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| LNWZ > SEC Filings for LNWZ > Form 10-Q on 13-Aug-2012 | All Recent SEC Filings |
13-Aug-2012
Quarterly Report
General
The following discussion and analysis provides information which management of the Company believes to be relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read together with the Company's financial statements and the notes to the financial statements, which are included in this report. This information should also be read in conjunction with the information contained in our Form 10-K filed with the Securities and Exchange Commission (the "Commission") on April 16, 2012, including the audited financial statements and notes included therein as of and for the year ended December 31, 2011, which reports are incorporated herein by reference. The reported results will not necessarily reflect future results of operations or financial condition.
Caution Regarding Forward-Looking Statements
This Report contains forward-looking statements that relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Report. Forward-looking statements are often identified by words like "believe," "expect," "estimate," "anticipate," "intend," "project" and similar words or expressions that, by their nature, refer to future events.
In some cases, you can also identify forward-looking statements by terminology such as "may," "will," "should," "plans," "predicts," "potential," or "continue," or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements in an effort to conform these statements to actual results.
Business Overview
League Now Holdings Corporation ("League Now") was incorporated in September 2005 in Florida. We originally intended to operate as an application service provider offering web-based services for the online video gaming industry. In late 2009, we determined that the Company would be considered a "shell" company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934.
Infiniti Systems Group ("Infiniti"), a wholly owned subsidiary of League Now, was incorporated in the State of Ohio in January 1995 as J.L. Consulting, Inc., to develop and consult on application development, project management, managed information technology (IT) services, IT helpdesk services, professional staffing and placement, network security products and services, and server virtualization, backup and disaster recovery. On July 15, 1999, J.L. Consulting, Inc. changed its name to Infiniti Systems Group, Inc.
Infiniti is a reseller for Microsoft, McAfee and many other security products. We market our managed IT services to the small to medium businesses and our security and staffing services to Fortune 1000 companies. Our client base is across many industries including healthcare, financial, manufacturing, construction, transportation, non-profits and government. Infiniti is now specializing in IT security and information technology consulting for companies in the Midwestern United States. Infiniti's security division provides product and service support in the Windows, Unix and Linux, Internet, mobile device, the latest on intrusion detection and prevention, disaster recovery and business continuity planning. The consulting division provides network support, application development, staffing and recruiting for many companies in the Midwestern United States.
Managed Services
Infiniti's managed service is a cost effective approach to outsourcing some or all effort required to build or maintain an IT infrastructure environment. "Infrastructure" refers to:
? computers that function as servers and workstations;
? hubs, switches, routers making up hard wired and
wireless connectivity;
? printers, scanners, tape drives and other workflow
peripherals;
? and software components relating to program and data
backup, virus projection, and security.
Our managed service consists of:
? Problem Resolution
? Preventive Maintenance
? Remote Access Support
? Remote Monitoring
? Dispatch Desk
? Help Desk
? Virtual CIO/CTO
Security Consulting
We offer a complete line of security service to help our clients develop, implement and maintain effective security awareness programs. We have developed an information security practice that is time-tested and client specific. We focus on the following areas:
? Network Security, Vulnerability Assessment, Penetration Testing ? Mobile Device Security:
? Security Policies and Procedures (ISO 17799 compliant):
? Security Awareness Training:
? PCI Compliance Review:
Staffing Services
Our professional staffing and recruiting services provide the top IT talent for temporary and permanent placement for the lowest cost to our customers. Infiniti will also complete the entire project as a turnkey operation, or assist our client's staff with project completion as part of an in-house/outside consultant team approach.
Products
We also provide our clients with the latest in Firewalls/Gateway Security, Network/Internet Security and Messaging Security, Mobile Security and Backup/Restore as a reseller for the industry's top software product manufacturers like Microsoft, McAfee and Good Technologies.
Market Opportunity
Infiniti has positioned itself in the IT consulting business by being able to market its services to small and mid-size firms, while also being able to capture the larger market of Fortune 1000 companies. We continue to build partnerships with various vendors to enable us to offer unique support and solutions to our customers. The market need for outside IT services continues to grow as businesses seek to save money by out-sourcing many of the necessary functions which our company offers.
Industry Overview
The IT service industry continues to be one of the fastest growing in the United States. The dependency of most businesses on information technology platforms and security has grown at a pace relative to the development of the computer and internet businesses. In addition, the recent recession has left businesses seeking ways to cut costs without risking damage to their companies. One way has been outsourcing of certain services, including human resources, accounting, information technology and security. Moreover, many companies have short-term staffing needs but concerns about fulltime employment costs and expenses (such as payroll taxes, disability and workers' compensation premiums, health insurance contributions and employment related liabilities). Our information technology staffing solutions provide a way for our clients to get the short-term staffing they need for projects while avoiding these potential liabilities. Our competition is large with staffing and security companies, but our pricing gives us a competitive advantage to open doors in this marketplace.
Growth Strategy
The Company plans to continue to develop each of its practice areas. We are currently looking at acquisition opportunities to expand our services, territories and customer base.
We currently do not own any intellectual property but are working in healthcare space to develop a product to better handle medical processing of claims and significantly reduce medical costs. We have not yet chosen a name for this product. Our plan is to have the product developed by mid-2013, with a number of installations to commence also in 2013. This product could provide significant growth to our revenue and profitability.
RESULTS OF OPERATIONS
Results of Operations
Comparison of the Three Months Ended June 30, 2012 with the Three Months Ended
June 30, 2011 and Six Months Ended June 30, 2012 with the Six Months Ended June
30, 2011
Revenues
Revenues for the three months ended June 30, 2012 were $960,381. This is up substantially from the revenue from the second quarter of 2011. No revenue was reported last year second quarter. Infiniti revenues have increased by 13% from last year through June 30. We have seen an increase need for temporary IT staff, security products and consulting in 2012. Year to date sales as of June 30, 2012 reached $1,905,052.
Cost of Revenues
Cost of Revenues for the three months ended June 30, 2012 was $784,928. Cost includes the employee/contractor costs and security product costs for the period. Year to date Cost of Revenues was $1,511,274 as of June 30, 2012.
Gross Profit
Our gross profit was $175,453 for the three months ended June 30, 2012, In comparison to 2011 where there was no sales or gross profit recorded. This includes both staffing and security product gross profit for the period. Gross Profit year to date as of June 30, 2012 was $393,778.
General and Administrative Expenses
General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses increased to $323,968 for three months ending June 30, 2012 as compared to $12,500 during the three months ended June 30, 2011. We believe that our existing executive and administrative staffing levels are going to increase to support our growth plan of 20% per year in our business plan. G&A Expenses year to date for June 30, 2012 were $588,099.
Capital Resources and Liquidity
As of June 30, 2012 we had $15,996 in cash. As reflected in the accompanying financial statements, we had an increase of cash in our operations of $8,715 and had a net loss of $169,909 for the three months ended June 30, 2012.
We may not have sufficient resources to fully develop any new products or technologies unless we are able to raise additional financing. We can make no assurances these required funds will be available on favorable terms, if at all. If additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in dilution to our existing stockholders. Additionally, these conditions may increase costs to raise capital and/or result in further dilution. Our failure to raise capital when needed would adversely affect our business, financial condition and results of operations, and could force us to reduce or cease our operations.
We believe that we will be able to meet the costs of growth and public reporting with funds generated from operations and additional amounts generated through debt and equity financing, Although management believes that the required financing to fund product development there is no guarantee these funds will be made available, and if funds are available, that the terms will be satisfactory to the Company.
Impact of Inflation
The business will have to absorb any inflationary increases on development costs in the short-term, with the expectation that it will be able to pass inflationary increases on costs on to our customers through price increases on the release of these new/enhanced products into the market and hence the management do not expect inflation to be a significant factor in our business.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between us and any other entity 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 stockholders.
Going Concern
The Company has a working capital deficiency of $792,395 and a stockholders' deficiency of $155,222, as of June 30, 2012. These factors raise substantial doubt about its ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these 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.
Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. Some of the critical accounting estimates are detailed below.
Critical Accounting Estimates and New Accounting Pronouncements
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
? it requires assumptions to be made that were uncertain at the time the estimate was made, and
? changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
We base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following accounting policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management's most subjective and complex judgments in estimating the effect of inherent uncertainties: share-based compensation expense, income taxes, and derivative financial instruments.
Share-Based Compensation Expense. We calculate share-based compensation expense for option awards and warrant issuances ("Share-based Awards") based on the estimated grant/issue-date fair value using the Black-Scholes-Merton option pricing model ("Black-Sholes Model"), and recognize the expense on a straight-line basis over the vesting period, net of estimated forfeitures. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards. Although we believe our assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.
Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. Our provision for income taxes is determined using the asset and liability approach to account for income taxes. A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. Changes in valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted. Where a valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense.
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain. In spite of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities. We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions. Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.
New Accounting Pronouncements
In December 2011, FASB issued Accounting Standards Update ("ASU") 2011-11, Balance Sheet - Offsetting. This guidance requires disclosures about offsetting and related arrangements for recognized financial instruments and derivative instruments. The standard is effective for us as of January 1, 2013 and will not materially impact our financial statement disclosures.
In September 2011, the FASB issued ASU 2011-08, "Testing Goodwill for Impairment." This guidance provides the option to evaluate prescribed qualitative factors to determine whether a calculated goodwill impairment test is necessary. The standard is effective for us as of January 1, 2012 and will not materially impact on our financial condition, results of operations, or financial statement disclosures.
In May 2011, FASB issued Accounting Standards Update ("ASU") 2011-05, Comprehensive Income: Presentation of Comprehensive Income, to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments do not change the guidance regarding the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments should be applied retrospectively, and is effective for fiscal years and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption is not expected to have a material impact on the Company's results of operations, financial position or cash flows.
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the "Boards") on fair value measurement, and results in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term "fair value." These amendments change some of the terminology used to describe many of the existing requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments should be applied prospectively, and they are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The adoption is not expected to have a material impact on the Company's results of operations, financial position or cash flows.
Management does not believe there would be a material effect on the accompanying financial statements had any other recently issued but not yet effective accounting standards been adopted in the current period.
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