Form 10KSB/A for CYBERADS INC
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7-Jun-2006
Annual Report
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis contains various forward-looking statements within the meaning of the Securities and Exchange Act of 1934. These statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward looking terminology such as "may", "expect", "anticipate", "estimates", or "continue" or use of negative or other variations of comparable terminology. We caution that these statements are further qualified by important factors that could cause actual results to differ materially from those contained in our forward looking statements, that these forward looking statements are necessarily speculative, and there are certain risks and uncertainties that could cause actual events or results to differ materially from those referred to in our forward looking statements.
Management's discussion and analysis should be read in conjunction with the financial statements and the notes thereto.
OVERVIEW
CyberAds did not record revenues during 2005. We discontinued the third party affiliate sales of Cellular phones and services during 2004, and discontinued all cellular sales in 2005 due to the financial losses inherent with the commission structure paid to third party affiliates. The affiliates commission was earned on "leads" provided, rather than on sales made, therefore the cancellations and returns on cellular phones were not recouped from the third party affiliate and the losses became CyberAds expense. During 2005 we focused on developing a new business plan in the extreme sports sector and marketing of its lifestyle. We engaged with three primary products during 2005, XBoard, Rhino, and Planet X TV.
RELATED PARTIES AND RELIANCE ON CERTAIN PROVIDERS We rely on the manufacturers of XBoard, Rhino, and Planet X TV for the inventory and production of products specific to our reselling rights.
RECENT EVENTS
As noted above we entered into relationships with Aqua Xtremes, Inc., and its products XBoard, whereby the company was provided exclusive rights to resell distribution and dealers within a defined territory. During 2005 we developed a resell relationship with Rhino Off Road Industries whereby the company would recruit and demonstrate the Rhino product line to Distributors, Dealers, and consumers. During 2005 we developed a relationship with Planet X TV whereby the company would be compensated for recruiting advertisers and sponsors for the Planet X TV shows.
During 2005 we engaged in multiple negotiations with Internet and Extreme Sports / Lifestyle companies on merger and acquisition discussions, as of December 31, 2005 we were not party to any binding letter of intents.
PATENTS AND PROPRIETARY RIGHTS
We do not hold any trademark, copyright or patent protection.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2005 AND 2004
We reported revenues of $0 and $303,120 for the years ending December 31, 2005 and 2004, respectively, losses of $7,783,970 and $520,520 during the years ended December 31, 2005 and 2004, respectively. The reduction in revenue from 2005 to 2004 is attributed to the change in business plan, and our effort to develop into an extreme sports and lifestyle sector company. The Increase in losses was due to the developmental stage of the company, and the delay in delivering XBoard to the market in 2005.
RESULTS OF OPERATIONS
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Twelve months ended December 31, 2005 compared to the twelve months ended
December 31, 2004.
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Decrease
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Revenue $ 0 $ 303,120 $ 303,120 - 100%
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Revenue for the twelve months ended December 31, 2004 resulted from the sale of Cellular phone plans through Inphonic. In 2005 we discontinued marketing of cellular phones. The Company did not recognize revenue in 2005 for the sales of XBoard, Rhino, or Planet X. In 2005, all efforts were put towards the sales and marketing of XBoard, Rhino, and Planet X, and the recruitment of extreme sports oriented product distribution for which no revenue has been obtained to date.
Decrease
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
G&A Expenses $ 681,731 $ 812,824 $ 131,093 16%
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G & A Expenses for the twelve months ended December 31, 2005 resulted from the sale of the XBoard distribution, recruitment of new products, and expenses for consultants and management relating to the extreme sports segment. G&A expenses decreased in 2005 vs 2004 as a result of the discontinuance of sales of cellular phone plans, specifically the cost of administrating the sales.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Marketing
Expenses $ 5,605,613 $ 0 $ 5,605,613 100%
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Marketing Expenses for the twelve months ended December 31, 2005 increased due to efforts on securing distribution for XBoard, Rhino, and Planet X TV. Marketing costs include production of TV spots, trade shows, product demonstrations, consultants, and efforts toward recruitment of extreme sports products for the company to resell.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Selling
Expenses $ 1,412,253 $ 0 $ 1,412,253 100%
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Selling Expenses for the twelve months ended December 31, 2005 increased as a result of additional management and consulting expenses primarily in an effort to represent additional business opportunities, and present distribution opportunities of XBoard, Rhino, and Planet X.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Other Income $ 5,430 $ 4,847 $ 583 12%
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Other Income for the twelve months ended December 31, 2005 was derived by a marketing activity related to a promotion on a product line.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Gain on Forgiveness
of debt $ 2,500 $ 0 $ 2,500 100%
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Gain on Forgiveness of debt for the twelve months ended December 31, 2005 was provided through forgiveness of debt by note holder at time of conversion.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Interest Expense $ 78,132 $ 15,663 $ 62,469 398%
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Interest expense for the twelve months ended December 31, 2005 increased to $78,132 versus $15,663 in 2004. The increase of $62.469 was attributable to interest on notes to related parties, and advances from stockholder.
Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Loss on Abandonment $14,171 $0 $14,171 100%
Of Assets
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Loss on Abandonment of Assets for the twelve months ended December 31, 2005 increased by $14,171 over year end 2004. The Company abandoned fixtures, furnishings and equipment in its Florida offices upon its relocation to offices in California. The equipment abandoned was miscellaneous desks, computer equipment and filing type cabinets.
FINANCIAL POSITION & LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2005 compared to December 31, 2004:
As of December 31, 2005 Increase
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2005 2004 Amount Percentage
-------------- -------------- ------------ --------------
Marketing rights $ 210,000 $ 0 $ 210,000 100%
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Marketing rights increased as a result of the Company's purchase of rights to resale X-Board dealerships to others.
As of December 31, 2005 Increase
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2005 2004 Amount Percentage
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Deferred net $ 172,453 $ 0 $ 172,453 100%
Revenue
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Deferred net revenue consisted of the resale of X-Board dealerships, net of commissions. The X-Board product has not yet come to market. Accordingly, the Company has not recorded the sales as revenue.
LIQUIDITY AND CAPITAL RESOURCES
CYAD has not been profitable and
has experienced negative cash flow from operations due to its development stage, and substantial ongoing investment in development efforts. Consequently, CYAD has been dependent on the sales of equity to fund cash requirements.
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