Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto appearing elsewhere in this Report on Form 10-Q as well as our other SEC filings.
Overview
We were incorporated on February 23, 2005 under the laws of the state of Nevada. We have had several changes in our officers and directors since inception up to March 9, 2010 when Mr. Kam Shah became our chairman of the board of directors, president, secretary, treasurer and chief executive officer. On June 28, 2013, the Company changed its name from Webtradex International Corporation to ZD Ventures Corporation (ZDV, the Company).
We do not have any subsidiaries. Our principal office is located at 47 Avenue Road, Suite 200, Toronto, Ontario, Canada M5R 2G3. Our telephone number is (416) 929-1806. Our fiscal year end is March 31.
Effective June 15, 2014, the Company leased an office space of approximately 180m2 in Barcelona Spain. The office will be used by the Companys consultants to monitor the Companys investments and development of BWished web site and other future businesses that the Company may get involved in Spain.
The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes of the Company for the three months ended June 30, 2014 and the audited financial statements and notes for the year ended March 31, 2014.
Business Plan and Strategy
ZDVs current business strategy involves, primarily, developing a social website ( BWished) aimed at driving traffic for various sellers of products and services which can generate revenue through commissions from the associated sellers and advertisements, as well as other related sources for the Company and secondarily participating in the initial investment in new and emerging companies through a Spanish investment club in which the Company became a member in January 2014.
The Company is a developmental stage corporation and has not yet generated or realized significant revenues from business operations
Results of operations
The Company did not have any operating income since its inception on February 23, 2005 through June 30, 2014. For the period from inception through to the quarter ended June 30, 2014, the Company recognized a net loss of $261,191.
Operating expenses for the three months ended June 30, 2014, increased significantly from those for the three months ended June 30, 2013. The increase of approximately $50,000 is attributable to legal and consulting fees of approximately $ 40,000 charged for the first time during the quarter under review.
Professional Fees
Professional fees for the three months ended June 2014 were $16,818 compared to the fees of $4,000 for the three months ended June 30, 2013. The fees for the three months ended June 30, 2014 included legal fee of approximately $ 12,000 charged by a lawyer in Spain which were due to various investment activities initiated during the quarter. There were no such legal fees during the three months ended June 30, 2013.
Consulting fee
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Consulting fee for the three months ended June 30, 2014 included $ 6,000 charged by the CEO, approximately $15,000 charged by a consultant who owns approximately 31.36% equity in the Company and is based in Barcelona, Spain and provides investor relation services and overseas BWished development. The balance of the consulting fee of approximately $6,000 was charged by a non-related consultant in Barcelona, Spain, providing administration and web site development services.
No consulting fees or expenses were paid during the three month period ended June 30, 2013.
Rent
In June 2014, the Company signed a five-year lease on an approximately 180 square metre of office premises in Barcelona , Spain at a monthly lease of
2,291.74, subject to 50% reduction for the first seven months. The lease is however, cancellable by the Company after twelve months.
Rent costs of $6,194 for the three months ended June 30, 2014 included rent of $1,636 , commission of $3,927 charged by the real estate broker and $632 incurred in painting and minor work done on premises prior to moving in.
In addition, the Company also paid legal and additional rent deposit of $12,974, which is included under assets.
There were no rental costs during the three months ended June 30, 2013.
Interest Expense
Interest expense for the three month period ended June 30, 2014 totalled
$13,712, and was $4,051 for the three months ended June 30, 2013.
Interest of $13,712 consisted of interest of $1,247 at 5% on convertible debt and amortized amount of $12,466 representing the convertible feature of the convertible debt for the three months ended June 30, 2014.
Interest of $4,051 for the three months ended June 30, 2013 related to interest charged on Note payable for that period. Interest charge on the Note payable was discontinued effective July 17, 2013 under a new arrangement with the Note holder.
Financial Condition, Liquidity and Capital Resources
For the three months ended June 30, 2014 and 2013, the Company has not generated cash flow from operations. Consequently, the Company has been dependent upon its shareholders and associates to fund its cash requirements.
Our present material commitments are professional and administrative fees and expenses associated with rented premises and the preparation of our filings with the U.S. Securities and Exchange Commission (SEC) and other regulatory requirements and the debt associated with the acquisition of BWished.
As of June 30, 2014, the Company had cash of $5,304. The Company's total assets decreased marginally from $576,931 as at March 31, 2014 to $568,744 as at June 30, 2014. Total liabilities increased from $573,566 as of March 31, 2014 to $642,472 as of June 30, 2014. These increases are attributable to additional borrowing to pay expenses.
The Company is seeking to raise capital to implement the Company's business strategy. In the event additional capital is not raised or alternatively debt financing is not available from our shareholders, the Company may seek a merger, acquisition or outright sale.
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Investments
On January 27, 2014, the Company acquired a membership to a private investors club in Barcelona, Spain, Necotium Investors Club (Club). The Club has been created as a platform to promote, channel and monitor investment in early stage companies with strong growth potential. The Company will thus have access to investment opportunities in entities with high growth potentials.
Up to June 30, 2014, the Company participated in two such investments:
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Mailtrack Company SL
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$27,400
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Mobile Media Content
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20,550
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$47,950
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The Companys indirect equity interest in both the above entities is under 5%. The Clubs review committee will monitor these investments on behalf of its members and will recommend their disposal at an appropriate time. Approximately 80% of the capital gain on disposal of investments will be distributed to the participating members in proportion to their invested amount. The remaining 20% is retained by the Club as a bonus for the managers of the Club.
The investments are considered as available for sale and are stated at their fair value. The fair value consideration will be based on a quarterly report to be received from the Club manager on each of the investments. As at June 30, 2014, the carrying value is considered to be equal to the fair value.
Going Concern
The accompanying financial statements have been prepared assuming that we will continue as a going concern. We have an accumulated deficit of $261,191. The Company realized a net loss from operations of $65,711 and $13,046, respectively, for the three months ended June 30, 2014 and 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Development of Beta one version of BWished web portal to its commercial launch will require further funding of at least $ 100,000 plus the Company will need operating costs in connection with its Spanish office, until BWished and other investments can start generating revenue. The Company has so far been funded by its shareholder and is currently negotiating with others to raise equity funding needed. However, there is no guarantee that such negotiations will succeed or result in the availability of the required funding. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Companys financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 4 - Controls and Procedures
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive and Financial officer to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer who is also our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this From 10-Q. Based on that evaluation, the Company's principal executive and financial officer concluded that due to the material weakness discussed below, the Company's disclosure controls and procedures were not effective, as of the end of the quarter ended March 31, 2014, to provide reasonable assurance that information required to be disclosed in the Companys reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control our financial reporting as of March 31, 2014, the Company determined that the following items constituted material weaknesses:
The Company does not have policies and procedures in place to ensure the timely review, disclosure and accurate financial reporting for significant agreements and transactions.
The Company does not have duel controls as management consists of only one person who acts as CEO and CFO on a part time basis. The Company also does not have an independent audit committee in place, which would provide oversight of the Companys officers, operations and financial reporting function.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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