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| MLTX > SEC Filings for MLTX > Form 10-Q/A on 1-May-2009 | All Recent SEC Filings |
1-May-2009
Quarterly Report
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND INVOLVES A HIGH DEGREE OF RISK AND UNCERTAINTY. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-Q ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT, THE WORDS "ANTICIPATE," "ESTIMATE," "PROJECT," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS DUE TO RISKS AND UNCERTAINTIES THAT EXIST IN OUR OPERATIONS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDING AMONG OTHERS, THE RISK THAT OUR PRODUCT DEVELOPMENT PROGRAMS WILL NOT PROVE SUCCESSFUL, THAT WE WILL NOT BE ABLE TO OBTAIN FINANCING TO COMPLETE ANY FUTURE PRODUCT DEVELOPMENT, THAT OUR PRODUCTS WILL NOT PROVE COMPETITVE IN THEIR MARKETS. THESE RISKS AND OTHERS ARE MORE FULLY DESCRIBED IN OUR S-1 REGISTRATION STATMENT. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR PROJECTED.
ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS INCLUDED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GIVE ANY ASSURANCES THAT THESE EXPECTATIONS WILL PROVE TO BE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto appearing in Part I, Item 1.
General
Multisys Language Solutions, Inc. was organized under the laws of the state of Nevada on June 6, 2008, and is doing business as a marketer of language education software in the People's Republic of China, Taiwan, Hong Kong, and Macao via an independent third party software distribution company. We are structured expressly as a marketing entity and therefore we do not engage in the design, development or manufacturing of language education software. We intend to operate only in China, Taiwan, Hong Kong, and Macao under the terms of our exclusive Software Reseller Agreement with Strokes International AG, an unaffiliated Austrian company. We purchased the Software Reseller Agreement for; (i) $10,000 in cash, (ii) warrants to purchase 100,000 shares of the Company's common stock at $0.10 per share valid for three years from the date of issuance, June 11, 2008, and (iii) a royalty equal to 5% of all revenue received by us from the sale of all language education software sold in China. Since commencement of operations in 2008, our efforts to date have been principally devoted to and limited primarily to organization, initial capitalization, business development, identifying a marketing partner in China, preparing a comprehensive business and operating plan, and evaluating, with our exclusive marketing agent in China, the markets in China in which to market language education software. Substantial research has been undertaken on competing software currently being offered in China to teach residents of China to learn how to speak English and German.
Under our exclusive Software Resellers Agreement with Strokes International, AG (or Strokes) we are required to pay a fee equal to 40% of the net retail price on each unit sold after the production and marketing fee to Xiamen Eurotech Intelligence Commercial & Trading Co. ("Xiamen") is taken out. Our company entered into an Exclusive Marketing and Distribution Agreement with Xiamen under which Xiamen will act as our exclusive marketing agent to produce, market, and sell the language education software products in the covered territories of China, Taiwan, Hong Kong, and Macao. As part of that agreement, Xiamen has assumed the underlying financial obligations of the Software Reseller Agreement and will remit proceeds from the sale of language education software products to Strokes on a direct basis.
Under the terms and conditions of the Resellers Agreement with Strokes we agreed
to sell three different interactive multimedia language education software
programs for the following net retail prices: 1) 385 RMB ($56.62) for the
beginner program; 2) 556 RMB ($81.76) for the intermediate program; and 3) 726
RMB ($106.76) for the advanced program. Because the products will be produced
in China by Xiamen, the costs for production, duplicated, packaging, printing
and marketing expenses in the amount of 45 RMB for the beginners program, 55 RMB
for the intermediate program, and 65RMB for the advanced program will be
deducted from the net retail price before calculating 40% of the net retail
price payable to Strokes. Out of the 60% net retail price to be retained by
Xiamen for all operating costs and Multisys will receive $4.00 per unit sold or
27.2 RMB, using the currency conversion calculation as of this date.
Since we are a marketing company and not engaged in the manufacture of our products, we have not been required to invest in assets dedicated to software design, software development, software testing and manufacturing and duplication of software. Instead, our sales and marketing partner, Xiamen, will duplicate the software and assume responsibility for its packaging and distribution. We provided $60,000 to Xiamen to financially assist in the organization and launch of the language education software products.
We do not intend at this point in time to market any other language education software except for English and German. The exclusive Software Reseller Agreement does provide us the option, in the future, to potentially market software to teach Japanese, Spanish, Italian, and French languages.
Our plan of operation for the next 12 months will be the execution of our strategic business plan. We intend to finalize the Strategic Marketing Plan, evaluate the feasibility of expanding the product line to include languages other than just German and English, evaluate the feasibility of securing additional operating capital through a second private equity or debt offering, and making application to have Multisys Language Solutions' shares of common stock to become listed on the OTC-BB.
Results of Operations
Since Multisys Language Solutions was formed on June 6, 2008, it has not earned any revenues and has incurred a net loss of $97,648 for the period from June 6, 2008 (inception), through March 31, 2009.
For the period from June 6, 2008 (inception), through March 31, 2009, we incurred $60,000 in distribution and marketing and $37,648 in general and administrative expenses. Our general and administrative expenses include the following major expenses:
1. A monthly consulting fee contracted to our CEO, Janelle Edington, in the amount of $1,000 per month, which was implemented in September of 2008, totaling $7,000 through March 31, 2009.
2. A consulting fee was paid for outside corporate development and organization consulting, in the amount of $5,000, which was paid in September 2008.
3. Our corporate website was developed at a cost of $2,500 in October 2008. This amount increased the total general and administrative expenses.
4. Our company retained a company accountant and transfer agent in November 2008, and accountant expenses for the period ended March 31, 2009, was $2,475.
5. Our company retained a transfer agent in November 2008, and transfer agent expenses for the period ended March 31, 2009, was $1,867.
5. Our company retained a corporate attorney to oversee contracts and our public reporting obligations in January 2008. The legal expenses for the period ended March 31, 2009, was $5,600.
6. Our company retained an independent auditor in January 2009 and we had auditing expenses of $10,000 at March 31, 2009.
Liquidity and Capital Resources.
We are currently financing our operations from the proceeds from sales of common stock offered pursuant to a private placement which was closed on October 31, 2008, in which we had gross proceeds of $110,250. As of March 31, 2009, we had cash in the amount of $6,848. We will need to raise additional capital or generate sufficient revenues by during the second quarter of 2009 or curtail our operations.
Net cash used in operating activities for the period from June 6, 2008 (inception), through March 31, 2009, was $94,152.
Net cash from financing activities for the period from June 6, 2008 (inception), through March 31, 2009, was $111,000. This funding came from 43 investors in an offering of common stock at $.10 per share that ended on October 31, 2008, and $750 from our three officers for common stock at $.001 per share.
We plan to finance our needs principally from the following:
• Issuance of convertible promissory notes and warrants.
• A private placement stock offering for shares in the company.
We do not have sufficient capital to carry on operations past May 2009, but we
plan to raise additional capital in a private placement offering to secure funds
needed to finance our plan of operation for at least the next twelve months.
However, this is a forward-looking statement, and there may be changes that
could consume available resources before such time. Our long term capital
requirements and the adequacy of our available funds will depend on many
factors, including the eventual reporting company costs, public relations fees,
and operating expenses, among others.
We are pursuing potential equity financing and other collaborative arrangements that may generate additional capital for us. We cannot assure you that we will generate sufficient additional capital or revenues, if any, to fund our operations beyond May 2009, that any future equity financings will be successful, or that other potential financings through bank borrowings, debt, or equity offerings, or otherwise, will be available on acceptable terms or at all.
New Accounting Pronouncements
In June 2003, the Securities and Exchange Commission ("SEC") adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), as amended by SEC Release No. 33-8934 on June 26, 2008. Commencing with its annual report for the year ending December 31, 2009, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:
• management's responsibility for establishing and maintaining adequate
internal control over its financial reporting;
• management's assessment of the effectiveness of its internal control over
financial reporting as of year end; and
• the framework used by management to evaluate the effectiveness of the
Company's internal control over financial reporting.
Furthermore, in the following fiscal year, it is required to file the auditor's attestation report separately on the Company's internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.
In December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) "Business Combinations" ("SFAS No. 141(R)"), which requires the Company to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred and does not permit certain restructuring activities previously allowed under Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of purchase accounting. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company will adopt this standard at the beginning of the Company's year ending December 31, 2008, for all prospective business acquisitions. The Company has not determined the effect that the adoption of SFAS No. 141(R) will have on the financial results of the Company.
In December 2007, the FASB issued FASB Statement No. 160 "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS No. 160"), which causes non-controlling interests in subsidiaries to be included in the equity section of the balance sheet. SFAS No. 160 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company will adopt this standard at the beginning of the Company's year ending December 31, 2008, for all prospective business acquisitions. The Company has not determined the effect that the adoption of SFAS No. 160 will have on the financial results of the Company.
In March 2008, the FASB issued FASB Statement No. 161 "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133" ("SFAS No. 161"), which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to SFAS No.161, Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Critical Accounting Policies and Estimates.
This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management 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 the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Our critical accounting policies are:
Revenue Recognition. Royalties will be recognized as revenue when the amounts are contractually earned, fixed and determinable, and there is substantial probability of collection.
Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Intangible Assets. Multisys Language Solutions' intangible assets are composed of an exclusive Software Reseller Agreement with Strokes International AG and a Sales and Marketing Agreement with Xiamen Eurotech Intelligence Commercial & Trading Co.
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