
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Total current liabilities |
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| 344,615 |
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| 337,737 |
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Commitments and Contingencies (Note 7)
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Stockholders’ Deficit |
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Common stock, $0.001 par value; 200,000,000 shares authorized; |
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| 13,263 |
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| 12,375 |
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Common stock issuable, $0.001 par value; zero and 128,500 issuable |
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| - |
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| 129 |
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Additional paid-in capital |
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| 318,797 |
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| 137,697 |
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Accumulated Deficit |
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| (648,585 | ) |
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| (466,122 | ) |
Total stockholders’ deficit |
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| (316,525 | ) |
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| (315,921 | ) |
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Total Liabilities and Stockholders’ Deficit |
| $ | 28,090 |
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| $ | 21,816 |
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The accompanying unaudited notes are an integral part of these condensed consolidated unaudited financial statements
1
MY CATALOGS ONLINE, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
| For the nine months ended June 30, |
| For the three months ended June 30, |
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| 2011 |
| 2010 |
| 2011 |
| 2010 |
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Revenues: |
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Affiliate Commissions | $ | 141 |
| $ | 181 |
| $ | - |
| $ | 107 |
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Website Development services |
| 17,500 |
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| 32,665 |
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| 9,010 |
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| 14,579 |
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Total Revenues |
| 17,641 |
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| 32,846 |
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| 9,010 |
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| 14,686 |
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Operating Expenses: |
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Internet & hosting services |
| 1,451 |
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| 15,683 |
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| 484 |
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| 484 |
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Programming & development |
| 21,097 |
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| 63,053 |
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| 8,447 |
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| 19,892 |
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Advertising & marketing |
| 489 |
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| 18,669 |
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| 89 |
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| 3,500 |
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Domain names |
| 4,629 |
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| - |
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| 1,377 |
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| - |
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Office and administrative |
| 21,202 |
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| 9,343 |
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| 6,783 |
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| 1,195 |
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Professional fees |
| 46,505 |
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| 12,620 |
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| 6,589 |
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| 7,275 |
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Amortization |
| - |
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| 23 |
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| - |
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| 8 |
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Salaries |
| 90,000 |
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| 90,000 |
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| 30,000 |
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| 30,000 |
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Rent - related party |
| 4,500 |
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| 7,500 |
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| 1,500 |
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| 1,000 |
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Total Operating Expenses |
| 189,873 |
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| 216,891 |
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| 55,269 |
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| 63,354 |
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Loss From Operations |
| (172,232 | ) |
| (184,045 | ) |
| (46,259 | ) |
| (48,668 | ) |
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Other Income (Expense) |
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Interest expense |
| (10,231 | ) |
| (12,878 | ) |
| (2,956 | ) |
| (4,424 | ) |
Total Other Expense |
| (10,231 | ) |
| (12,878 | ) |
| (2,956 | ) |
| (4,424 | ) |
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Net loss | $ | (182,463 | ) | $ | (196,923 | ) | $ | (49,215 | ) | $ | (53,092 | ) |
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Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.00 | ) |
Weighted average number of common shares - Basic and Diluted |
| 13,006,133 |
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| 12,316,300 |
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| 13,188,356 |
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| 12,359,066 |
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The accompanying unaudited notes are an integral part of these condensed consolidated unaudited financial statements
2
MY CATALOGS ONLINE, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| For the nine months ended June 30, |
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| 2011 |
| 2010 |
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Cash flows from Operating Activities: |
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Net loss |
| $ | (182,463 | ) | $ | (196,923 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization |
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| - |
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| 23 |
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Impairment of website development costs |
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| 2,610 |
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| 47,173 |
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Contributed capital |
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| 30,000 |
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| 30,000 |
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Changes in operating assets and liabilities: |
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Increase in accounts receivable |
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| (3,760 | ) |
| - |
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Decrease in employee advance |
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| - |
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| 700 |
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Increase in accrued salary promissory notes |
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| 53,000 |
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| - |
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Increase in accrued expenses |
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| 13,377 |
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| 89,338 |
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Net cash used in operating activities |
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| (87,236 | ) |
| (29,689 | ) |
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Cash flows from Investing Activities: |
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Purchase of domain names |
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| - |
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| (3,007 | ) |
Website development costs |
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| (2,610 | ) |
| (47,173 | ) |
Net cash used in investing activities |
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| (2,610 | ) |
| (50,180 | ) |
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Cash flows from Financing Activities: |
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Proceeds from sale of common stock |
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| 151,860 |
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| 17,500 |
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Proceeds from stock subscription receivable |
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| - |
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| 10,000 |
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Proceeds from convertible note payable |
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| - |
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| 5,000 |
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Proceeds from notes payable - related parties |
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| - |
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| 45,500 |
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Payments on notes payable - related parties |
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| (59,500 | ) |
| - |
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Net cash provided by financing activities |
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| 92,360 |
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| 78,000 |
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Increase (decrease) in cash during the period |
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| 2,514 |
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| (1,869) |
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Cash, beginning of the period |
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| 19,816 |
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| 2,602 |
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Cash, end of the period |
| $ | 22,330 |
| $ | 733 |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Cash paid for interest |
| $ | - |
| $ | - |
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Cash paid for income taxes |
| $ | - |
| $ | - |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Conversion of convertible note payable into common stock |
| $ | - |
| $ | 5,000 |
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The accompanying unaudited notes are an integral part of these condensed consolidated unaudited financial statements
3
My Catalogs Online, Inc. and Subsidiary
Notes to condensed consolidated financial statements
June 30, 2011
(Unaudited)
Note 1 - Nature of Operations, Significant Accounting Policies and Basis of Presentation
Nature of Operations and Business Organization
My Catalogs Online, Inc. (the “Company” “we” “us” “our”) was organized as Mycatalogsonline.com, Inc. in the state of Nevada on January 26, 2009. The Company holds the domain names to various catalog shopping web sites and provides a master web link to these sites. In April 2009, the Company changed its name to My Catalogs Online, Inc., however, the Company maintains the web domain of Mycatalogsonline.com and does business under that name.
The Company owns 100% of the outstanding common stock of Catalog Enterprises, Inc., which was formed in March 2009, for the purpose of acquiring and maintaining domain names for future use within the Company’s business model and for providing website development services for other companies.
Basis of Presentation
The interim condensed consolidated financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly the consolidated results of operations and cash flows for the three and nine months ended June 30, 2011, and the financial position as of June 30, 2011, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim condensed consolidated financial statements. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Report on Form 10-K as filed with the Securities and Exchange Commission on December 27, 2010. The September 30, 2010 balance sheet is derived from those financial statements.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Catalog Enterprises, Inc. All material inter-company transactions and accounts have been eliminated in consolidation.
Reclassifications
Certain amounts in the accompanying 2010 condensed consolidated financial statements have been reclassified to conform to the 2011 presentation. Such reclassifications were not material.
Use of Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of our unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. Significant estimates include the estimate for the allowance for doubtful accounts, valuation of intangible assets, valuation of equity based transactions and the valuation allowance on deferred tax assets.
4
My Catalogs Online, Inc. and Subsidiary
Notes to condensed consolidated financial statements
June 30, 2011
(Unaudited)
Fair Value Measurements
We measure our financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America. For certain of our financial instruments, including cash, and accrued expenses, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for notes payable, also approximate fair value because current interest rates available to us for debt with similar terms and maturities are substantially the same.
Effective upon inception, we adopted accounting guidance for financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| Level 1: | Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| Level 2: | Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
Upon inception, we adopted a newly issued accounting standard for fair value measurements of all non-financial assets and liabilities not recognized or disclosed at fair value in the consolidated financial statements on a recurring basis.
We currently measure and report at fair value our intangible assets which are non-financial assets. The fair value of intangible assets has been determined using the present value of estimated future cash flows method for 2011. The Company could not project positive cash flow for valuation purposes related to website development costs and therefore, 100% impairment was recorded in 2011. The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011:
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| Balance at June 30, 2011 |
| Quoted Prices in Active Markets for Identical Assets |
| Significant other Observable Inputs |
| Significant Unobservable Inputs | ||||
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| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Assets: |
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Website Development Costs |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
Total Non-Financial Assets |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
Following is a summary of activity for assets measured under level 3 through June 30, 2011 of the fair value of intangible assets:
Balance at September 30, 2010 |
| $ | - |
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Fair value recorded for additional website development costs in fiscal 2011 |
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| 2,610 |
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Change in fair value included in net loss |
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| (2,610 | ) |
Ending balance at June 30, 2011 |
| $ | - |
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5
My Catalogs Online, Inc. and Subsidiary
Notes to condensed consolidated financial statements
June 30, 2011
(Unaudited)
Note 2 - Going Concern
As reflected in the accompanying unaudited condensed consolidated financial statements for the nine months ended June 30, 2011, the Company had a net loss of $182,463 and cash used in operations of $87,236. At June 30, 2011, the Company had a working capital deficit of $316,525, a stockholders' deficit of $316,525, and an accumulated deficit of $648,585. In addition, the Company has had minimal revenue generating activities in fiscal 2011. These matters raise substantial doubt about the Company's ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to implement its business plan and continue as a going concern. Management plans to continue to pursue contracts to develop websites in efforts to generate additional revenue. In addition, the Company is actively seeking investor funding.
Note 3 – Accrued Expenses - Related Party
The major components of accrued expenses - related party are summarized as follows:
| June 30, 2011 |
| September 30, 2010 | ||
Accrued rent - related party | $ | 13,500 |
| $ | 9,000 |
Accrued interest - related party |
| 32,923 |
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| 22,847 |
Other accrued expenses - related party |
| 7,200 |
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| 7,890 |
Total accrued expenses - related party | $ | 53,623 |
| $ | 39,737 |
Note 4 – Notes Payable Related Parties
The Company has notes payable to two officers aggregating $63,500 and $35,192 respectively as of June 30, 2011. Total amounts due the officers as of June 30, 2011 was $98,692. During fiscal 2011, the Company repaid $59,500 related to these notes. Both notes bear interest at 12% per year and are payable on demand. Interest expense on these notes for the nine months ended June 30, 2011 was $10,231 and accrued interest was $32,923 at June 30, 2011 and is included in accrued expenses - related party (See Note 3).
Note 5 – Related Party Transactions
The Company has loans outstanding to its officers, see Note 4, and other payables due related parties as described in Note 3.
Two officers of the Company had previously agreed to defer their salaries until the Company generates sufficient revenues to be able to pay them. As a result, in April 2009, the Company executed deferral agreements in the form of non-interest bearing promissory notes totaling $10,000 per month. On April 1, 2010, both officers agreed to waive any further salary accrual until such time the Company is financially stable. The company recorded contributed capital of $30,000 for contributed services for the three months ended December 31, 2010 based on the previous employment agreements. Effective January 1, 2011, the officers, by written consent of the directors, re-instated the prior employment agreements. Accrued salary promissory notes at June 30, 2011 was $189,000.
The Company leases office space from a company which is affiliated with an officer of the company. The lease agreement provides for a monthly rental of $500, which is deferred and has not been paid. Accrued rent at June 30, 2011 was $13,500 and included in accrued expenses - related party as described in Note 3.
Note 6 – Stockholders Deficit
Common stock issued for cash:
During the three months ended December 31, 2010, the Company received executed subscription agreements for a total of 659,300 shares of common stock at $0.20 per share for total proceeds of $130,860 and a subscription receivable of $1,000 which was subsequently collected during the three months ended March 31, 2011.
6
My Catalogs Online, Inc. and Subsidiary
Notes to condensed consolidated financial statements
June 30, 2011
(Unaudited)
During the three months ended June 30, 2011, the Company received executed subscription agreements for a total of 100,000 shares of common stock at $0.20 per share for total proceeds of $20,000.
Contributed capital:
The Company recorded $30,000 of contributed capital for the nine months ended June 30, 2011. (See Note 5)
Note 7 – Commitments and Contingencies
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2011, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on our results of operations.
Note 8 – Concentration
The Company is currently producing revenue primarily from one revenue stream, website development services. One customer accounted for 66% of the total revenue for the nine months ended June 30, 2011.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
There are statements in this Form 10-Q statement that are not historical facts. These "forward-looking statements" can be identified by use of terminology such as "believe", "hope", "may", "anticipate", "should", "intend", "plan", "will", "expect", "estimate", "project", "positioned", "strategy", and similar expressions. Although management believes that the assumptions underlying the forward-looking statements included in this Report are reasonable, they do not guarantee our future performance, and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements.
OVERVIEW
My Catalogs Online, Inc. (the “Company” "we" "us" "our") was organized as Mycatalogsonline.com, Inc. in the state of Nevada on January 26, 2009. The Company holds the domain names to various catalog shopping web sites and provides a master web link to these sites. In April 2009, the Company changed its name to My Catalogs Online, Inc., however, the Company maintains the web domain of Mycatalogsonline.com and does business under that name.
The Company owns 100% of the outstanding common stock of Catalog Enterprises, Inc. which was formed in March 2009, for the purpose of acquiring and maintaining domain names for future use within the Company’s business model and for providing website development services for other companies.
CRITICAL ACCOUNTING ESTIMATES
In response to the SEC’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its more subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the Company’s financial condition. These accounting estimates are discussed below. These estimates involve certain assumptions that if incorrect could create a material adverse impact on the Company’s results of operations and financial condition.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, products are delivered to and accepted by the customer, economic risk of loss has passed to the customer, the price is fixed or determinable, collection is reasonably assured, and any future obligations of the Company are insignificant.
Revenue can be derived from five primary streams as follows: affiliate marketing commissions, website development services, advertising, infomediary data, and catalog conversion further defined below:
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Affiliate Marketing Commissions: By bringing buyers and sellers together to facilitate transactions, affiliate partner commissions are paid by online merchants. When a customer clicks on an image of a product they wish to purchase, the order will be processed by the "affiliate” partner that then handles fulfillment of the customer‘s order. In other words, MyCatalogsOnline.com does not stock or ship any product that is purchased. The customers orders are filled by the actual vendor and the Company receives a commission for driving the customer to the vendor. This Model is currently in use by the Company. Revenue is recognized when the order is filled by the vendor.
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Website Development Services: As the Company continues to develop its core business, the company leverages its expertise and team of design and development resources, to build and optimize websites for other Companies, generating additional revenues. This model is currently in use by the Company. Revenue is recognized when services are rendered.
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Advertising: Charging companies to advertise their products to our site visitors, by means such as banner advertising, email campaigns and text message marketing. This Model is not currently being used by the Company at this time, but is under consideration and being marketed at this time. Revenue related to advertising sales will be recognized at the time the advertisement is displayed.
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Infomediary Data: Selling data collected from site users, including product preferences, to companies that wish to understand a market better. Data will be derived from TheBigBuzz.com social shopping site, and MyCatalog user shopping and browsing behavior. This Model is not currently being used by the Company at this time, but is under consideration. Revenue will be recognized upon the sale and delivery of the data.
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Catalog Conversion: Through the Company’s Green initiative, the Company intends to utilize its custom conversion tool to assist its customers in the conversion from print to digital media for a fee. This Model is not currently being used by the Company at this time, but is under consideration. Revenue will be recognized when the services have been rendered.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2011 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2010
Revenue: The Company's revenues decreased approximately 39% from $14,686 during the three months ended June 30, 2010 as compared to $9,010 for the three months ended June 30, 2011 due to a decrease in services provided for website development and affiliate commissions.
Operating Expenses: The Company's operating expenses decreased approximately 13% from $63,354 during the three months ended June 30, 2010 as compared to $55,269 for the three months ended June 30, 2011 due to a decrease in advertising and marketing and a decrease in programming and development costs, partially offset by an increase in office and administrative expenses.
Interest Expense: The Company's interest expense decreased approximately 33% from $4,424 during the three months ended June 30, 2010 as compared to $2,956 for the three months ended June 30, 2011 primarily due to a decrease in notes payable.
Net loss from operations: The Company's net loss from operations decreased approximately 7% from $53,092 during the three months ended June 30, 2010 as compared to $49,215 for the three months ended June 30, 2011. The primary reason for this was due to a decrease in programming and development costs and a decrease in advertising and marketing, partially offset by an increase in office and administrative expenses.
FOR THE NINE MONTHS ENDED JUNE 30, 2011 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2010
Revenue: The Company's revenue decreased approximately 46% from $32,846 during the nine months ended June 30, 2010 as compared to $17,641 for the nine months ended June 30, 2011 due to a decrease in services provided for website development and affiliate commissions.
Operating Expenses: The Company's operating expenses decreased approximately 13% from $216,891 during the nine months ended June 30, 2010 as compared to $189,873 for the nine months ended June 30, 2011 due to a decrease in advertising and marketing and a decrease in programming and development costs, partially offset by an increase in professional fees and an increase in office and administrative expenses.
Interest Expense: The Company's interest expense decreased approximately 21% from $12,878 during the nine months ended June 30, 2010 as compared to $10,231 for the nine months ended June 30, 2011 primarily due to a decrease in notes payable.
Net loss from operations: The Company's net loss from operations decreased approximately 7% from $196,923 during the nine months ended June 30, 2010 as compared to $182,463 for the nine months ended June 30, 2011. The primary reason for this was due to a decrease in programming and development costs and a decrease in advertising and marketing, partially offset by an increase in professional fees and an increase in office and administrative expenses.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $87,236 for the nine months ended June 30, 2011 as compared to $29,689 for the nine months ended June 30, 2010, primarily due to a decrease in net loss for the period.
Net cash used in investing activities was $2,610 for the nine months ended June 30, 2011 as compared to $50,810 for the nine months ended June 30, 2010, due to a decrease in website development costs.
Net cash provided by financing activities was $92,360 for the nine months ended June 30, 2011 as compared to $78,000 for the nine months ended June 30, 2010, primarily due to an increase in proceeds from the sale of common stock, offset by note repayments to officers.
As of July 20, 2011, the Company had approximately $17,000 in cash. The Company has incurred losses from operations, and such losses are expected to continue. The Company’s auditors have included a "Going Concern Qualification" in their report for the year ended September 30, 2010. In addition, the Company has a working capital deficit with minimal revenues as of June 30, 2011. The foregoing raises substantial doubt about the Company's ability to continue as a going concern. The Company plans to fund ongoing operations by continuing to pursue contracts to develop websites in efforts to generate additional revenue. In addition, the Company is actively seeking investor funding. There can be no assurance that the level of funding needed will be acquired or that the Company will generate sufficient revenues to sustain operations for the next twelve months. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The "Going Concern Qualification" might make it substantially more difficult to raise capital.
RELATED PERSON TRANSACTIONS
For information on related party transactions and their financial impact, see Note 5 to the unaudited condensed consolidated financial statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For information on recently issued accounting pronouncements, see Note 1 to the unaudited condensed consolidated financial statements if applicable.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any 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 is material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures: An evaluation was conducted by the registrant’s president of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of June 30, 2011. Based on that evaluation, the president concluded that the registrant’s controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that the registrant files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. If the registrant develops new business or engages or hires a chief financial officer or similar financial expert, the registrant intends to review its disclosure controls and procedures.
Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risk associated with such lack of segregation is low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management may reevaluate this situation as circumstances dictate.
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Changes in Internal Control Over Financial Reporting: The was no change in the registrant's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or Rule 15d–15 under the Securities Exchange Act of 1934 that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
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PART II- OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. (Removed and Reserved)
Item 5. Other Information.
None.
Item 6. Exhibits
(a)
Exhibits
EXHIBIT |
| DESCRIPTION |
31.1 |
| Section 302 Certification of Chief Executive Officer |
31.2 |
| Section 302 Certification of Chief Financial Officer |
32.1 |
| Section 906 Certification |
32.2 |
| Section 906 Certification |
.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| My Catalogs Online, Inc. |
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Date: July 20, 2011 | By: | /s/ Ronald Teblum |
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| Ronald Teblum |
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| CEO (Principal Executive Officer), President |
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