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| FNGP.OB > SEC Filings for FNGP.OB > Form 10-Q on 20-Apr-2009 | All Recent SEC Filings |
20-Apr-2009
Quarterly Report
This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our services, fluctuations in pricing for materials, and competition.
Overview
Our current operations consist of the operations of Forwant.com, a FREE online classified website launched by us on February 20, 2009, that enables users to search for a variety of items and specializes in the categories of Jobs, Housing, For Sale, Personals and Services internationally. The property also has paid premium component.
WallStreet, a financial media and advertising company that provides various financial Internet solutions, tools, content and services to individual investors, media, corporate, and financial services companies. WallStreet also provides Internet-based media and advertising services through its financial Web site www.wallst.net. Advertising on WallSt.net consists of continuous or rotating client profiles on various Web pages within WallSt.net. Delivery of these profiles is based on a certain number of impressions on WallSt.net depending on our client agreements. An impression is defined as a single instance of an advertisement being displayed. Furthermore, WallStreet provides E-mail services to its clients, which are mailings sent to a targeted list of e-mail addresses, with delivery consisting solely of transmitting the mailing to the e-mail targets. E-mail services may be purchased on a per-transmittal basis, for which revenue is recorded when the transmittal occurs, or on a fixed-fee basis in which the client receives access to a fixed number of transmittals per-month. We record the revenue on the fixed-fee basis pro-rated over the term of the client agreement.
We established our Financial Filings Corp. subsidiary to leverage WallStreet Direct, Inc.'s existing client base, by offering Edgarization services to small and mid-sized public companies. Financial Filings is a provider of news wire and compliance services to small and mid-sized publicly traded companies worldwide including preparation of registration statements, electronic filings for SEC documents (EDGAR), preparation of proxy materials, and news distribution in more than 30 languages to media outlets in more than 135 countries.
In January 2007, we acquired the trade name "The Wealth Expo" and formed a wholly owned subsidiary The Wealth Expo Inc. on June 12, 2007. The Wealth Expo is designed to provide a broad range of information on investing techniques, and tools to investors through workshops and exhibits held throughout the United States. Exhibitors at the Wealth Expo include public and private companies, franchises, financial newsletter publishers, investor education providers, and real estate companies. The Wealth Expo provides us several new revenue streams through exhibition sales, speaking presentation sales, collateral material sales, and advertising sales. Since its inception, The Wealth Expo has attracted hundreds of exhibitors and thousands of attendees from around the world.
WallStTV was launched in May 2008 and offers free access to our original video programming including the 3-Minute Press Show, Sweet Picks, the Analyst's Review, and WSNM. WSNM is also distributed through television via as a paid advertisement on the Fox Business Network. More than 15 episodes of WSNM have aired since March 2008. Our half-hour television program at Fox Business Network is also syndicated on our Web properties, allowing visitors to watch the show on the Web as well as on television. Revenue from the television program is derived from the sale of interviews to paid clients, and the sale of segments of the show where our clients' press releases are summarized. We incur production costs related to booking talent, renting studio time, and members of our production crew.
Results of Operations
Our consolidated results of operations for the three months and six months periods ended February 28, 2009 and 2008 include our wholly-owned subsidiaries WallStreet, Financial Filings, Corp., My WallStreet, Inc., and The Wealth Expo Inc.
We reported a net loss of $1,079,249 and $2,129,819 for the three months and six months periods ended February 28, 2009, respectively, compared to a loss of $1,066,379 and $1,697,699 for the same periods ended February 29, 2008, respectively. The increase in loss was principally attributable to the significant reduction in sales due to current economic downturn and increase in loss realized on sale of marketable securities in our portfolio, as more fully explained in "Operating Expenses" below.
Revenues
Revenues for the three months and six months periods ended February 28, 2009 were $241,805 and $1,076,592, respectively, compared to $2,168,747 and $4,047,640 for the same periods in 2008, respectively. Revenues decreased by $1,926,942 (89%) and $2,971,048 (137%) during the three months and six months periods ended February 28, 2009 and 2008, respectively, due to significant decrease in advertisements on our website from the current economic conditions and recent downturn in financial markets, resulting in clients not spending money on advertising.
Operating Expenses
Selling, general, and administrative expenses (S,G&A) for the three months and six months periods ended February 28, 2009 were $622,821 and $1,633,299, respectively, compared to $1,410,640 and $2,994,270 for the same periods in 2008, respectively. S,G&A expenses decreased by $787,819 (56%) and $1,360,971 (45%), respectively, during the three months and six months periods ended February 28, 2009 as compared to the same periods in 2008, primarily due to reduction in payroll costs, reduction in costs due to closure of our office in New York City, reduction in overall administrative, sales and marketing personnel due to right sizing the Company as a result of reduction in revenues, and reduction in legal costs.
Impairment of marketable securities for the three months and six months periods ended February 28, 2009 were $460,544 and $1,089,789, respectively, compared to $1,469,547 and $2,331,450 for the same periods ended in 2008, respectively. Impairment expense was recorded because the market value of the securities we received as compensation for services declined in excess of 50% of their market value. This reduction in our judgment appeared to be other than temporary reduction in the fair value of the marketable securities. Therefore, we took a conservative approach of recording the impairment expense. Furthermore, to safeguard us with impairments of marketable securities, we have revised our contractual terms on agreements with our clients which provides that, in the event during the term of the agreement, the share bid price of client securities decline by more than 10% of the share bid price on the date of execution of the agreement, the client agrees to issue additional shares of their common stock to us in order to make up the deficiency caused by the reduction in the value of their stock. Implementation of this policy further helped us reduce our impairment expense during the three months and six months periods ended February 28, 2009.
Depreciation expense for the three months and six months periods ended February 28, 2009 was $15,136 and $30,271, respectively, compared to $13,298 and $23,914 for the same periods in 2008, respectively.
Interest expense for the three months and six months periods ended February 28, 2009 was $2,292 and $9,803, respectively, compared to $17,720 and $$65,260 for the same periods in 2008, respectively. Interest expense decreased by $15,428 (87%) and $55,457 (357%) for the three months and six months periods ended February 28, 2009 resulting from the conversion in January 2008 of the $3,000,000 promissory notes due to an officer into 15,000,000 shares of common stock. Interest was charged on the $3,000,000 promissory notes we executed in January 2005 due and payable in January 2010.
Realized loss on sale of marketable securities for the three months and six months periods ended February 28, 2009 was $220,265 and $438,503, respectively, compared to $323,921 and $325,645 for the same periods in 2008, respectively. We sold marketable securities held in our possession and realized losses on their sale to fund our operating costs. Unrealized gain for the six months period ended February 28, 2009 was $929,586 compared to $1,567,320 for the same period in 2008. Unrealized gain resulted from the increase in market value of the marketable securities held at February 28, 2009 and August 31, 2008, respectively.
Liquidity and Capital Resources
Cash and cash equivalents were $13,788 at February 28, 2009 compared to $72,934 at February 29, 2008. As shown in the accompanying consolidated financial statements, we recorded a loss of $2,129,819 for the six months period ended February 28, 2009 compared to a loss of $1,697,699 for the same period in 2008. Our current liabilities exceeded our current assets by $2,164,398 at February 28, 2009 and net cash used in operating activities for the six months ended February 28, 2009 was $668,058. These factors and our ability to meet our debt obligations from current operations, and the need to raise additional capital to accomplish our objectives raises doubt about our ability to continue as a going concern.
We expect significant capital expenditures during the next 12 months, contingent upon raising capital. These anticipated expenditures are for software development, assets additions, administrative overheads and working capital requirements. We do not have sufficient funds to conduct our operations for more than a month and we will need an additional $2,000,000 to fund our anticipated operations for the next 12 months, depending on revenues from operations. We have no contracts or commitments for additional funds and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.
We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.
Whereas we have been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of our planned service development and marketing efforts, any of which could have a negative impact on our business and operating results. In addition, insufficient funding may have a material adverse effect on our financial condition, which could require us to:
- curtail operations significantly;
- sell significant assets;
- seek arrangements with strategic partners or other parties
that may require the company to relinquish significant
rights to products, technologies or markets; or
- explore other strategic alternatives including a merger or
sale of our company.
We have been able to meet our obligations through liquidation of our "Market Securities" portfolio; however, we have missed opportunities to maximize our value, due to the untimely demands for cash not matching with the highest market value. The components of the current liabilities specifically the "Deferred Revenue" classification, reflects a more informative view. As we enter into sundry contracts for services with our customers, contractually the revenue is earned upon execution of the agreement. We are in compliance with GAAP and amortize this revenue stream over the life of the contract, resulting in a non-cash reduction of this liability.
Operating Activities
Net cash used in operating activities for the six months period ended February 28, 2009 was $668,058 resulted due to decrease in receivables of $9,565, decrease in other current assets and deposits of $24,274, increase in accounts payable of $247,891, increase in accrued expenses and other liabilities of $162,935, and increase in deferred revenues of $12,059.
Investing Activities
Net cash provided by investing activities for the six months period ended February 28, 2009 was $306,070 from sale of marketable securities.
Financing Activities
Net cash provided by financing activities for the six months period ended February 28, 2009 was $302,464 from the sale of common stock amounting to $302,464.
As a result of the above activities, we experienced a net decrease in cash of $59,524 for the six months period ended February 28, 2009. Our ability to continue as a going concern is still dependent on our success in obtaining additional financing from investors through the sale of our securities.
Application of Critical Accounting Policies
Marketable Securities and Impairments
Our investments in securities are classified as available-for-sale and, as such, are carried at fair value based on quoted market prices. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder's equity. Realized and unrealized gains and losses for securities classified as available-for-sale are included in the statement of operations and comprehensive gain, respectively.
We review, on a quarterly basis or more frequently if warranted by circumstances, the carrying value of the marketable securities we receive from our customers for providing services. We record impairment expense each quarter when the market value of the securities received show a consistent decline over 90 to 180 days, and the carrying amount of the marketable securities exceeds its fair value by 50% or more, and is deemed not recoverable. As such, we record on a quarterly basis in our financial statements the impairment loss for the difference between the carrying amount of the marketable securities and their fair value.
At the end of each quarter, we evaluate the marketable securities that show a consistent decline in market value than the cost over a period of 90 to 180 days for any possible impairment. We evaluate various factors relating to the securities one of which is the length of the time and the extent to which the market value has been less than cost. Our accounting policy is consistent with SFAS 115 and SAB Topic 5M, whereby we record impairment expense each quarter when the market value of the securities show a consistent decline over 90 to 180 days, and the cost of the marketable securities exceeds its fair value by a material amount (50% or more), and is deemed not recoverable. In those instances where impairment charges have been taken, the cost of the marketable securities on a quarterly basis is brought down to the market value of securities in our financial statements. The marketable securities are written down to zero only if the marketable securities are either de-listed or not traded. However, after an impairment for certain securities is recorded in a period, further impairment is recorded if the fair value of the securities in future period falls substantially (more than 50%) below the cost (after impairment adjustment) and if the decline in market value is consistent for a period of time. Accordingly, after the first impairment, we may record an unrealized loss for some period till we are convinced that there is further impairment in the marketable securities.
Revenue Recognition
We record revenues on the basis of services provided to our client for a fixed determinable fee pursuant to a contractual agreement. In lieu of providing services, we receive from our clients' cash and/or securities, as compensation for providing such services.
Our primary source of revenue is generated from providing Internet based media and advertising services and a full array of customized investor awareness programs to small and medium sized companies through its financial websites www.wallst.net and my.wallst.net. The services include audio and video production of senior management interviews, text and display advertising, press releases, e-mail marketing, and promotion across our network of web sites. These services are provided by our subsidiaries WallStreet Direct, Inc. and Digital WallStreet, Inc. Revenues from Internet based media and advertising services are recognized and recorded when the performance of such services are completed. We adhere to the guidelines established under Staff Accounting Bulletin 104 whereby, we execute a contractual agreement with the client for a fixed fee to perform services, delivery of services has occurred when we performed the contracted services, and collectability of the fees has occurred when we receive cash and/or marketable securities in satisfaction for services provided.
We provide news wire and compliance services to small and medium size publicly traded companies including preparation of registration statements, electronic filings and reporting of SEC documents (EDGAR), preparation of proxy materials and news distribution. Such services are provided by our subsidiary Financial Filings Corp. Revenues are recognized and recorded when the performances of such services are completed. We adhere to the guidelines established under Staff Accounting Bulletin 104 whereby, we execute a contractual agreement with the client for a fixed fee to perform services, delivery of services has occurred when we completed the performed the contracted services, and collectability of the fees has occurred when we receive cash and/or marketable securities in satisfaction of services provided.
We provide a broad range of information on investing techniques and education tools to investors through workshops and exhibits. Our subsidiary, The Wealth Expo, provides us revenue streams through exhibition sales, speaking presentation sales, collateral material sales and advertising sales. Revenues from Wealth Expo services is recognized and recorded when the performance of such services are completed. We adhere to the guidelines established under Staff Accounting Bulletin 104 whereby, we execute a contractual agreement with the client for a fixed fee to perform services, delivery of services has occurred when we completed the performed the contracted services, and collectability of the fees has occurred when we receive cash and/or marketable securities in satisfaction of services provided.
Payments received in advance of services provided, are recorded as deferred revenue.
Stock-Based Compensation
We adopted SFAS No. 123 (Revised 2004), Share Based Payment ("SFAS No. 123R"), under the modified-prospective transition method on January 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all share-based payments granted prior to and not yet vested as of January 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for our stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related interpretations.
Issuance of Shares for Service
We account for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements". This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for our fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on financial statements.
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after our fiscal year beginning October 1, 2009. While we have not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on our consolidated financial statements, we will be required to expense costs related to any acquisitions after September 30, 2009.
FASB Staff Position on FAS No.115-1 and FAS No. 124-1 ("the FSP"), "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," was issued in November 2005 and addresses the determination of when an investment is considered impaired, whether the impairment on an investment is other-than-temporary and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of other-than-temporary impairments on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance on Emerging Issues Task Force (EITF) Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary, must be recognized in earnings at an amount equal to the entire difference between the securities cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also required that an investor recognize other-than-temporary impairment losses when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The adoption of this statement will not have a material impact on our consolidated financial statements.
In March 2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities". The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity's financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring . . .
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