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ECHI > SEC Filings for ECHI > Form 10-Q on 14-Nov-2013All Recent SEC Filings

Show all filings for ECAREER HOLDINGS, INC.

Form 10-Q for ECAREER HOLDINGS, INC.


14-Nov-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

Cautionary Note about Forward-Looking Statements

Forward-Looking Statements

We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. You can identify these statements as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as "believe," "anticipate," "expect," "estimate," "predict," "intend," "plan," "project," "will," "will be," "will continue," "will result," "could," "may," "might" or any variations of such words or other words with similar meanings. Forward-looking statements address, among other things, our expectations, our growth strategies, future profitability, results of operations, capital expenditures or other "forward-looking" information regarding our actions, plans or strategies. We are including this cautionary statement in this report to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf, of us.

Important factors that may cause actual results to differ from projections include, for example:

- the success or failure of management's efforts to implement the Registrant's plan of operation;
- the ability of the Registrant to fund its operating expenses;
- the ability of the Registrant to compete with other companies that have a similar plan of operation;
- the effect of changing economic conditions impacting our plan of operation;
- the ability of the Registrant to meet the other risks as may be described in future filings with the SEC.

In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. We do not assume any obligation and do not intend to update any forward-looking statements except as may be required by securities laws.

General

The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements, including footnotes, and other information presented elsewhere in this report.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations and financial condition.

Overview

We were incorporated in March 2005, as Barossa Coffee Company, under the laws of the State of Nevada. We were originally formed to open and operate, through a wholly-owned subsidiary, Alchemy Coffee Company, Inc. ("Alchemy"), a retail, specialty coffee outlet. We opened a retail coffee outlet in February 2006, specializing in the sale of high quality foods and beverages. Due to continuing cash needs, however, we spun off Alchemy in October 2006. In the spin off transaction, we transferred ownership of Alchemy to one of our stockholders in exchange for all his shares of our common stock. After this transaction, we had no business activity or operations, other than investigating potential acquisitions. Upon the acquisition of eCareer, Inc. ("ECI"), the business of ECI became our sole business. We are a developmental stage company with limited operations to date.

As a result of the transactions effected by the Exchange Agreement, as noted in Item 1, for financial statement reporting purposes, the exchange has been treated as a reverse acquisition with ECI deemed the accounting acquirer and BCCI deemed the accounting acquire. The reverse acquisition is deemed a capital transaction and the assets and liabilities of ECI are carried forward to the Company at their carrying value before the acquisition. The equity of the Company is the historical equity of ECI retroactively restated to reflect the number of shares issued by ECI using the capital structure of BCCI. Upon the closing of the Exchange Agreement, ECI became the operating company and BCCI abandoned all of its previous business plans, with the business of ECI now being the Company's sole business. Accordingly, these financial statements present the operations only of ECI from inception through the date of the exchange (April 11, 2013) and on a consolidated basis for ECHI and ECI after the exchange, and the resulting non-controlling interest in ECI. All intra-company transactions have been eliminated on consolidation.

We are a website designer, developer and marketer of niche career sites. Our sites are designed to brand client companies to active and passive candidates within each identified niche. Site features include: industry news, social media groups, niche-specific content, webinars, events, training programs and consolidated industry statistics. Access to the site is free to users and revenue is generated through advertising, resume searches and a job board function. Our first site, Openreq , was publically launched on January 1, 2013.

Critical Accounting Policies

We use estimates throughout our consolidated financial statements. We consider an accounting estimate to be critical if: (1) the estimate requires us to make assumptions about the matters that are highly uncertain at the time the estimate is made or (2) changes in the estimate are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors. In addition there are other items within our financial statements that require estimation but are not deemed critical as defined above. Change in estimates could have an impact on our operations and financial position.

The accounting policies and estimates we consider most critical are presented below.

Development Stage - The Company's financial statements are presented as those of a development stage company. Activities during the development stage primarily include implementing the business plan and obtaining additional equity related financing.

Revenue Recognition-The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of service has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Revenue is recognized net of customer discounts ratably over the service period. Payments received in advance of services being rendered are recorded as deferred revenue and recognized over the service period. The Company generates revenue from the following sources:

Talent acquisition package revenues are derived from the sale, to recruiters and employers, a combination of talent packages and access to a searchable database of candidates on the Openreq.com website. Certain of the Company's arrangements include multiple deliverables, which consist of the ability to post jobs and access to a searchable database of candidates. The Company determines the units of accounting for multiple element arrangements in accordance with the Multiple-Deliverable Revenue Arrangements subtopic of the FASB ASC. Specifically, the Company will consider a delivered item as a separate unit of accounting if it has value to the customer on a standalone basis. The Company's arrangements do not include a general right of return. Services to customers buying a package of available talent packages and access to the database are delivered over the same period and revenue is recognized ratably over the length of the underlying contract, typically from one to 12 months. The separation of the package into two deliverables results in no change in revenue recognition since delivery of the two services occurs over the same time period.

Advertising revenue is recognized over the period in which the advertisements are displayed on the websites or at the time the newsletter campaign is sent to its registered members.

Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Such estimates and assumptions impact, among others, the following: valuation and potential impairment associated with intangible assets and estimates pertaining to the valuation allowance for deferred tax assets due to continuing, and expected future operating losses.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates, and those differences could be material.

Intangible Assets - The Company's intangible assets consist of website development costs and domain names.

The Company accounts for website development costs in accordance with Accounting for Website Development Costs, wherein website development costs are segregated into three activities:

1) Initial stage (planning), whereby the related costs are expensed.

2) Development (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures.

3) Post-implementation (after site is up and running: security, training, admin), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality.

Amortization is provided utilizing the straight-line method over the three year estimated useful lives of these assets.

Domain names are not being amortized as they are determined to have indefinite lives.

Intangible assets are reviewed annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no impairment charges taken during the three months ended September 30, 2013 and 2012, and since inception.

Results of Operations - Three months ended September 30, 2013 compared to September 30, 2012

Revenue for the three months September 30, 2013, was $11,011. There was no revenue in September 30, 2012.

Net loss for the three months ended September 30, 2013, was approximately $1.1 million or approximately $1.02 per share (basic and diluted) as compared to approximately $400,000, or approximately $1.49 per share (basic and diluted), for the three months ended September 30, 2012. This increase in net loss of approximately $700,000 was primarily due to increases in marketing, advertising, professional fees and payroll costs.

Operating expenses for the three months ended September 30, 2013, were approximately $1.1 million compared to approximately $400,000 in operating expenses for the three month ended September 30, 2012. Operating expenses for the three months ended September 30, 2013, consist of approximately $300,000 of professional and consulting fees, approximately $ 400,000 of payroll expenses, approximately $200,000 of marketing, and approximately $200,000 of general and administrative expenses. This is compared to operating expenses for the three months ended September 30, 2012, of $400,000, which consist of approximately $200,000 of professional and consulting fees, approximately $100,000 of payroll expenses, approximately $30,000 of advertising and marketing expenses, and $80,000 of general and administrative expenses. The majority of these increases can be attributed to the start up of operations, launching the first niche site
- openreq.com - and raising capital.

Liquidity and Capital

At September 30, 2013, we had cash of $34,312 as compared to $214,483 at June 30, 2013. The working capital deficit at September 30, 2013, was $481,257 compared to $17,916 at June 30, 2013, a decrease of $463,341. The decrease is primarily attributable to the operating net loss of approximately $1.1 million, and an increase in cash raised through exercise of warrants for common stock of approximately $60,000, sale of subsidiary common stock and warrants for approximately $600,000.

For the three months ended September 30, 2013, cash used in operating activities was approximately $800,000 as compared to approximately $600,000 for the three months ended September 30, 2012. Our primary uses of cash from operating activities for the three months September 30, 2013, were losses from operations of approximately $1.1 million.

Net cash used in investing activities for the three months ended September 30, 2013, was approximately $14,000, predominantly from the purchase of property and equipment and intangible assets. This compares with net cash used in investing activities of approximately $257,000 for the three months ended September 30, 2012, predominantly from the purchase of property and equipment and intangible assets.

Net cash provided by financing activities for three months ended September 30, 2013, was approximately $700,000, which included approximately $60,000 from the exercise of warrants, approximately $600,000 from the sale of subsidiary common stock and warrants, and $100,000 from a loan payable offset by offering costs. For the three months ended September 30, 2012, the net cash provided by financing activities was approximately $700,000, which included approximately $800,000 from the issuance of common stock offset by offering costs and the repayment of a stockholder loan.

Current and Future Financing Needs

We have stockholders' equity of approximately $200,000 at September 30, 2013, and have incurred a net loss of approximately $7.1 million since inception. Since September 30, 2013, we have raised additional capital through November 7, 2013, of approximately $200,000 through the exercise of warrants for common stock.

We have incurred negative cash flow from operations since inception and have primarily financed our operations through the sale of stock. At September 30, 2013, we had debt of $100,000 and a working capital deficit of approximately $481,000. There is substantial doubt as to our ability to continue as a going concern as stated in Note 2 of the September 30, 2013 Notes to Condensed Consolidated Financial Statements. During the three months ended September 30, 2013, we raised approximately $700,000 (net of expenses of approximately $100,000) from the issuance of our and our subsidiary's common stock, and since then we have raised an additional approximately $210,000 from the exercise of warrants for common stock. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our advertising and marketing campaign, and fees in connection with regulatory compliance and corporate governance. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. Our current negative cash flow rate is approximately $300,000 per month. We do not have sufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. If our anticipated sales for the next few months do not meet our expectations, our existing resources will not be sufficient to meet our cash flow requirements. Furthermore, if our expenses exceed our anticipations, we will need additional funds to implement our business plan. We will not be able to fully establish our business if we do not have adequate working capital so we will need to raise additional funds, whether through a stock offering or otherwise.

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