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ROCAP MARKETING INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 18, 2014



The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this periodic report. Some of the statements herein may include forward-looking statements which reflect our current views with respect to future events and financial performance. Statements which include the words "expect," "intend," "plan," "believe," "project," "anticipate," "will," and similar statements of a future or forward-looking nature identify forward-looking statements.

All forward-looking statements address such matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

Results of Operations



The nature of our operations changed completedly on July 1, 2014. On that date, we acquired 100 percent ownership of Spiral, LLC, which designs and distributes online entertainment applications. Subsequently, Hubert Blanchette, from whom we acquired our subsidiary Lexi-Luu Designs, Inc., exercised his option to repurchase Lexi-Luu Designs from us in exchange for the 2.5 million Rocap shares that was the original purchase price. As a result of these events occurring subsequent to the end of the second fiscal quarter, our financial statements for the period ending June 30, 2014 reflect the financial condition and results of operations of Lexi-Luu Designs, Inc. as a discontinued operation and do not reflect the financial condition or the results of operations of Spiral, LLC.

Accordingly, the results of operations reflected in the financial statements included in this report are in no way predictive of the future operations of the Company.

As set forth in Note 4 to the financial statements, during the six months ended June 30, 2014, Lexi-Luu Designs, which was the Company's sole operating business, recorded revenue of $210,767, a reduction of 16% from revenue in the first six months of 2013. In the same period, the costs incurred to produce the goods increased, resulting in a 34% decrease in gross profit, as our gross margin on sales fell from 61% in the first six months of 2013 to 48% in the first six months of 2014.

The operating expenses of Lexi-Luu Designs, in both the six months ended June 30, 2014 and the six months ended June 30, 2013 substantially exceeded gross profit, resulting in a loss from operations of $15,570 during the six months ended June 30, 2014 and $87,233 during the six months ended June 30, 2013. The operating expenses of the parent company (with the resulting loss from operations) in both the three and six month periods ended June 30, 2014 were substantially greater - 24% and 41% respectively - than during the three and six month periods ended June 30, 2013, primarily due to expenses incurred in investigating and obtaining our new investment in Spiral, LLC.

The losses incurred by Lexi-Luu Designs, combined with the expenses incurred by our parent corporation, resulted in net losses of $76,521 and $126,343 for the three and six month periods ended June 30, 2014. During these periods, however, we owned only 80% of the equity in Lexi-Luu Designs. For that reason, the portion of Lexi-Luu Designs' loss attributable to the 20% non-controlling interest was deducted from the net loss attributable to common stockholders on our Statements of Operations, resulting in a net loss attibutable to common stockholders of $71,870 for the three months ended June 30, 2014, an improvement on the $98,973 net loss incurred in the three months ended June 30, 2013. For the six months ended June 30, 2014, net loss attributable to common stockholders was $121,593, again an improvement over the $146,800 net loss recorded in the six months ended June 30, 2013.

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Liquidity and Capital Resources

At June 30, 2014, the greater portion of our assets and liabilities were the assets and liabilities of Lexi-Luu Designs, Inc. On July 1, 2014 those were transferred to Hubert Blanchette. Our June 30 going forward balance sheet, therefore, shows $68,229 in cash as the sole asset, balanced against $488,832 in liabilities, all of which are current. As a condition to the closing of the Spiral LLC acquisition on July1, 2014, current and prior members of management agreed that $120,000 in liabilities due to them would not be payable until the company raises at least $2 million in financing. Nevertheless, in order to fund the growth of Spiral, LLC, we will have to raise capital.

During the six months ended June 30, 2014, our parent company used $50,776 in cash to pay ongoing expenses. We funded that cash use by selling notes for $15,000 and common stock for $67,500.

Our cash at June 30, 2014 is insufficient to meet our operating requirements for the next twelve months. We anticipate that we will require approximately $150,000 of operating capital over the next twelve months. We expect to use debt and equity financing to raise that capital. However, we have no agreements to issue any debt or equity securities and cannot predict whether equity or debt financing will become available at acceptable terms, if at all. As of June 30, 2014 we owed $276,250 in salaries payable and an aggregate of $120,738 in notes payable to related and unrelated parties. We owed $15,559 of accrued interest on these notes.

Recently Issued Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company's financial position, or statements.


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Source: Edgar Glimpses


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