ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Report on Form 10-K, Form 10-Q and any Current Reports on Form 8-K.
Overview and History
Bulk Storage Software, Inc. (the “Company”), was incorporated in the State of Colorado on October 15, 2007. The Company was formed to provide software and consulting services with regard to computer data storage.
We are presently designing and developing software and hardware based data storage appliance which will be known as “Enterprise Mass Storage Manager” (EMSM). This product can be utilized by any data intensive industry. We will utilize industry standard network communication protocols coupled with state of the art data deduplication technology in the development of the EMSM data storage appliance.
The terms data storage “appliance” and “data deduplication” will be used frequently throughout this document. The term “appliance”, as used herein, refers to:
A standard packaged computer assembly utilizing a central processing unit (cpu), disk and memory resources along with a Linux operating system. This computer will be utilized to run the specialized storage software application referred to as EMSM. The EMSM appliance will be designed as a self contained storage appliance which can be quickly and easily installed and deployed in virtually any computer storage network.
The term “data deduplication” refers to:
Specialized software algorithms which identify repeated instances of files, such as word documents, etc. in computer networks and replace these repeated instances with keys or “hashes” which uniquely identify the replaced file. Identical blocks or strings of data, which are not necessarily in file format, are identified and replaced in the same way. By replacing the actual repeated data on a computer network with a small, unique representation of the data (the key), the amount of physical electronic data storage is reduced significantly.
The Product
EMSM comes from traditional Network Attached Storage (NAS) technology, utilizing the well established Network File System (NFS) protocol and utilizing data deduplication methods. EMSM will provide corporate Information Technology professionals with advanced data storage technology to provide the following benefits:
| - | 10-20 times the electronic storage capacity of traditional storage devices |
| - | Storage capacity planning |
| - | Live error and alarm capture and notification |
| - | Storage asset management |
| - | Storage device management |
| - | Reduced data center power consumption |
| - | Reduced data center cooling requirements |
| - | Reduced data center floor space requirements |
We believe that the recent increase in the demands for electronic data storage has increased these challenges to corporate Information Technology (“IT”) organizations and technicians significantly over the last several years.
Bulk Storage EMSM provides the capability for corporations to address these issues with a platform independent, scalable appliance for a fraction of what they are currently spending on data storage devices and administration (human resource costs coupled with the capital costs of storage arrays). We believe that Bulk Storage EMSM can help IT organizations achieve strategic corporate objectives such as:
| - | Maximizing the use of IT resources (administrative and capital) |
| - | Ensuring business continuance and data protection |
| - | Managing capital and administrative costs associated with information management |
| - | Managing growth associated with electronic information storage |
| - | Meeting Federal regulatory compliance requirements (HIPAA, SOX) |
| - | Meeting data protection requirements |
To help corporations achieve these objectives, we have developed an open, independent Specialized Storage Management Software (SMS) application.
The majority of the application will be written in Java, while the Data Deduplication Software will be written in “C” to minimize CPU cycles on the data deduplication end. The data deduplication database utilized will most likely be historical Berkely Database for licensing purposes. However, if the end user prefers Oracle, Sybase, etc. they will have that flexibility, but the licensing burden will be theirs.
Data deduplication is a technology whereby the EMSM appliance, through proprietary software algorithms, stores identical blocks of information and identical files only once. Where most storage devices store multiple copies of the same files and identical blocks of information many times over, thus using costly storage space for redundant information.
The EMSM storage appliance stores only one copy of the identical information while storing only a small representation of the identical information, or a “reference key”, each time the redundant information is encountered in the computer enterprise. This capability enables the EMSM appliance to provide 5, 10, 15, 20 or even 50 times the effective storage capacity of conventional storage arrays utilizing the same “raw” disk drive capacity. This “effective capacity” also requires the same amount of power and cooling as the conventional storage array with significantly more electronic storage capacity for the user.
The EMSM product is designed to install on any Unix, Linux or Microsoft computer system. We not intend to pursue the MVS or AS400 markets. Supported backup applications will initially Veritas ™ NetBackup, and BackupExec ™, with the next targeted application being IBM ™ TSM. The Company will support fiber channel and iSCSI SANS initially. The Company will initially support EMC and Hitachi disk arrays, with IBM Shark, NetApp and LSI Logic as the next targets. These application ports encompass approximately 70% of our targeted midrange market.
The product will be extremely scalable as the end user can choose either a central or distributed EMSM database. With the centralized management console approach the user will be able to view all Bulk Storage appliances globally from a single User Interface (UI), while different geographical locations can be restricted with regard to viewing and management capabilities. Permissions will be restricted through access control lists (ACL’s).
We intend to pursue several strategic software development partnerships with established software and hardware vendors. Additionally, we intend to immediately pursue a strategic selling relationship with a large storage hardware vendor. At the present time, there are no definitive agreements in place.
Our original focus will be in the Denver, Colorado metropolitan area, but eventually plan to expand nationwide. However, we currently have no plans for expansion. At the present time, we have no active operations and are developing our business plan. At the present time, we have no plans to raise any additional funds within the next twelve months, other than those raised in our recent Offering. Any working capital will be expected to be generated from internal operations or from funds which may be loaned to us by Mr. Gibbs, our President. In the event that we need additional capital, Mr. Gibbs has agreed to loan such funds as may be necessary through December 31, 2014 for working capital purposes, although he is under no contractual obligation to do so. However, we reserve the right to examine possible additional sources of funds, including, but not limited to, equity or debt offerings, borrowings, or joint ventures. Limited market surveys have never been conducted to determine demand for our services. Therefore, there can be no assurance that any of its objectives will be achieved.
Our product is currently under development. We estimate that it will take until December 31, 2014 for our product to be completed. The development of this product is expected to cost approximately $75,000, with this amount being comprised entirely of software development and integration labor costs.
The finished computer appliance product will retail for $25,000 for the enterprise edition. We estimate that selling an average of one appliance product a quarter will result in profitability for the Company.
We have not been subject to any bankruptcy, receivership or similar proceeding. Our address is 10790 Glengate Loop, Highlands Ranch, Colorado 80130. Our telephone number is (303) 862-6857.
Results of Operations
From our inception on October 15, 2007 through December 31, 2013, we have generated no revenue. As a result we have no operating history upon which to evaluate our intended business. In addition, we have a history of losses. We had a net loss of $171,376 for this period.
Operating expenses, which consisted solely of general and administrative expenses for the three month period ended December 31, 2013, were $4,197. This compares with operating expenses for the three month period ended December 31, 2012 of $520. The major components of general and administrative expenses include accounting fees, consulting fees, office expenses and stock transfer fees.
As a result of the foregoing, we had a net loss of $5,247 for the three month period ended December 31, 2013. This compares with a net loss for the three month period ended December 31, 2012 of $1,570.
Because we do not pay salaries, and our major professional fees have been paid for the year, operating expenses are expected to remain fairly constant through the end of our fiscal year.
To try to operate at a break-even level based upon our current level of proposed business activity, we believe that we must generate approximately $25,000 in revenue per year. Each dollar of revenue is not directly tied to increasing costs. We believe that we can become profitable without incurring additional costs under our current operating cost structure. However, if our forecasts are inaccurate, we will need to raise additional funds. In the event that we need additional capital, we must seek funding, although we currently do not have any commitments for such funding.
On the other hand, if we decide that we cannot operate at a profit in our current configuration, we may choose to scale back our operations to operate at break-even with a smaller level of business activity, while adjusting our overhead to meet the revenue from current operations. In such event, we will probably not be profitable. In addition, we expect that we will need to raise additional funds if we decide to pursue more rapid expansion, the development of new or enhanced services or products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.
We expect to incur operating losses in future periods because we will be incurring expenses and not generating sufficient revenues. We expect approximately $25,000 in operating costs over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business.
Liquidity and Capital Resources.
As of December 31, 2013, we had cash or cash equivalents of $240. As of September 30, 2013, we had cash or cash equivalents of $240.
Net cash used for operating activities was $0 for the three month period ended December 31, 2013. This compares to net cash used for operating activities of $0 for the three month period ended December 31, 2012. For the period from October 15, 2007 through December 31, 2013 they were $69,875.
Cash flows from investing activities were $-0- from our inception on October 15, 2007 through December 31, 2013.
Cash flows provided by financing activities were $0 for the three month period ended December 31, 2013 which compares to cash flows provided by financing activities of $0 for the three month period ended December 31, 2012. For the period from October 15, 2007 through December 31, 2013 they were $70,115. These cash flows were all related to sales of stock and the issuance of notes.
Over the next twelve months we do not expect any material capital costs to develop operations.
Our principal source of liquidity will be our operations. We expect variation in revenues to account for the difference between a profit and a loss. Also business activity is closely tied to the U.S. economy. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully sell our data storage products and services in order to generate revenues.
Going Concern
In the course of its life the Company has had limited operations, and has a working capital deficit. This raises substantial doubt about the Company’s ability to continue as a going concern.
The Company believes it can raise capital through equity sales and borrowing to fund its marketing and operating activities. Management believes this will contribute toward its operations and subsequent profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements with any party.
Plan of Operation.
Our plan for the twelve months is to operate at a profit or at break even. Our plan is to attract sufficient additional product sales and services within our present organizational structure and resources to become profitable in our operations.
Our intended business will be to design and develop software and hardware based data storage appliance which will be known as “Enterprise Mass Storage Manager” (EMSM). This product can be utilized by any data intensive industry. We will utilize industry standard network communication protocols coupled with state of the art data deduplication technology in the development of the EMSM data storage appliance.
From our inception on October 15, 2007 through December 31, 2013, we have generated no revenue. The timing of the completion of the milestones needed to become profitable is not directly dependent on anything except our ability to develop sufficient revenues. We believe that we can achieve profitability as we are presently organized with sufficient business. Our principal cost will be marketing our product. At this point, we do not know the scope of our potential marketing costs but will use our existing resources to market our product.
If we are not successful in our operations we will be faced with several options:
| 1. | Cease operations and go out of business (which would mean closing the company and having the shareholders lose all or most of their investment); |
| 2. | Continue to seek alternative and acceptable sources of capital (our President and sole Director, Mr. Geoffrey Gibbs is currently our only source of financing. We would look to alternative sources, if available); |
| 3. | Bring in additional capital that may result in a change of control(if we seek additional sources of capital, all shareholders would potentially be diluted, perhaps to the point of a change of control); or |
| 4. | Identify a candidate for acquisition that seeks access to the public marketplace and its financing sources(we might explore potential acquisition candidates, although we have no such candidates at this time) |
Currently, we believe that we have sufficient capital to implement our proposed business operations or to sustain them through December 31, 2014. If we can become profitable, we could operate at our present level indefinitely. To date, we have never had any discussions with any possible acquisition candidate nor have we any intention of doing so.
Proposed Milestones to Implement Business Operations
Our plan is to make our operation profitable by December 31, 2014 by expanding the sales of our data storage product and consulting services.
We believe that we can be profitable or at break even by the end of the current fiscal year, assuming sufficient sales of our product and consulting services. Based upon our current plans, we have adjusted our operating expenses so that cash generated from operations and from working capital financing is expected to be sufficient for the foreseeable future to fund our operations at our currently forecasted levels. To try to operate at a break-even level based upon our current level of anticipated business activity, we believe that we must generate approximately $20,000 in revenue per year. However, if our forecasts are inaccurate, we may need to raise additional funds. On the other hand, we may choose to scale back our operations to operate at break-even with a smaller level of business activity, while adjusting our overhead to meet the revenue from current operations. In addition, we expect that we will need to raise additional funds if we decide to pursue more rapid expansion, the development of new or enhanced services and products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.
We expect to incur operating losses in future periods because we will be incurring expenses and not generating sufficient revenues. We expect approximately $25,000 in operating costs over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business
There is no assurance that additional funds will be made available to us on terms that will be acceptable, or at all, if and when needed. We expect to generate and increase sales, but there can be no assurance we will generate sales sufficient to continue operations or to expand.
We also are planning to rely on the possibility of referrals from clients and will strive to satisfy our clients. We believe that referrals will be an effective form of advertising because of the quality of service that we bring to clients. We believe that satisfied clients will bring more and repeat clients.
In the next 12 months, we do not intend to spend any material funds on research and development and do not intend to purchase any large equipment.
Recently Issued Accounting Pronouncements.
We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.
Seasonality.
We do not expect our revenues to be impacted by seasonal demands for our services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
ITEM 4. CONTROLS AND PROCEDURES
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a -15(e) and 15(d)-15(e) under the Exchange Act), our Chief Executive Officer has concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the applicable time periods specified by the SEC’s rules and forms. As of the end of the period covered by this report, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a -15(e) and 15(d)-15(e) under the Exchange Act), our officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Identified in connection with the evaluation required by paragraph (d) of Rule 240.13a-15 or Rule 240.15d-15 of this chapter that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
There have been no changes to our Risk Factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 14, 2014 for the fiscal year ended September 30, 2013.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following financial information is filed as part of this report:
(a) (1) FINANCIAL STATEMENTS
(2) SCHEDULES
(3) EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:
Exhibit Number | | Description |
| | | |
| | Articles of Incorporation |
| | | |
| | |
| | | |
| | Certification of CEO/CFO pursuant to Sec. 302 |
| | | |
| | Certification of CEO/CFO pursuant to Sec. 906 |
| | XBRL Taxonomy Extension Definition Linkbase Document* |
| | | |
| | |
| | | |
| | XBRL Taxonomy Extension Schema Document |
| | | |
| | XBRL Taxonomy Extension Calculation Linkbase Document |
| | | |
| | XBRL Taxonomy Extension Label Linkbase Document |
| | | |
| | XBRL Taxonomy Extension Presentation Linkbase Document |
| | | |
| | XBRL Taxonomy Extension Definition Linkbase Document |
* Previously filed with Form S-1 Registration Statement, July 26, 2010
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 18, 2014.
| | Bulk Storage Software, Inc. |
| | | |
| | By: | /s/ Geoffrey Gibbs |
| | Geoffrey Gibbs |
| | President, Secretary and Treasurer (principal executive officer and principal financial and accounting officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.
| | | |
| Date: February 18, 2014 | By: | /s/ Geoffrey Gibbs |
| | Geoffrey Gibbs |
| | Director |
