ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Nature
of Business
The
Tradeshow Marketing Company was incorporated on December 03, 2003. Over the
past
twenty years, Tradeshow’s management team and demonstration professionals have
worked in the direct sales industry marketing a variety of products directly
to
consumers at trade shows, malls (kiosks), fairs and exhibitions throughout
Canada and the United States. The Company’s product categories include specialty
household, beauty and fitness, home and garden and electronics products.
The
products we retail are considered small ticket items, are innovative and
are
highly desired by the target audience. Price points for our products typically
start in the $50 range and our target demographic is in the $50,000 - $100,000
annual income range.
Products
from various suppliers that we have sold in the past included:
a)
Ontel
Products: “As Seen On TV” products that include the Swivel Sweeper, Glass Wizard
and AB Master;
b)
American Direct (TriStar): product supplied includes the Lateral Thigh Trainer
and Jack Lalanne’s Power Juicer;
c)
Cava
Industries: supplies the Cold Heat Soldering Tool and Smart Spin
containers;
d)
ITW
Space Bags: supplies Space Bags for storage;
e)
Orange
Glow International: suppliers of cleaning products OxiClean, Orange Glo,
and Kaboom, among others;
f)
Overbreak: supplies toys that include Hover Disc, Hover Copter and Rainbow
Art.
Sales
volumes for products fluctuate increasing significantly during the holiday
season. Typically, the Company experiences the highest sales volume for products
that are demonstrated via infomercials, during those periods when the
infomercials are advertised on television. No one particular product represents
a material portion of our revenues for the entire fiscal year. Rather, annual
gross sales are derived from numerous products, with eight to ten feature
products, on average, being the biggest sellers.
For
the
period ended February 28, 2007 the bulk of our sales revenue has come from
our
retail stores and Internet sales. Both sales channels are experiencing moderate
growth. Store sales continue to lead Internet sales.
Measures
Tradeshow has taken to build infrastructure
To
date,
Tradeshow has sold product at a number of venues that includes trade shows,
malls (kiosks) fairs, exhibitions in the following cities: Canada: Vancouver,
Abbotsford, Victoria, Nanaimo (includes mall kiosks), Calgary, Edmonton,
Regina,
Saskatoon, Winnipeg, Toronto (every second year); United States: Puyallup,
WA,
Tacoma, WA, Pomona, CA, Phoenix, AZ.
On
August
31, 2005, Tradeshow acquired the assets and sub-leases of two retail stores
in
the Arrowhead and Paradise Valley Malls in Phoenix, Arizona. Following the
acquisition, the Company changed the name of the two stores to “Sandstrom OnTV”.
The Company’s Sandstrom OnTV stores feature a unique and diverse mix of
innovative consumer products, which includes the same merchandise that the
Company demonstrates and sells at tradeshow venues.
On
December 23, 2005 the company announced the launch of its first eCommerce
website for ON TV products. The site, located at www.ontvco.com, offers direct
access to classic and the most popular ON TV Items. The site is managed by
the
companies Chief Technical Officer and orders are fulfilled thru the Paradise
Valley retail store in Phoenix Arizona.
Acquisition
of productive assets
The
acquisition of the two retail stores was an acquisition of productive assets,
as
the Company purchased the assets of, and assumed the sub-leases for, both
retail businesses. The Company also received the rights to use the “As Seen On
TV” trade name for the stores, but has decided to use the name Sandstrom OnTV”
instead. The Company acquired $35,000 dollars of stock and equipment in the
acquisition. The assets acquired included an inventory of “as seen on TV”
like products valued at the time of the transaction at $25,000 (based on
the
products wholesale prices; the retail value is approximately double that
figure), and store fixtures, such as shelving, displays casing video
surveillance equipment, computers, a cash register and a credit card machine,
the value of which was deemed to be $10,000.
Currently,
each store is fully operational and is open for business during regular mall
hours. Both stores are staffed. There are four full-time employees (as at
February 28, 2007). The approximate square footage of each store is 530 sq
feet.
In
December 2006, the Company hired Timothy J.McCarthy as Vice President of
Franchise Development. .
The
Company has two operating subleases for retail outlets located in the Arrowhead
and Paradise Valley Malls, Arizona with aggregate monthly payment of $8,045
or
$96,450 per year. The leases on Paradise Valley store and the Arrowhead store
expire on December 2008. The numbers shown below assume that the Company
will be
able to renew its lease or sublease and continue to operate these facilities
at
the current rate:
|
|
|
Year
1
|
|
|
Year
2
|
|
|
Year
3
|
|
|
Year
4
|
|
|
Year
5
|
|
|
Retail
Outlets
|
|
$
|
96,450
|
|
|
$
|
96,450
|
|
|
$
|
96,450
|
|
|
$
|
96,450
|
|
|
$
|
96,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
space
|
|
$
|
65,184
|
|
|
$
|
65,184
|
|
|
$
|
65,184
|
|
|
$
|
65,184
|
|
|
$
|
65,184
|
|
|
Result
of Operations
|
|
|
|
|
|
|
|
|
Third
Quarter of 2007 Compared to Third Quarter of 2006
|
|
|
|
|
|
The
following overview provides a summary of key information concerning
our
financial results for
|
|
|
third
quarter of our fiscal year ending May 31st,2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
February
28,
|
|
|
Increase
|
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
145,989
|
|
|
$
|
168,483
|
|
|
$
|
(22,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
35,694
|
|
|
|
67,247
|
|
|
|
(31,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
110,295
|
|
|
|
101,236
|
|
|
|
9,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative
|
|
|
136,078
|
|
|
|
94,953
|
|
|
|
41,125
|
|
|
Professional
Fees
|
|
|
70,532
|
|
|
|
2,827
|
|
|
|
67,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
|
206,610
|
|
|
|
97,780
|
|
|
|
108,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income / (Loss)
|
|
$
|
(96,315
|
)
|
|
$
|
3,456
|
|
|
|
(99,771
|
)
|
Revenue
For
the
three months ended February 28, 2007, revenues decreased by $22,494 compared
to
the three months ended February 28, 2006. The decrease was due to the fact
that
there were no sales in the Canadian market during the current fiscal year.
During this period, management decided to focus its entire effort in the
USA.
Cost
of
Sales & Gross Profit
For
the
three months ended February 28, 2007, cost of sales decreased by $31,553
compared to the three months ended February 28, 2006.The decrease reflects
the
lack of activity in the Canadian market and consequent reduction in Canadian
purchases for resale as well as freight and courier charges to
Canada.
For
the
three months ended February 28, 2007 gross profit increased by $9,059 compared
to the three months ended February 28, 2006. This reflects the benefit of
consolidating our efforts exclusively on the US market
during this period of time.
Expenses
There
was
an increase of $41,125 in general and administrative expenses for the third
quarter of 2007 compared to the third quarter of 2006. Additional staff
was hired for the Arizona stores, and also employees were given incentives
in
the form of sales bonuses resulting in increased wages and employee
benefits. There was an increase of $67,705 for additional consulting
fees connected with legal accounting and franchise development
fees.
Net
Loss
Our
net
loss for the third quarter of fiscal year May 31, 2007 was $96,315 compared
to
income of $3,456 for the third quarter of fiscal year May 31, 2006. The
loss is reflective of the increase in professional and consulting fees as
well
employee wages and benefits, which were deemed necessary by management in
order to focus our sales and marketing
efforts.
Results
of Operations
First
Nine Months ended February 28, 2007 compared to First Nine Months ended
February 28, 2006
The
following overview provides a summary of key information concerning our
financial results for the first nine months of our fiscal year ending May
31st
,2007:
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
February
28,
|
|
|
Increase
|
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
344,686
|
|
|
$
|
246,465
|
|
|
$
|
98,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
152,973
|
|
|
|
130,664
|
|
|
|
22,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
191,713
|
|
|
|
115,801
|
|
|
|
75,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative
|
|
|
331,173
|
|
|
|
323,734
|
|
|
|
7,439
|
|
|
Professional
Fees
|
|
|
99,585
|
|
|
|
63,869
|
|
|
|
35,716
|
|
|
Officer
Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
|
430,758
|
|
|
|
387,603
|
|
|
|
43,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income / (Loss)
|
|
$
|
(239,045
|
)
|
|
$
|
(271,802
|
)
|
|
$
|
32,757
|
|
Revenue
The
company generated revenues of $ 344,686 from operations during the first
nine
months of the fiscal year ended May 31, 2007 compared to $ 246,465 for the
same
period in the previous fiscal year. The increased revenue was primarily due
to
sales over the internet as well as increased sales at stores.
Cost
of Sales & Gross Profit
For
the
nine months ended February 28, 2007, cost of sales increased by $22,309 compared
to the nine months ended February 28, 2006.The increase reflects the additional
purchase of stock and freight charges required to support the additional
sales.
For
the
nine months ended February 28, 2007 gross profit increased by $75,912 compared
to the nine months ended February 28, 2006. This reflects the benefit of
our
increased sales efforts.
Expenses
There
was
an increase of $7,439 in general and administrative expenses for the first
nine
months of the fiscal year ending May 31, 2007 compared to the first
nine months of the fiscal year ending May 31, 2006. This increase was comprised
of advertising expenses in connection with promoting the web site to drive
internet sale of products. There was an increase in professional fees of
$35,716
connected with additional legal, accounting and franchise development
fees.
Net
Loss
Our
net
loss for the first nine months of the fiscal year ended May 31, 2007 was
$(239,045) compared to a net loss of $(271,802) for the first nine months
of the
fiscal year ended May 31, 2006.
Dividends
There
are
no restrictions in the Company’s articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however,
do
prohibit the Company from declaring dividends where, after giving effect
to the
distribution of the dividend:
|
|
1.
|
The
Company would not be able to pay its debts as they become due in
the usual
course of business; or
|
|
|
|
|
|
|
2.
|
The
Company total assets would be less than the sum of its total liabilities
plus the amount that would be needed to satisfy the rights of shareholders
who have preferential rights superior to those receiving the
distribution.
|
The
Company has not declared any dividends and does not plan to declare any
dividends in the foreseeable future.
Need
for Additional Capital
We
cannot
guarantee that we will be successful in our business operations. The Company’s
business is subject to risks inherent in the establishment of a new business
enterprise. See Risk Factors below.
The
Company has no assurance that future financing will be available to us on
acceptable terms. If financing is not available on satisfactory terms, the
Company may not be unable to continue, develop or expand operations. Equity
financing could result in additional dilution to existing
shareholders.
Liquidity
and Financial Condition
The
Company had cash on hand of $127,788 as of February 28, 2007. The Company
has not attained profitable operations and is dependent upon obtaining
additional financing. For these reasons our auditors have stated in their
report
that they have substantial doubt that we will be able to continue as a going
concern.
The
financial statements accompanying this quarterly report contemplate the
Company’s continuation as a going concern. However, the Company has sustained
substantial losses. Additional funding will be necessary to continue
development and marketing of our products. The Company intends to arrange
for
the sale of additional shares of our common stock to obtain additional operating
capital for at least the next twelve months.
Off-
Balance Sheet Arrangements
The
Company has no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company’s financial
condition, changes in financial condition, revenues or expenses, results
of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
financial statements are based on accounting principles generally accepted
in
the United States of America, many of which require management to make
significant estimates and assumptions. We believe that the following are
some of
the more critical judgment areas in the application of our accounting policies
that currently affect our financial condition and results of
operation.
Revenue
recognition
.
We recognize revenue at the point of sale at
our retail stores, at our tradeshows and over the Internet. We do not carry
any
accounts receivable and all sales are final. No warranties are expressed
or
offered on any goods except that of the manufacturer, which they support
directly.
Merchandise
inventories
.
We record inventory at lower of cost
(first-in, first-out method) or market value. We reduce the carrying value
of
our inventory for estimated obsolescence or unmarketable inventory by an
amount
equal to the excess of the cost of inventory over the estimated market value
based upon
assumptions
about future demand and market conditions. If actual market conditions are
less
favorable than those projected by management, additional reserves may be
required.
Income
taxes
. The provision for income taxes is the total of the current
taxes payable and the net of the change in the deferred income taxes. Provision
is made for the deferred income taxes where differences exist between the
period
in which transactions affect current taxable income and the period in which
they
enter into the determination of net income in the financial
statements.
Stock
Based Compensation:
The Company accounts for its stock based
compensation based upon provisions in SFAS No. 123,
Accounting for
Stock-Based Compensation
. In this statement stock based compensation is
divided into two general categories, based upon who the stock receiver is,
namely: employees/directors and non-employees/directors. The employees/directors
category is further divided based upon the particular stock issuance plan,
namely compensatory and non-compensatory. The employee/directors
non-compensatory securities are recorded at the sales price when the stock
is
sold. The compensatory stock is calculated and recorded at the securities’ fair
value at the time the stock is given. SFAS 123 also provides that stock
compensation paid to non-employees be recorded with a value which is based
upon
the fair value of the services rendered or the value of the stock given,
whichever is more reliable. The Company has selected to utilize the fair
value
of the stock issued as the measure of the value of services
obtained.
Risk
Factors
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in
this
Quarterly Report before investing in our common stock. If any of the following
risks occur, our business, operating results and financial condition could
be
seriously harmed. The trading price of our common stock could decline due
to any
of these risks, and you may lose all or part of your investment.
Our
accountants believe there is substantial doubt about our ability to continue
as
a going concern.
The
Company incurred a loss in the amount of $689,017 for the period from inception
February 28, 2007.Net loss from operations for the nine months ended February
28, 2007 was $239,045.
The
decrease in operating loss of $32,757 between the nine months ended February
28,
2006 and February 28, 2007 was due to our increased revenue from internet
and
store sales; however, general and administrative expenses and professional
fees
increased by $7,439 and $35,716 respectively. The additional costs incurred
were
from development of our online business as well as our recent costs to develop
our franchise model.
The
Company will require additional financing if the costs of our operations
are
greater than anticipated. We will also require additional financing to sustain
our business operations if we are not successful in earning revenues. We
currently do not have any arrangements for financing and we may not be able
to
obtain financing when required. The Company’s future is dependent upon our
ability to obtain financing and upon future profitable operations from the
development of our business. Obtaining additional financing would be subject
to
a number of factors. These factors may make the timing, amount, terms or
conditions of additional financing unavailable to the Company.
Since
this is a new business, we face a high risk of business failure due to our
inability to predict the success of our business
The
Company faces a high risk of business failure because of the unique difficulties
and uncertainties inherent in new ventures.
Potential
investors should be aware of the difficulties normally encountered by commencing
a new business venture and the high rate of failure of such enterprises.
The
likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
business the Company plans to undertake.
Our
stock is a “penny stock”, with the result that trading of our common stock in
any secondary market may be impeded.
The
SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities
with
a price of less than $5.00, other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current
price
and volume information with respect to transactions in such securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the Commission, that: (a)
contains a description of the nature and level of risk in the market for
penny
stocks in both public offerings and secondary trading; (b) contains a
description of the broker's or dealer's duties to the customer and of the
rights
and remedies available to the customer with respect to a violation to such
duties or other requirements of Securities' laws; (c) contains a brief, clear,
narrative description of a dealer market, including bid and ask prices for
penny
stocks and the significance of the spread between the bid and ask price;
(d)
contains a toll-free telephone number for inquiries on disciplinary actions;
(e)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (f) contains such other information and is in
such
form, including language, type, size and format, as the Commission shall
require
by rule or regulation. The broker-dealer also must provide, prior to effecting
any transaction in a penny stock, the customer with: (a) bid and offer
quotations for the penny stock; (b) the compensation of the broker-dealer
and
its salesperson in the transaction; (c) the number of shares to which such
bid
and ask prices apply, or other comparable information relating to the depth
and
liquidity of the market for such stock; and (d) a monthly account statements
showing the market value of each penny stock held in the customer's account.
In
addition, the penny stock rules require that prior to a transaction in a
penny
stock not otherwise exempt from those rules; the broker-dealer must make
a
special written determination that the penny stock is a suitable investment
for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our stock as it is subject to these
penny
stock rules. Therefore, stockholders may have difficulty selling those
securities.
FORWARD
LOOKING STATEMENTS
The
statements contained in this
Quarterly Report on Form 10-QSB that are not historical fact are forward-looking
statements (as such term is defined in the Private Securities Litigation
Reform
Act of 1995), within the meaning of Section 27A of the Securities Act of
1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The forward-looking statements contained herein are based on
current expectations that involve a number of risks and uncertainties.
These statements can be identified by the use of forward-looking terminology
such as “believes,” “expects,” “may,” “will,” “should,” or “anticipates,” or the
negative thereof or other variations thereon or comparable terminology, or
by
discussions of strategy that involve risks and uncertainties. The Company
wishes to caution the reader that these forward-looking statements that are
not
historical facts are only predictions. No assurances can be given that the
future results indicated, whether expressed or implied, will be achieved.
While sometimes presented with numerical specificity, these projections and
other forward-looking statements are based upon a variety of assumptions
relating to the business of the Company, which, although considered reasonable
by the Company, may not be realized. Because of the number and range of
assumptions underlying the Company’s projections and forward-looking statements,
many of which are subject to significant uncertainties and contingencies
that
are beyond the reasonable control of the Company, some of
the assumptions inevitably
will not
materialize, and unanticipated events and circumstances may occur subsequent
to
the date of this report. These forward-looking statements are based on
current expectations and the Company assumes no obligation to update this
information. Therefore, the actual experience of the Company and the
results achieved during the period covered by any particular projections
or
forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements
should not be regarded as a representation by the Company or any other person
that these estimates and projections will be realized, and actual results
may
vary materially. There can be no assurance that any of these expectations
will be realized or that any of the forward-looking statements contained
herein
will prove to be accurate.
Seasonality
The
Companies sales are quite seasonal, increasing with the shopping trends
associated with the retail industry of sales peaking during the holiday season.
In the past year, a substantial portion of our total revenues and all or
most of
our earnings came in the first quarter ending February 28. The results of
operations for this quarterly period are not necessarily indicative of the
results for the full fiscal year.
