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DICO, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 20, 2014

Our product line consists of a wide assortment of loose diamonds of a variety of sizes, cuts, and quality. We have been selling our product line via in house sales. We have an oral agreement with Mr. David Lazar, our chief operating officer, in which he has agreed to loan up to $50,000 to the registrant for working capital. These loans bear no interest and are to be repaid on demand.

There is no guarantee that Mr. Lazar will provide this funding as agreed. We currently have active business relationships with several suppliers, wholesalers, and distributors in both Los Angeles and in Israel. There can be no certainty that we will be able to sell our product line to any other internet retailers to gain the exposure we are looking for.

Our performance will be significantly affected by changes in general economic conditions and, specifically, shifts in consumer confidence and spending. Additionally, our performance will be affected by competition from regional, national and international wholesalers and distributors, general merchandisers, internet retailers and warehouse clubs. Management believes that as the jewelry industry continues to consolidate, competition with respect to price will intensify. Such a heightened competitive pricing environment will make it increasingly important for us to successfully distinguish us from competitors based on product, quality and superior service and operating efficiency.

The jewelry industry is seasonal in nature and we believe we will earn a significant portion of earnings generated during the third fiscal quarter holiday selling season.

We are currently not aware of any other known material trends, demands, commitments, events or uncertainties that will have, or are reasonable likely to have, a material impact on our financial condition, operating performance, revenues and/or income, or results in our liquidity decreasing or increasing in any material way.

Plan of Operations

We will execute our marketing strategy to enhance customer awareness and appreciation of our brand, expand distribution channels, and ensure customer satisfaction through customer service.

Our current method of distribution is to send marketing materials to prospective buyers, and to utilize traveling salesmen to bring our product to prospective buyers along their routes. These salesmen work on commission. We currently only have one salesman working for us. We do not have any written agreements with our salesman, nor do we intend to in the future. We intend to expand our distribution channels by incorporating more traveling salesmen with different sales routes.


Our current cash balance is estimated to be sufficient to fund our current operations for 3 months. We are attempting to increase the sales to raise much needed cash for the remainder of the year, which will be supplemented by our efforts to raise cash through the issuance of equity securities. It is our intent to secure a market share in the diamond industry which we feel will require additional capital over the long term to undertake sales and marketing initiatives, and to manage timing differences in cash flows.

Liquidity and Capital Resources

For the period from October 30, 2013 (inception) through March 31, 2014, we did not pursue any investing activities.

For the three months ended March 31, 2014, we received proceeds from a related party loan of $8,000. As a result, we had net cash provided by financing activities of $8,000 for the three months ended March 31, 2014.

For the cumulative period from October 30, 2013 (inception) to March 31, 2014, we received $300 from proceeds from the issuance of common stock and $10,390 as proceeds from a related party loan. As a result, we had net cash provided by financing activities of $10,690 for the period.

We had cash and cash equivalents of $7,100 on hand at March 31, 2014. If additional funds are required in connection with our present planned business operations or for Exchange Act filings or other expenses, such funds may be advanced by management or principal stockholders. We are currently funded by our management.

Our liquidity has improved with the commencement of sales and the generation of revenues. However, any delay in sales will negatively affect our liquidity as we continue to purchase additional merchandise.

Results of Operations

Currently the registrant is purchasing merchandise. To date, we have generated $2,100 in revenue. Our purchase terms are 60 days and our sale terms are net 30 days.

For the three months ended March 31, 2014, we earned $2,100 in revenues. Our cost of sales was $1,712, resulting in a gross profit of $388. We paid filing fees of $26 and other costs of $30. We paid auditor's fees of $3,500. As a result, we had a net loss of $3,168 for the three months ended March 31, 2014.

For the cumulative period from October 30, 2013 (inception) through March 31, 2014, we earned revenues of $2,100. Our cost of sales was $1,712, resulting in a gross profit of $388. We paid filing fees of $26 and other costs of $62. We paid auditor's fees of $3,500 and setup costs of $390. As a result, we had a net loss of $3,978 for the period.


The costs incurred for the period from October 30, 2013 (inception) to December 31, 2013 were primarily the costs associated with a startup company.

We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources except for the agreement with our chief operating officer, Mr. David Lazar.

Going Concern

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Our auditor has issued a going concern opinion, raising substantial doubt about our ability to continue as a going concern. In the near term, Dico expects operating costs will exceed funds generated from operations. As a result, we expect to continue to incur operating losses and may have insufficient funds to grow its business in the near future. We can give no assurance that it will achieve profitability or be capable of sustaining profitable operations. As a result, operations in the near future are expected to continue to use working capital.

For the next six months, we shall only concentrate on the marketing of our products through our in house sales representative. We currently have an oral arrangement with Mr. David Lazar, our chief financial officer, in which he will lend the registrant up to $50,000 to be used as working capital. Should this amount prove to be insufficient at a future date, we may seek to raise additional funds through public or private placement offerings.

Critical Accounting Policies and Estimates

Management's discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses and the valuation of our assets and contingencies. We believe our estimates and assumptions to be reasonable under the circumstances. However, actual results could differ from those estimates under different assumptions or conditions. Our financial statements are based on the assumption that we will continue as a going concern. If we are unable to continue as a going concern we would experience additional losses from the write-down of assets.

We are an "emerging growth company" as defined in the JOBS Act of 2012. Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those


standards would otherwise apply to private companies. However, we are choosing to opt out of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

For as long as we remain an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company."

We will remain an "emerging growth company" for up to five years, although we would cease to be an "emerging growth company" prior to such time if we have more than $1 billion in annual revenue, more than $700 million in market value of our common stock is held by non-affiliates or we issue more than $1 billion of non-convertible debt over a three-year period.

Off-Balance Sheet Arrangements

The registrant had no material off-balance sheet arrangements as of March 31, 2014.

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Source: Edgar Glimpses

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