Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995,
including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii)
our strategy for financing our business. Forward-looking statements are statements other than historical information or statements
of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”,
“intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete
financing and purchase capital expenditures, growth of our business including entering into future agreements with companies,
and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely
on our current expectations and projections about future events and financial trends that we believe may affect our financial
condition, results of operations, business strategy and financial needs.
Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the
bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections,
the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us
or any other person that our objectives or plans will be achieved.
We
assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions
affecting forward-looking statements.
Our
revenues and results of operations could differ materially from those projected in the forward-looking statements as a result
of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of
the our company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates,
and changing government regulations domestically and internationally affecting our products and businesses.
You
should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and
the other financial data appearing elsewhere in this Quarterly Report.
US
Dollars are denoted herein by “USD”, “$” and “dollars”.
Overview
We
were incorporated on March 4, 2014 under the laws of the State of Nevada. Since September 15, 2015, we have operated through a
wholly-owned subsidiary RM Fresh Brands Inc. (“RM Fresh”), who services food and beverage retailers and distributors
who are looking for innovative, trend-setting products across North America and in international markets. With a focus on sustainable,
category changing consumables, RM Fresh acquired the rights to distribute an extensive portfolio of highly desirable brands, including
Boxed Water, Cleansify, Uncle Si’s Iced Tea, Chef 5-Minute Meals, Gurkha Cigars, Shimla Foods, Aloe Gloe and Arriba Horchata.
Through a network of sub-distribution partners across Canada, RM Fresh provides national product distribution and brokerage services.
RM Fresh has an emerging focus on the United States and Middle East through the establishment of sub-distribution partners.
On
August 31, 2016, in order to fund the ongoing operation and further development of RM, we consented to new third party investments
into RM in the approximate total amount of $175,000, made in the form of cash and retirement of indebtedness owed by RM. As result
of these new investments into RM, our ownership percentage of the company has been reduced to twenty percent (20%). In addition,
we entered into a new Shareholder Agreement with RM, under which our shares in RM are subject to certain restrictions on transfer
until such time as we declare a shareholder dividend of our RM shares following a going public transaction by RM, or in the alternative,
for one (1) year after RM completes a going public transaction. Further, we disposed of an inter-company liability owed to us
by RM in the amount of CDN$166,961.70. The liability was documented under a Demand Promissory Note issued to us by RM. We then
assigned the note to an investor in RM in exchange for $3,000. Finally, we entered into a mutual Release agreement with RM. Under
the Release, we released and discharged all liabilities owed to us by RM (with the exception of the Demand Promissory Note). RM
in turn released us of all liabilities owing to RM and released us all ongoing contractual and financial responsibilities to RM,
including our contractual obligation to further fund management fees or other expenses to be incurred by RM.
Going
forward, we are continuing as a holding company owning a 20% ownership stake in RM. Our management is also reviewing additional
opportunities for new business.
On
November 16, 2016, the Company amended its Articles of Incorporation with the State of Nevada in order to effectuate a 1 for 1000
reverse stock split and to keep the authorized shares of common stock at 100,000,000 (the “Amendment”). The board
of directors of the Company approved the Amendment on November 15, 2016. The shareholders of the Company approved of the Amendment
by written consent on November 15, 2016.
Results
of Operations – Three Months Ended March 31, 2017 and March 31, 2016
For
the three months ended March 31, 2017, the Company generated no revenue. For the three months ended March 31, 2016, the Company
generated $79,074 in revenue. The decrease in revenue is due to deconsolidation of RM Fresh. The Company’s condensed financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification
of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The
Company has a minimum cash balance available for payment of ongoing operating expenses, has experienced losses from operations,
and it does not have a source of revenue. Its continued existence is dependent upon its ability to continue to execute its operating
plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will
be available, or will be available on terms acceptable to the Company.
Revenue
and gross profit
The
Company had $79,074 in revenue during the three months ended March 31, 2016 from sales made by RM Fresh. The Company made $0 in
gross profit during the three months ended March 31, 2017, as opposed to $47,772 in gross profits during the three months ended
March 31, 2016, mainly through increased sales and a relatively favorable exchange rate.
Net
Loss
We
reported a net loss of $4,457 for the three months ended March 31, 2017 as compared to a net loss of $561,193 for the three months
ended March 31, 2016, respectively. The decrease in losses for the months ended March 31, 2017 as compared to 2016 is due to a
decrease in professional fees and general expenses as a result of deconsolidation of RM Fresh.
Operating
Expenses
Our
total operating expenses for the three months ended March 31, 2017 and March 31, 2016 were $4,378 and $539,004 respectively. The
decrease is primarily due to deconsolidation of RM Fresh.
Translation
Adjustment
Translation
adjustment as a result of the currency exchange rate between U.S. Dollar and Canadian Dollar was $Nil and $7,025 for the three
months ended March 31, 2017 and March 31, 2016, respectively.
Comprehensive
Loss
We
reported a comprehensive loss of $4,457 and $557,168 for the three months ended March 31, 2017 and 2016, respectively. The decrease
is primarily due to a significant decrease in professional fees.
Results
of Operations – Nine months Ended March 31, 2017 and March 31, 2016
For
the nine months ended March 31, 2017, the Company generated $74,042 in revenue. For the nine months ended March 31, 2016, the
Company generated $116,492 in revenue. The decrease in revenue is from deconsolidation of RM Fresh brand. The Company’s condensed
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability
and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue
as a going concern.
The
Company has a minimum cash balance available for payment of ongoing operating expenses, has experienced losses from operations,
and it does not have a source of revenue. Its continued existence is dependent upon its ability to continue to execute its operating
plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will
be available, or will be available on terms acceptable to the Company.
Revenue
and gross profit
Revenue
of $74,402 during the nine months ended March 31, 2017, represents sales made by RM Fresh. Revenue of $116,492 during the nine
months ended March 31, 2016, represents sales made by RM Fresh. The Company made a gross profit of $23,377 during the nine months
ended March 31, 2017, as opposed to a gross profit of $32,363 during the nine months ended March 31, 2016, mainly through decreased
sales.
Operating
Expenses
Our
total operating expenses were $386,585 and $1,267,586 for the nine months ended March 31, 2017 and 2016, respectively. The
decrease is primarily due to a decrease in professional fees
Translation
Adjustment
Translation
adjustment as a result of the currency exchange rate between U.S. Dollar and Canadian Dollar was $0 for the nine months ended
March 31, 2017, compared to $21,128 for the nine months ended March 31, 2016.
Comprehensive
Loss
We
reported a comprehensive loss of $303,441 and $2,675,123 for the nine months ended March 31, 2017 and 2016, respectively. The
decrease is primarily due to a significant increase in expense in 2016 due to impairment of goodwill as a result of the acquisition
of RM Fresh Brand Inc.
Liquidity
and Capital Resources
As
of March 31, 2017, we had cash balance of $7,377. As of June 30, 2016, we had cash balance of $2,993.
The
following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the
nine months ended March 31, 2017 and 2016 respectively:
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For the
nine months ended
March 31,
2017
$
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For the
nine months ended
March 31, 2016
$
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Net Cash Used in Operating Activities
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(29,873
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)
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(308,454
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)
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Net Cash Provided by Investing Activities
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—
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3,671
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Net Cash Provided by Financing Activities
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34,257
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302,736
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Net Increase (Decrease) in Cash and Cash Equivalents
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4,384
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(2,047
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)
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Net
Cash Used in Operating Activities
For
the nine months ended March 31, 2017, net cash used in operating activities was $29,873, primarily attributable to the net loss
for the period.
For
the nine months ended March 31, 2016, net cash used in operating activities was $308,454, primarily attributable to our net loss
of $2,696,251, adjusted by impairment of goodwill of $1,394,135.
Net
Cash Provided by Investing Activities
For
the nine months ended March 31, 2017, net cash provided by investing activities was $0, compared to $3,671 for the nine months
ended March 31, 2016. The decrease is due to reconsolidation of RM Fresh due to loss of control.
Net
Cash Provided by Financing Activities
For
the nine months ended March 31, 2017, net cash provided by financing activities was $34,257, compared to $302,736 for the nine
months ended March 31, 2016. The decrease is mainly attributable to the Company not issuing convertible notes and common stock
to investors in the same amount as in 2016.
We
have limited assets and have generated no revenues since inception. We are also dependent upon the receipt of capital investment
or other financing to fund our ongoing operations and to execute our business plan of seeking a combination with a private operating
company. In addition, we are dependent upon certain related parties to provide continued funding and capital resources.
Going
Concern
Our
unaudited condensed interim condensed financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of business. We have incurred recurring losses from
operations and as at March 31, 2017 has accumulated deficit of $4,182,777 which has primarily arisen from a non-cash goodwill
impairment charge in the current period. Our continued existence is dependent upon our ability to continue to execute our
operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity
financing will be available, or will be available on terms acceptable to us, in which case we may be unable to meet our obligations.
Should we be unable to realize our assets and discharge our liabilities in the normal course of business, the net realizable value
of our assets may be materially less than the amounts recorded in the financial statements. The financial statements do not include
any adjustments relating to the recoverability of recorded asset amounts that might be necessary should we be unable to continue
in existence.
Critical
Accounting Policies and Estimates
Basis
of Presentation and Consolidation
The
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America and are expressed in United States dollars (“USD”).
The
Company’s unaudited condensed interim condensed financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”) for interim financial information and the rules and
regulations of the SEC and are expressed in US dollars. Accordingly, the unaudited condensed interim condensed financial statements
do not include all information and footnotes required by US GAAP for complete annual financial statements. In the opinion of management,
the accompanying unaudited condensed interim condensed financial statements reflect all adjustments, consisting of only normal
recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative
of results that may be expected for the year ending June 30, 2017 or for any other interim period. The unaudited condensed interim
condensed financial statements should be read in conjunction with the audited financial statements of the Company and the notes
thereto as of and for the year ended June 30, 2017.
The
Company’s fiscal year-end is June 30. The parent Company’s functional currency is the US dollar. The subsidiary
operates in Canadian dollars. The Company’s reporting currency is the U.S. dollar.
The
condensed interim condensed financial statements include the accounts of the Company and its wholly-owned subsidiary RM Fresh,
Inc. All inter-company transactions and balances have been eliminated in preparing the condensed financial statements.
Use
of Estimates
The
preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Areas involving significant estimates
and assumptions include inventory valuation reserves, allowance for doubtful account, intangible assets, goodwill, impairment,
income taxes, accruals and going concern assessment. These estimates are reviewed periodically, and, as adjustments become
necessary, they are reported in earnings in the period in which they become known. Actual results could materially differ from
those estimates.
Cash
Cash
includes cash on hand and balances with banks.
Inventories
Inventories
which comprise of finished goods, is valued at the lower of cost and market value, with cost being determined on a first-in, first-out
basis. The cost of finished goods consists of purchase price, freight, custom duties and other delivery expenses. Net realizable
value is the estimated selling price in the ordinary course of business, less any applicable selling costs. The Company evaluated
the carrying value of inventory on a regular basis, taking into account such factors as historical and anticipated future sales
compared with quantities on hand and the price the Company expects to obtain for products in market compared with historical cost.
Revenue
Recognition
The
Company recognizes revenues when they are earned, specifically when all of the following conditions are met:
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ownership of the goods has been transferred to the customers.
Ownership of the goods is transferred to the customers when the good are transferred to a designated carrier in accordance with
shipping terms agreed with the customer.
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there is persuasive evidence that an arrangement exists;
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there are no significant obligations remaining;
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amounts are fixed or can be determined; and
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the ability to collect is reasonably assured.
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Accounts
Receivable
Accounts
receivable are stated at outstanding balances, net of an allowance for doubtful accounts. The allowance for doubtful accounts
is established through provisions charged against income. Accounts deemed to be uncollectible are charged against the allowance
and subsequent recoveries, if any, are credited to the allowance. Management’s periodic evaluation of the adequacy of the
allowance is based on past experience, aging of the receivables, adverse situations that may affect a customer’s ability
to pay, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires estimates
that may be susceptible to significant change. Unpaid balances remaining after the stated payment terms are considered past due.
The Company routinely assesses the financial strength of its customers and, therefore, believes that its accounts receivable credit
risk exposure is limited.
Shipping
and Handling Costs
The
Company accounts for shipping and handling fees in accordance with FASB ASC Topic 705 “Cost of Sales and Services”.
Costs related to raw materials purchased, are included in inventory or cost of goods sold, as appropriate. While amounts charged
to customers for shipping product are included in revenues, the related outbound freight costs are included in expenses as incurred.
Segment
Reporting
The
Company operates in one operating segment based on the activities for the Company in accordance with ASC Topic 280-10.
Operating segments are defined as components of an enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources
and in assessing performance.
Goodwill
and Identifiable Intangible Assets
Goodwill
and other identifiable intangible assets with indefinite lives that are not being amortized, such as trade names, are tested at
least annually for impairment and are written down if impaired. Identifiable intangible assets with finite lives are amortized
over their estimated useful lives and are reviewed for impairment whenever facts and circumstances indicate that their carrying
values may not be fully recoverable. The intangible asset is being amortized over its estimated useful life of 5 years using the
straight-line method.
Earnings
(Loss) Per Share
The
Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings
per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect
is anti-dilutive. There were no potentially dilutive shares outstanding as at March 31, 2017 and June 30, 2016.
Foreign
Currency Translation
The
functional currency of the Company is the US dollar. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains
or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. The
translation gains and losses resulting from the changes in exchange rates are reported in accumulated other comprehensive gain
(loss).
Fair
Value of Financial Instruments
Accounting
Standards Codification Topic 820 “
Fair Value Measurements and Disclosures
” (“ASC 820”) defines
fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of
assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The
standard describes six levels of inputs that may be used to measure fair value:
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Level 1 -
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Valuation
based on quoted market prices in active markets for identical assets or liabilities.
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Level 2 -
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Valuation
based on quoted market prices for similar assets and liabilities in active markets.
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Level 3 -
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Valuation
based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best
estimate of what market participants would use as fair value.
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In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term
nature of these instruments or interest rates that are comparable to market rates. These financial instruments include due from
a shareholder, accounts receivable, accounts payable, accrued expenses and other liabilities, due to shareholders, note payable
and loan payable. The Company’s cash, which is carried at fair value, is classified as a Level 1 financial instruments. Bank accounts
are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Impairment
of Long-Lived Assets
The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts
of the assets may not be recoverable through undiscounted future cash flows. If impairment exists based on expected future undiscounted
cash flows, a loss is recognized in income. The amount of the impairment loss is the excess of the carrying amount of the impaired
asset over the fair value of the asset, typically based on discounted future cash flows.
Income
Taxes
The
Company accounts for under ASC Topic 740 Accounting for Income Taxes. The Company provides for federal and provincial income
taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial
statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in
tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary,
to reduce deferred income tax assets to the amount that is more likely than not to be realized.
Recently
Issued Accounting Pronouncements
In
April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-08, “Presentation of Financial Statements
and Property, Plant, and Equipment - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity’’,
which revises what qualifies as a discontinued operation, changes the criteria for determining which disposals can be presented
as discontinued operations and modifies related disclosure requirements. This ASU will be effective for the Company for applicable
transactions occurring after October 1, 2016. The Company will prospectively apply the guidance to applicable transactions and
does not expect adoption to have a material impact on the financial statements.
On
May 28, 2015, the FASB issued a new financial accounting standard on revenue from contracts with customers, ASU 2015-09, “Revenue
from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In July 2016, the
FASB voted to approve a one-year deferral of the effective date of ASU 2015-09, which will be effective for the Company in the
first quarter of fiscal year 2018 and may be applied on a full retrospective or modified retrospective approach. This ASU will
have no impact on the Company until it begins to generate revenue.
In
June 2015, the FASB issued Accounting Standards Update ASU 2015-10, “Development Stage Entities”. The amendments in
this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial
reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition,
the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements
of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3)
disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year
in which the entity is no longer a development stage entity that in prior years it had’ been in the development stage. The
amendments in this update are applied retrospectively.
On
August 27, 2015, the FASB issued a new financial accounting standard on going concern, ASU 2015-15, “Presentation of Financial
Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern”. The standard provides guidance about management’s responsibility to evaluate whether there is substantial
doubt about the organization’s ability to continue as a going concern. The amendments apply to all companies and are effective
in annual periods ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact
of this accounting standard on its financial statements.
On
April 7, 2016, the FASB issued ASU No. 2016-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation
of Debt Issuance Costs”. The amendments in this ASU require that debt issuance costs related to a recognized debt liability
be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts and the accounting for debt issue costs under IFRS. The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this ASU. The amendments apply to all companies and are effective for public business entities
in annual periods ending after December 15, 2016, and interim periods within those fiscal years, with early application permitted.
The Company is currently evaluating the impact of this accounting standard on its financial statements.
Off
Balance Sheet Arrangements
We
do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital
resources that are material to an investment in our securities.