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MOMO > SEC Filings for MOMO > Form 10-K on 15-Apr-2014All Recent SEC Filings

Show all filings for MOPALS.COM, INC.

Form 10-K for MOPALS.COM, INC.


Annual Report

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following is management's discussion and analysis of the consolidated financial condition and results of operations of, Inc. for the fiscal years ended December 31, 2013 and 2012. The results of the Mortgage Brokerage Business is reported as discontinued operations following the Mortgage Brokerage Privatization that was transacted on March 26, 2013. The following information should be read in conjunction with the audited consolidated financial statements for the period ending December 31, 2013 and notes thereto appearing elsewhere in this Form 10K.

Discontinued Operations

In 2011, Holdings, Inc. management had been actively exploring restructuring options to reduce Company overhead expenses. Based upon the 2011 year-end financial results, the 2012 financial results of operations and:

i. current economic conditions and the ongoing loss of cash from operating activities;
ii. the high costs associated with driving a high-service value proposition in an eroding margin brokerage marketplace in Canada;
iii. current equity market conditions not being favorable for a publicly traded mortgage brokerage operation limiting the liquidity of our stock and Company capitalization; and
iv. the increasingly high costs associated with administering a publicly traded company,

Our Board of Directors had decided to privatize the Mortgage Brokerage Business through a sale to a private company under common control. In an effort to reduce overhead costs, and in exchange for the provision of ongoing working capital deficit funding, in late 2010, all human resources for the Company were consolidated into a related party company who provided back office corporate services to the Company on a cost allocation basis. Over 2012, in an effort to further reduce overhead expenses and in preparation for the inevitable Mortgage Brokerage Privatization, all brokerage services including mortgage brokerage licensure, branding, mortgage agent back office operations, training and technology platforms were transitioned to the same related party company in the latter half of 2012.

As part of the contemplated Mortgage Brokerage Privatization of the Company, the following occurred:

i. the Company's subsidiaries have not renewed their provincial mortgage brokerage licensure in the various jurisdictions where they operate. As at December 31, 2012, the Company's subsidiaries had no active licenses empowering them to operate as a mortgage brokerage;
ii. select individual mortgage agents were offered the opportunity to operate under the licensure of a related party company;
iii. in late 2012, all human resources for the Company were consolidated into a related party company that provided back office corporate services to the Company on a cost allocation basis. As of December 31, 2012, there were two part time employees.

The primary activity that currently takes place in our Company in the latter half of 2012 relates to: activities related to the contemplated Mortgage Brokerage Privatization; activities related to the administration of the publicly reporting entity; and administration of the business including management of trades payables and any outstanding legal claims.

On March 26, 2013, the Company entered into an Agreement of Sale, pursuant to which the Company transferred to Canada Inc., a Canadian Corporation under the control of the Company Principal Shareholder, all of the Company's equity interest in the Company's former Mortgage Brokerage Business and Canada Inc. agreed to assume any and all liabilities associated with the Company's former Mortgage Broker Business, including, but not limited to all commitments, liabilities and contingent liabilities, effective immediately prior to closing of the Share Exchange. Pursuant to the Agreement of Sale, the Company Principal Shareholder forfeited all rights to any monies owed to the Company Principal Shareholder by the Company associated with a shareholder loan of approximately $25,000.

Also on March 26, 2013, the Company entered into the Exchange Agreement by and among (i) the Company, (ii) MoPals (Nevada); (iii) the Company Principal Shareholder and (iv) and the MoPals Nevada Shareholders. Pursuant to the terms of the Exchange Agreement, the Company acquired 100% of the issued and outstanding equity securities of MoPals (Nevada) in exchange for the issuance of 50,000,000 shares of the Company's Common Stock.

On March 26, 2013, articles of amendments were filed with the State of Delaware changing the name of our Company to, Inc. pursuant to the Spin Out and Cancellation and subsequent execution of the Exchange Agreement., Inc. is a development stage internet and mobile brand loyalty social media company.

Results of Operations (Continued Operations)

Our Company had the following comparative results from operations for the fiscal years ended December 31, 2013 and 2012:

1. No reported gross revenue in 2013 or 2012.
2. Operating expenses in 2013 were $1,691,195 as compared with $163,237 in 2012; and,
3. Loss from operations of $1,691,195 in 2013 as compared to a loss of $163,237 in 2012.

Revenue Trend Analysis

Our development stage Company had no reported revenue in 2013 or 2012.

Expense Trend Analysis

It is too early in the operation of our Company to identify any significant expense trends other than our expenses have grown in our first full year of operation in 2013 at $1,691,195 as compared to our first five months of operations in 2012 (inception of August 7, 2012) at $163,237. The expense growth is related to the continued development of our Company as we bring our service to market. Since inception, the Company has incurred total operating expenses of $1,854,432.


At December 31, 2013, we had $437,650 in cash and $155,830 in prepaid expenses for a total of $593,480 in current assets. Comparatively, at December 31, 2012, we had $175,799 in cash and $32,317 in prepaid expenses for a total of $208,116 in current assets.

At December 31, 2013, we had $181,129 in accounts payable and accrued liabilities, $148 in accrued MoCoins™ liability, $14,924 in accrued stock-based compensation and $652,633 in loans from shareholders for a total of $848,834 in liabilities. Comparatively as of December 31, 2012, the Company had $20,348 in accounts payable and accrued liabilities and $364,315 in loans from shareholders for a total of $384,663 in total liabilities.

Management makes the following comments regarding the most significant factors affecting Company liquidity and their measured trends over the reporting period as compared to 2012:

a) Cash and cash equivalents associated with continuing operations has grown 149% from 2012 to $437,650 in 2013. This is associated with several subscriptions for shares that have been executed in 2013.
b) Accounts payable and accrued liabilities grew 790% in 2013 over 2012 to $181,129. This is associated with a payroll deduction at source tax accrual of approximately $120,000, board of director fee accruals of approximately $32,500 and minor amounts associated with trades payable and insurance premium accruals.
c) Stock-based compensation accruals fluctuate year to year. The accrual is valued based on stock prices at the end of the period, grant prices and vesting terms for which the Company has no direct influence. Thus, it is difficult to analyze related trends. The Company anticipates that it will continue to negotiate stock-based compensation arrangements to maximize working capital resources.

Capital Resources

Our Company had no reported gross revenue in 2013 or 2012.

The Company realized a net cash loss from operating activities during the reporting period of $1,248,597. The Company increased its total cash and cash equivalent position at the end of 2013 to $437,650 from $175,799 the previous year as a direct result of a net cash increase of cash flows into the Company of $1,498,012 as a result of financing activities and $3,711 of cash used in investing activity. As at December 31, 2013, with no means to generate revenue and until such time as our operating expenses are augmented with revenue following our service launch, the Company relies upon loans from shareholders and the purchase and sale of common stock via investor subscription agreements to fund our development stage operations. There is no guarantee that there will be a market for the Company's common stock, an ability to raise investment capital, or an ability to procure shareholder loans in the future to fund our future operations.

Off-Balance Sheet Arrangements



We do not believe that inflation has had a material effect on our Company's results of operations.

Significant Accounting Policies and New Pronouncements

The following are the most significant accounting policies that have a substantive impact on the underlying discussions and analysis:

Payable to Loyalty Program Partners

Payable to loyalty program partners includes amounts owing to these partners for loyalty currency purchased by the Company as a principal or as an agent collected through ecommerce services for retailing, wholesaling and other loyalty currency services transactions with end users.

Stock-based Compensation

The Company maintains a stock-based compensation plan under which incentive stock options to buy common stock may be granted to directors, officers and employees. Pursuant to ASC 718, the Company recognizes expense for its stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of the grant using the Black-Scholes option pricing model, that require the input of highly subjective assumptions. Measured compensation cost is recognized ratably over the vesting period of the related stock-based compensation award. The amount recognized as expense is adjusted to reflect the number of stock options expected to vest. When exercised, stock options are settled through the issuance of common stock and are therefore treated as equity awards. The expected volatility of our commons stock is estimated based on the historical performance of the stock.

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