Statement Regarding Forward-Looking Information
The following management's discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this report. The management's discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company's actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report. On
December 6, 2013, the Company, Symbid Holding B.V., a limited liability company organized under the laws of The Netherlands, and the shareholders of Symbid Holding B.V.entered into a Share Exchange Agreement, which closed on the same date. Pursuant to the terms of the Share Exchange Agreement, the shareholders of Symbid Holding B.V.sold all of their capital stock in Symbid Holding B.V.to us in exchange for 21,170,000 shares of our common stock. As a result of this Share Exchange, Symbid Holding B.V.became our wholly-owned subsidiary and, through Symbid B.V., the Dutch LLCoperating subsidiary of Symbid Holding B.V., we entered the business of creating and operating online, equity-based "crowdfunding" platforms. The following discussion highlights the Company's results of operations and the principal factors that have affected our financial condition, as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the Company's unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United Statesgenerally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.
The Company was launched in
April 2011with its headquarters in Rotterdam, The Netherlands, as one of the first three equity based crowdfunding forerunners worldwide. Entrepreneurs use the Company to obtain business growth funding from the crowd in exchange for a part of the equity of their company. Investors can participate for as little as $27.50, and become shareholders of start-up companies or growing businesses in need of capital. Since August 2012, the Company is one of the first platforms worldwide to offer multiple models of crowd funding on a progressive scale for Small and Medium Enterprises(SME's), integrating a unique legal structure into the IT-infrastructure of the crowd funding platform. The goal of the Company is to create a portfolio of crowdfunding products, where anyone interested in crowd funding can find their right solution. The Symbidinfrastructure serves as a matchmaking platform with added value for both entrepreneurs and investors on a global scale. The Company earns success fees and transaction fees charged to the entrepreneurs and investors active on the platform. In addition to matchmaking on the Company platform, the Company licenses its infrastructure in several forms to other partners.
The Company is a speculative investment, and investors may lose some or all of their investment in the Company.
The following is a summary of our financial performance for the three and six months ended
? Consolidated revenue for the three and six month periods ended
100% compared to the prior year periods. ? For the three and six months ended
June 30, 2014, over 95% of our total
revenues during both periods was attributable to core crowdfunding activities,
consistent with the prior year period.
? For the three and six months ended
administrative expenses and professional fees totaled approximately
? Net cash used by operating activities totaled approximately
six month period ended
Recent Developments and Trends
The Company's continued focus on core crowdfunding activities following the portfolio rebalance in 2013 has contributed to the strong growth experienced in the first half of 2014. The growth in crowdfunding revenues is attributable to an increase in investors and propositions to the
Symbidplatform, as the market for the Company's services in the Netherlandscontinues to grow. During the second quarter of 2014, the Company attracted several high profile propositions to the Company's platform, resulting in higher than average success fees for the three month periods ended June 30, 2014, which significantly contributed to the growth when compared to the prior year. In July 2014, the Company acquired the FAC B.V., a limited liability corporation incorporated in The Netherlandsin exchange for 2,750,000 shares of restricted common stock. Through this acquisition, the Company obtained an exclusive license for infrastructure technology upon which we intend to develop a platform to enable cloud based financing solutions for small and medium sized enterprises, expanding on our current equity based crowdfunding platform in the Netherlands. Results of Operations The following tables set forth our condensed consolidated statements of income data: Three months ended Six months ended June 30, June 30, 2014 2013 2014 2013 Revenues Crowdfunding $ 72,090 $ 12,055 $ 150,144 $ 29,913Other - 59 8,050 1,723 Total revenues' 72,090 12,114 158,194 31,636 Operating expenses Selling, general and administrative 313,196 98,015 587,212 175,150 Professional fees 192,436 10,300 397,148 22,074 Research and development costs 98,774 24,702 144,748 24,702 Depreciation and amortization 333 319 668 639 Total operating expenses 604,739 133,336
Operating loss (532,649 ) (121,222 ) (971,582 ) (190,929 ) Other income (expense) Fair value adjustment derivative liability - warrants 70,097 - 85,361 - Interest expense (3,860 ) (5,561 ) (7,819 ) (10,501 ) Government subsidy 2,742 7,868 10,962 15,737 Equity in losses of Gambitious B.V. (7,114 ) (11,872 ) (8,743 ) (34,361 ) Other income and expense (14,630 ) - (16,480 ) - Total other income (expense) 47,235 (9,565 ) 63,281 (29,125 ) Net loss (485,414 ) (130,787 ) (908,301 ) (220,054 ) Net loss attributable to noncontrolling interests (4,608 ) (3,514 )
(15,624 ) (19,329 )
Net loss attributable to
Symbid Corp.stockholders $ (480,806 ) $ (127,273 )
Basic and diluted net loss per common share
$ (0.02 ) $ (0.01 )
Weighted average number of shares outstanding Basic and diluted 26,224,839 22,577,453 25,479,431 21,769,706 25
Crowdfunding Revenues were approximately
$72,000and $150,000for the three and six month periods ended June 30, 2014as compared to $12,000and $30,000for the three and six month periods ended June 30, 2013. Revenues increased for the three and six month periods ended June 30, 2014by approximately $60,000and $120,000, respectively, compared to the prior year periods. The increase compared to the prior period is primarily attributable to i) increased numbers of investors and entrepreneurs on the Symbidplatform ii) investments of the Company in the Symbidplatform and iii) growth in the overall crowdfunding market in the Netherlands. The Company was in the early stages of building its crowdfunding platform during the three and six month periods ended June 30, 2013. In early 2014, the Company released a redesign of its crowdfunding platform via its website with significant improvements to the aesthetics and functionality of its website, which has assisted with the acquisition of entrepreneurs and investors to the Symbidplatform.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased for the three and six month periods ended
June 30, 2014by approximately $215,000and $412,000to $313,000and $587,000compared to $98,000and $175,000for the prior year periods. The increase is primarily attributable to higher salary costs and additional employees to support the Company's growth and investment in the Symbidplatform. The Company continues to invest in its future expansion outside of the Netherlandsand additional employees to support the Company's information technology strategy. We anticipate that selling, general, and administrative expenses will continue to increase as a percentage of revenue as a result of planned increases in headcount and investments in the Symbidplatform. We also anticipate increases in selling, general and administrative expenses in 2014 due to the inclusion of share- based compensation expenses in connection with a grant to employees approved by the Board of Directors of Symbid Corporationin July 2014.
Professional fees increased for the three and six month periods ended
June 30, 2014by approximately $182,000and $375,000to $192,000and $397,000compared to $10,000and $22,000for the prior year periods. The increase is primarily attributable to legal and accounting fees associated with the Company's private placement offering ("PPO"), which were not incurred during the prior year period along with accompanying increased legal and compliance costs.
We anticipate professional fees will remain a substantial percentage of the operating costs in 2014. We anticipate incurring these costs in relation to the Company's listing on the OTC markets and planned expansion of the Company's platform.
Research and Development
Research and development costs increased for the three and six month periods ended
June 30, 2014by approximately $74,000and $120,000to $99,000and $145,000compared to $25,000and $25,000for the prior year periods. The increase is primarily attributable to investments in the Company's platform and website features in 2014 which were not incurred during the prior year due to the stage of the Company in the prior year periods.
Based on the proceeds from the PPO which was completed on
Other Income and Expenses
Total other income increased for the three and six month periods ended
June 30, 2014by approximately $57,000and $92,000to $47,000and $63,000compared to $10,000and $29,000of total other expenses in the prior year period. The fluctuation is primarily attributable to higher equity in losses of Gambitious B.V.in the prior year compared to a non- cash favorable fair value adjustment to the derivative liability for warrants issued in connection with the PPO during the three and six month periods ended June 30, 2014, which was not incurred during the prior year periods.
Loss from Operations Before Noncontrolling Interests
We incurred net losses from operations of approximately
$485,000and $908,000, and $131,000and $220,000, respectively, for the three and six months ended June 30, 2014and June 30, 2013. The increase in net losses was $354,000and $688,000, respectively, for the three and six months ended June 30, 2014compared to the three and six months ended June 30, 2013. The increased in comparable losses was primarily due to increased legal, accounting and advisory costs in connection with PPO related activities and investments in the Company's information technology infrastructure and equity based crowdfunding platform, which has only been partially offset by the significant growth in revenue in comparable periods.
Financial Condition, Liquidity and Capital Resources
We will need additional capital to implement our strategies. There is no assurance that we will be able to raise the amount of capital that we seek for acquisitions or for future growth plans. Even if financing is available, it may not be on terms that are acceptable to us. In addition, we do not have any determined sources for any future funding. If we are unable to raise the necessary capital at the times we require such funding, we may have to materially change our business plan, including delaying implementation of aspects of our business plan or curtailing or abandoning our business plan. We represent a speculative investment and investors may lose all of their investment. In order to be able to achieve our strategic goals, we need to further expand our business and financing activities. We aim to accomplish these goals by further developing our crowdfunding software platform and achieve a more international coverage of our services. Expanding our international network, together with further improvement of our crowdfunding platform will require future capital and liquidity expansion. Since our inception in
March 2011, our shareholders have contributed a significant amount of capital, making it possible for us to develop our crowdfunding platform, services, and activities. To continue to develop our product offerings, expand our services and to obtain international coverage, a significant capital increase has been and will continue to be required. Our principal sources of liquidity have been cash generated from the PPO and, prior to the December 6, 2013Share Exchange, proceeds from issuing new shares in Symbid B.V., and cash generated from operations. At June 30, 2014, cash was approximately $1,146,000, other current assets excluding cash were $126,000and we had working capital of $827,000. At the same time, we had current liabilities of approximately $446,000, which consisted principally of accounts payable and accrued expenses of $394,000a significant portion of which are attributable to legal and compliance costs for PPO related activities during the period and the current portion of notes payable of $52,000. At December 31, 2013, cash was approximately $892,000and we had other current assets excluding cash of $62,000. At the same time, we had current liabilities of approximately $448,000which consisted principally of accounts payable and accrued expenses of $395,000, a significant portion of which are attributable to legal and compliance costs for PPO related activities during the period and the current portion of notes payable of $42,000. Our working capital at December 31, 2013was approximately $506,000. The increase in our liquidity position at June 30, 2014compared to December 31, 2013is primarily attributable to proceeds from the third closing of our PPO. 27 --------------------------------------------------------------------------------
Net Cash Used in Operating Activities
Net cash used in operating activities was approximately
$1,031,000for the six months ended June 30, 2014, as compared to net cash used of $208,000for the six months ended June 30, 2013. The increase in net cash used in operations was primarily cash utilized for legal, advisory and accounting costs for PPO related activities during the period.
Net Cash Used in Investing Activities
During the six months ended
June 30, 2014and 2013, we used approximately $61,000and $0, respectively, of cash in investing activities. The cash used in investing activities in the six months ended June 30, 2014quarter was primarily for investments in Gambitious and Kredietpaspoort.
Net Cash Provided by Financing Activities
During the six months ended
June 30, 2014and 2013, cash flows from financing activities totaled $1,359,000and $288,000, respectively. Cash flows from financing activities for the six months ended June 30, 2014primarily relate to proceeds received in connection with the second and third closing of the PPO, partially offset by repayments of notes payable. Cash flows from financing activities during the six months ended June 30, 2013primarily relates to proceeds received from private investors.
We will only commit to capital expenditures for any future projects requiring us to raise additional capital as and when adequate capital or new lines of finance are made available to us. There is no assurance that we will be able to obtain any financing or enter into any form of credit arrangement. Although we may be offered such financing, the terms may not be acceptable to us. If we are not able to secure financing or it is offered on unacceptable terms, then our business plan may have to be modified or curtailed or certain aspects terminated. There is no assurance that even with financing we will be able to achieve our goals. Going Concern Our financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We have incurred losses since inception resulting in an accumulated deficit of approximately
$2,894,000as of June 30, 2014and further losses are anticipated in the development of our business raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and/or private placement of common stock. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
Critical Accounting Policies and Estimates
There are no material changes from the critical accounting policies set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our
December 31, 2013financial statements included in our Annual Report on Form 10-K filed with the SECon April 14, 2014. Please refer to that document for disclosures regarding the critical accounting policies related to our business. 28
Off-Balance Sheet Arrangements
None. Contractual Obligations Not applicable.