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BIOLOG, INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

July 9, 2014

GOING CONCERN QUALIFICATION

Several conditions and events cast substantial doubt about the Company's ability to continue as a going concern. The Company has incurred net losses of approximately $170,930 from inception through December 31, 2012 and had a working capital deficit of $135,280 as of December 31, 2012 and requires additional financing in order to finance its business activities on an ongoing basis. The Company's future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding a merger candidate and the pursuit of business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses. Management believes that actions presently being taken to revise the Company's operating and financial requirements provide them with the opportunity to continue as a going concern. At December 31, 2011, we had $434 cash on hand, and an accumulated deficit of $130,956. At December 31, 2012, we had $150 cash on hand, and an accumulated deficit of $170,930. See "Liquidity and Capital Resources."

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CRITICAL ACCOUNTING POLICIES & ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our balance sheet, and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition Policies



The Company recognizes revenues in accordance with FASB ASC 605. As of the year ended December 31, 2012, there was no deferred revenue. The Company derives its primary revenue from the sources described below, which includes dial-around revenues, operator service revenue, coin collections, telephone equipment repairs, and sales. Other revenue generated by the company includes sales commissions.

The Dial Around revenue is recognized when the billing and collection agent of the Company, APCC, calculates and compensates the Company for the use of the payphone on a quarterly basis by billing the actual party's long distance carrier that received the calls. The date of the Dial Around revenue recognition is determined when this compensation is collected and deposited into the Company's bank account.

The Operator Service revenue is recognized when the collection agents of the Company, Legacy Long Distance and US Intercom calculates and compensates the Company for the use of operator services on a monthly basis. The date of the Operator Service revenue recognition is determined when this compensation is collected and deposited into the Company's bank account.

Coin revenues are recorded in an equal amount to the coins collected.

Revenues on commissions, telephone equipment and sales are realized when the services are provided and payment for such services is deemed certain.

Off- Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Cash and Cash Equivalents



For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents to the extent the funds are not being held for investment purposes.

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COSTS RELATED TO OUR OPERATION

The principal costs related to the ongoing operation of our payphones include telecommunication costs, commissions and depreciation. Telecommunication expenses consist of payments made by us to local exchange carriers and long distance carriers for access to and use of their telecommunications networks and service and maintenance costs. Commission expense represents payments to owners or operators of the premises at which a payphone is located.

LIQUIDITY AND CAPITAL RESOURCES

It is the belief of management that sufficient working capital necessary to support and preserve the integrity of the corporate entity will be present. However, there is no legal obligation for either management or significant stockholders to provide additional future funding. Should this pledge fail to provide financing, we have not identified any alternative sources. Consequently, there is substantial doubt about our ability to continue as a going concern.

We have no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities prior to the location of a merger or acquisition candidate. Accordingly, there can be no assurance that sufficient funds will be available to us to allow us to cover the expenses related to such activities.

Our need for capital may change dramatically because of any business acquisition or combination transaction. There can be no assurance that we will identify any such business, product, technology or company suitable for acquisition in the future. Further, there can be no assurance that we will be successful in consummating any acquisition on favorable terms or that we will be able to profitably manage the business, product, technology or company we acquire.

Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we might seek to compensate providers of services by issuances of stock in lieu of cash.

At December 31, 2011, we had $434 cash on hand, $354 in accounts receivable and an accumulated deficit of $130,956. At December 31, 2012, we had $150 cash on hand, $705 in accounts receivable and an accumulated deficit of $170,930. Our primary source of liquidity for the current quarter has been from loans from related parties. This includes Joseph C. Passalaqua, the President and principal stockholder, Mary Passalaqua spouse of Joseph Passalaqua, and Cobalt Blue LLC of which Mary Passalaqua is President. As of December 31, 2012 we have convertible notes payable to Joseph C. Passalaqua, Mary Passalaqua, and Cobalt Blue LLC in the amount of $59,250. These notes bear a simple interest rate of 8% per annum and are payable upon demand. As of December 31, 2012 the accrued interest on these notes is $8,365.

Net cash used in operating activities was $20,107 and $18,533 during the years ended December 31, 2012 and 2011, respectively.

Net cash provided by investing activities was $0 during the years ended December 31, 2012 and 2011.

Net cash provided by financing activities was $19,823 and $18,939 during the years ended December 31, 2012 and 2011, respectively.

To date, we have had minimal revenues; and we require additional financing in order to finance our business activities on an ongoing basis. Our future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding a merger candidate and the pursuit of business opportunities. We are actively pursuing alternative financing and have had discussions with various third parties, although no firm commitments have been obtained to date. In the interim, shareholders of the Company have committed to meet our minimal operating expenses. We believe that actions presently being taken to revise our operating and financial requirements provide them with the opportunity to continue as a "going concern," although no assurances can be given.

18 NET LOSS FROM OPERATIONS



The Company had a net loss of $170,930 for the period from inception through December 31, 2012. The company had net loss of $39,974 for the year ended December 31, 2012 as compared to a net loss of $34,205 for the year ended December 31, 2011.

CASH FLOW



Our primary source of liquidity has been cash from shareholder loans.

WORKING CAPITAL



The Company had total current assets of $788 and total current liabilities of $97,094 resulting in a working capital deficit of $96,306 as of December 31, 2011. We had total current assets of $855 and total current liabilities of $136,135, which results in working capital deficit of $135,280 as of December 31, 2012.

FOR THE YEAR ENDED DECEMBER 31, 2012 COMPARED TO THE YEAR ENDED DECEMBER 31, 2011

REVENUES



Our total revenue increased by $83, from $7,009 for the year ended December 31, 2011 to $7,092 for the year ended December 31, 2012.

Our coin call revenue was $541 for the year ended December 31, 2012 and $827 for the year ended December 31, 2011.

Our non-coin call revenue, or commission income, which is comprised primarily of "dial around" revenue, star 88 commission revenue and operator service revenue, was $356 for the year ended December 31, 2012 and $555 for the year ended December 31, 2011. The FCC requires the sellers of long distance toll free services to pay the payphone owner $0.494 cents per "dial-around" call. These funds are remitted quarterly through a service provided by the American Public Communication Council (APCC).

Our local service revenue which is comprised primarily of service for payphone customers was $6,195 for the year ended December 31, 2012 and $5,627 for the year ended December 31, 2011. This is the revenue from monthly invoices billed to payphone customers in which the Company owns the payphone and provides service to operate the payphone on the premises. As of December 31, 2012 seven customers made up the local service revenue:

Addison Place Apartments, Addison, New York

Delaware County Building & Maint. Department, Delaware, New York

Delhi Central School District, Delhi, New York

Morningstar Foods, Delhi, New York

Mountainside Residential Care, Lake Katrine, New York

SUNY Delhi, Delhi, New York

Town of Meredith, Meredale, New York

19 COST OF SALES



Our overall cost of services increased by $785, from $6,747 in the year ended December 31, 2011, to $7,532 in the year ended December 31, 2012. The principal costs related to the ongoing operation of our payphones will include telecommunication costs, commission expense and depreciation.

Telecommunication costs consist of payments made by us to local exchange carriers and long distance carriers for access to and use of their telecommunications networks and service and maintenance costs.

Commission expense represents payments to owners or operators of the premises at which a payphone is located and APCC commission fees related to "dial-around" processing.

Depreciation expense is the quarterly depreciation of the payphone equipment, which is recorded at its cost of $5,000. The company uses the straight line method, with a useful life of 5 years with $0 salvage value. The payphone equipment was acquired by the company on September 1, 2010.

Telecommunication costs were $5,548 in the year ended December 31, 2011 and $6,336 in the year ended December 31, 2012. Commissions were $199 in the year ended December 31, 2011 and $196 in the year ended December 31, 2012. Depreciation expense was $1,000 in the year ended December 31, 2011 and the year ended December 31, 2012, respectively.

OPERATION AND ADMINISTRATIVE EXPENSES

Operating expenses increased by $3,550, from $31,468 in the year ended December 31, 2011 to $35,018 in the year ended December 31, 2012. Operating expenses primarily consist of general and administrative expenses (G&A) and professional fees. G&A expenses, made up primarily of office expenses and outside services, consisting of stock transfer fees and filing fees, increased by $95, from $14,968 in the year ended December 31, 2011 to $15,063 in the year ended December 31, 2012. Professional fees, made up of accounting, bookkeeping, and legal fees increased by $3,455, from $16,500 in the year ended December 31, 2011 to $19,955 in the year ended December 31, 2012. These are fees we pay to accountants and attorneys throughout the year for performing various tasks. Consulting fees remained at $0 for the years ended December 31, 2011 and 2012. These are services provided by the officers, directors, and stock transfer agent on behalf of the Company. The bulk of the increase in expense was due to the Company's accounting fees and legal fees in 2012, when comparing the same period in 2011. Our expenses to date are largely due to professional fees that include accounting and legal fees.

Common Stock



We are authorized by our Amended and Restated Articles of Incorporation to issue an aggregate of 110,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $0.001 per share (the "Common Stock") and 10,000,000 are shares of preferred stock, par value $0.001 per share (the "Preferred Stock").

As of December 31, 2012, 40,436,710 shares of common stock were issued and outstanding.

As of December 31, 2012, there are 933 shareholders of our common stock.

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All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights. We have not paid any dividends to date, and has no plans to do so in the near future.

The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company's Amended and Restated Articles of Incorporation and By-Laws, copies of which have been previously filed as exhibits in the Registration Statement Form 10SB filed on June 10, 2009.

Preferred Stock



Our board of directors is authorized to issue 10,000,000 shares of Preferred Stock, with a par value of $0.001. There are an aggregate of 0 shares of Preferred Stock issued and outstanding as of the date of this Annual Filing.


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Source: Edgar Glimpses


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