Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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The following discussion is intended
to assist you in understanding our business and results of operations together with the Company’s present financial condition.
This section should be read in conjunction with our historical combined and consolidated financial data included elsewhere in this
Memorandum. Statements in the Company’s discussion may be forward-looking statements. These forward-looking statements involve
risks and uncertainties. The Company cautions that a number of factors could cause future production, revenues and expenses to
differ materially from our expectations. Please see “Cautionary Note Regarding Forward-Looking Statements.”
Overview
Powerstorm Capital Corporation is a development
stage company formed solely for the purpose of identifying and consulting with companies related to telecommunications infrastructure.
We intend to focus on targets based primarily in Asia, South America, and Europe for two reasons. First, we believe that businesses
with an operating history and growth potential in these locations would benefit significantly from access to the United States
markets. Second, companies in emerging markets may offer the potential of capital appreciation as those markets experience economic
growth.
Our Strategy
We intend to capitalize on the continued
increase in the use of wireless communication services and the resulting infrastructure requirements for current and future generations
of wireless communication technologies. To that end, we are focusing on three segments of the telecom infrastructure market:
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·
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New and
refurbished telecom equipment
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·
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Spare part and asset management solutions
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·
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Telecom tower and hybrid power solutions
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Due to the continued increase in subscribers
for wireless personal communication and phone services, we expect wireless carriers will need to add a significant number of cell
sites to maintain the performance of their networks in the areas they currently cover and to extend service to new markets. In
addition, we believe that as wireless data services, such as e-mail, Internet access, and video, are deployed on a widespread basis,
wireless carriers will need to augment the cell density of their existing networks. The widespread deployment of those services
also may necessitate an overlay of new technology equipment and increase the demand for geographic expansion of network coverage.
The telecom tower business in particular
is experiencing explosive growth, requiring substantial investment. Smaller companies are finding it difficult to commit the necessary
resources. We believe that, rather than constructing and operating their own towers and maintaining their own tower service and
development capabilities, wireless carriers increasingly will outsource their tower infrastructure needs in order to improve existing
service coverage, implement new technology, accelerate access to their markets, and preserve capital. We see a clear market opportunity
and growth for Powerstorm to address these needs if we can acquire and integrate the right mix of companies to complement our
expertise in telecommunications infrastructure.
Results of Operations
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Three
Months
Ended
June 30, 2013
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|
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Three
Months
Ended
June 30, 2012
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|
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Six
Months
Ended
June 30, 2013
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|
|
Six
Months
Ended
June 30, 2012
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|
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From October 10,
2011
(Inception)
Through June 30, 2013
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|
Revenues
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|
$
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4,400
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|
|
$
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-
|
|
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$
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6,600
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|
|
$
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-
|
|
|
$
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6,600
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|
Total operating expenses
|
|
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(34,821
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)
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|
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(20,062
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)
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|
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(62,927
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)
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|
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(37,053
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)
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|
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(164,909
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)
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Other Income
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|
|
-
|
|
|
|
-
|
|
|
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270
|
|
|
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-
|
|
|
|
270
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|
Net loss
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|
$
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(30,421
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)
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$
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(20,062
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)
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$
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(56,327
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)
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$
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(37,053
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)
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$
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(158,039
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)
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For the Three Months Ended June 30, 2013 and 2012
Revenues
We are still in our development stage and
have generated insignificant revenues from consulting services of $4,400 during the three months ended June 30, 2013 and $0 revenues
during the three months ended June 30, 2012.
Operating Expenses
We incurred total operating expenses of
$34,821 and $20,062 for the three months ended June 30, 2013 and 2012, respectively. These expenses primarily consisted of general
and administrative expenses incurred in connection with the day-to-day operation of our business which were comprised of audit
and accounting fees of $6,908 and $10,375, legal fees of $9,525 and $0, filing fees of $8,595 and $0, rent expense of $4,668 and
$4,240, marketing expenses of $3,250 and $0, stock-based compensation of $0 and $2,100, and other expenses totaling $1,875 and
$3,347 for the three months ended June 30, 2013, and 2012, respectively.
Net Loss
During the three month ended June 30, 2013
and 2012, we incurred a net loss of $30,421 and $20,062, respectively.
For the Six Months Ended June 30, 2013 and 2012
Revenues
We are still in our development stage and
have generated insignificant revenues from consulting services of $6,600 during the six months ended June 30, 2013 and $0 revenues
during the three months ended June 30, 2012.
Operating Expenses
We incurred total operating expenses of
$62,927 and $37,053 for the six months ended June 30, 2013 and 2012, respectively. These expenses primarily consisted of general
and administrative expenses incurred in connection with the day-to-day operation of our business and were comprised of audit and
accounting fees of $24,789 and $15,875, legal fees of $9,525 and $0, filing fees of $10,837 and $0, rent expense of $9,406 and
$7,757, marketing expenses of $3,925 and $0, stock-based compensation of $0 and $5,100, and other expenses totaling $4,445 and
$8,321 for the six months ended June 30, 2013, and 2012, respectively.
Net Loss
During the six month ended June 30, 2013
and 2012, we incurred a net loss of $56,327 and $37,053, respectively.
From October 20, 2011 (Inception) through June 30, 2013
Revenues
For the period from October 10, 2011 (Inception)
to June 30, 2013, we generated insignificant revenues from consulting services of $6,600.
Operating Expenses
We incurred total operating expenses of
$164,909 for the period since inception on October 10, 2011 to June 30, 2013, which consisted primarily of general and administrative
expenses. Our general and administrative expenses were comprised of audit and accounting fees of $55,974, legal fees of $28,354,
rent expense of $26,340, stock-based compensation to our founders and third-party service providers of $20,213, filing fees of
$13,089, marketing expenses of $4,225, and other expenses totaling $16,714. The legal fees were primarily incurred in connection
with the preparation and filing of the registration statement with the SEC.
Net Loss
We had a net loss of $158,039 for the period
from October 10, 2011 (Inception) to June 30, 2013 due to incurred operating expenses and insignificant revenues.
Liquidity and Capital Resources
Our financial condition as of June 30,
2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012 is summarized as follows:
Working Capital:
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June 30, 2013
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|
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December 31, 2012
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Current assets
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$
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4,962
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$
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3,814
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Current liabilities
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|
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(33,301
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)
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|
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(28,424
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)
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Working capital (deficit)
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$
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(28,339
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)
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$
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(24,610
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)
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Cash Flows:
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Six Months
Ended
June 30,
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|
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From October 10,
2011
(Inception)
through
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|
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2013
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|
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2012
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|
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June 30, 2013
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Cash used in operating activities
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$
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(37,364
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)
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$
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(24,746
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)
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$
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(91,798
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)
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Cash used in investing activities
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|
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(1,500
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)
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|
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(7,367
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)
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|
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(9,287
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)
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Cash provided by financing activities
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|
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39,518
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|
|
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41,944
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|
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105,298
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Net increase in cash
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$
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654
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$
|
9,831
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$
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4,213
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We are a development stage company and
have incurred an accumulated loss of $158,039 since inception. Powerstorm has working capital deficit of $28,339 at June 30,
2013, which is not sufficient to finance its business plan for the next twelve months. Our independent auditors have issued
an audit opinion for us for the financial statements ended December 31, 2012 and the period than ended, which includes a statement
expressing substantial doubt as to our ability to continue as a going concern due to our limited liquidity and our lack of revenues.
We have minimal operating expenses at the
present time due to our limited business activities. To date, our founders have provided funding for our operations. We will, however,
be required to raise additional capital over the next twelve months to meet our current administrative expenses.
We are planning to obtain financing either
through the issuance of equity or debt. To the extent that funds generated from any private placements, public offerings, and/or
bank financings are insufficient, we will have to raise additional working capital through other sources.
We
didn’t have sufficient resources to effectuate our business plan from October 10, 2011 (Inception) through the period ended
June 30, 2013. We expected to incur a minimum of $150,000
in
expenses during the next 12 months of operations.
We indicated that we would have to raise
the funds to pay for these expenses. We may have to borrow money from founders or shareholders, issue debt or equity, or enter
into a strategic arrangement with a third party. There is no assurance that we will secure additional capital. There currently
are no agreements, arrangements, or understandings that would enable Powerstorm to obtain funds through bank loans, lines of credit,
or any other source. If we are unable to raise funds for acquisitions it will have a severe negative impact on our ability to execute
our business.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Estimates
In preparing our financial statements,
we make estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity,
revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future
events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on
generally accepted methods. In some cases, these estimates are particularly difficult to determine and we must exercise significant
judgment. We periodically evaluate our estimates and judgments that are most critical in nature. We believe that the following
discussion of critical accounting policies address all important accounting areas where the nature of accounting estimates or assumptions
is material due to the levels of subjectivity and judgment. Actual results could differ materially from the estimates and assumptions
that we use in the preparation of our financial statements.
Intangible Assets
The Company’s intangible assets consist
of trademarks with indefinite life. The Company capitalizes the filing and legal fees related to the trademark registrations, which
totaled $5,199 and $4,570 as of June 30, 2013 and December 31, 2012, respectively. The Company reviews its indefinite-lived intangible
assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The
Company assesses recoverability by reference to future cash flows from the products underlying these intangible assets. If these
estimates change in the future, the Company may be required to record impairment charges for these assets. As of June 30, 2013,
no impairment was recorded.
Stock-Based Compensation
The Company expenses the cost of employee
services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the
service period.
Equity instruments issued to parties other
than employees for acquiring goods or services are recorded at either the fair value of the consideration received or the fair
value of the instruments issued in exchange for such services, whichever is more reliably measurable.
Recent Accounting Pronouncements
The Company does not expect adoption of the new accounting
pronouncements will have a material effect on the Company’s financial statements.
Subsequent Events
On July 20, 2013, the Company issued 100,000
shares of common stock to a third party for cash proceeds of $10,000. The issuance of shares is exempt from registration, pursuant
to Section 4(2) of the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act
since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering
and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number
of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed
to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities
Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be
part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act for this transaction.