Item
1. Financial Statements
PetroTerra
Corp. and Subsidiary
Consolidated
Balance Sheet
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,103
|
|
|
$
|
11,725
|
|
Restricted cash
|
|
|
10,000
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
676
|
|
|
|
676
|
|
Deferred expense
|
|
|
-
|
|
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
15,779
|
|
|
|
14,351
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
15,779
|
|
|
$
|
14,351
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
34,365
|
|
|
$
|
1,318
|
|
Deferred revenue
|
|
|
-
|
|
|
|
2,800
|
|
Payroll taxes payable
|
|
|
-
|
|
|
|
2,107
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
34,365
|
|
|
|
6,225
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
34,365
|
|
|
|
6,225
|
|
Commitments and contingencies (Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's Equity:
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred stock, par value $0.001 per share; authorized
4,000,000 shares; issued and outstanding 4,000,000 shares (Liquidation value $4,000,000)
|
|
|
4,000
|
|
|
|
-
|
|
Common stock, par value $0.001 per share; authorized 500,000,000 shares; issued and outstanding
115,147,064 and 114,202,944 at March 31,2017 and December 31, 2016, respectively
|
|
|
115,147
|
|
|
|
114,203
|
|
Additional paid-in capital
|
|
|
(111,047
|
)
|
|
|
(106,103
|
)
|
Retained earnings (Accumulated deficit)
|
|
|
(26,686
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity (Deficit)
|
|
|
(18,586
|
)
|
|
|
8,126
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity (Deficit)
|
|
$
|
15,779
|
|
|
$
|
14,351
|
|
The
accompanying notes are an integral part of these consolidated financial statements
PetroTerra
Corp. and Subsidiary
Consolidated
Statement of Operations
(Unaudited)
|
|
For the three
months ended
March 31, 2017
|
|
Revenues
|
|
$
|
26,272
|
|
|
|
|
|
|
Total Revenue
|
|
|
26,272
|
|
|
|
|
|
|
Cost of Revenues
|
|
|
|
|
Carrier fees
|
|
|
17,450
|
|
Dispatch costs
|
|
|
450
|
|
|
|
|
|
|
Total Cost of Revenues
|
|
|
17,900
|
|
|
|
|
|
|
Gross Profit
|
|
|
8,372
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
Legal and professional
|
|
|
31,650
|
|
Rent - affiliate
|
|
|
900
|
|
General and administrative expenses
|
|
|
2,534
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
35,084
|
|
|
|
|
|
|
Operating Loss
|
|
|
(26,712
|
)
|
|
|
|
|
|
Net Loss
|
|
$
|
(26,712
|
)
|
|
|
|
|
|
Net Loss per Common Share
|
|
|
|
|
Basic and Diluted
|
|
$
|
-
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
Basic and Diluted
|
|
|
114,213,434
|
|
The
accompanying notes are an integral part of these consolidated financial statements
PetroTerra
Corp. and Subsidiary
Consolidated
Statement Of Changes In Stockholder's Equity (Deficit)
Three
Months Ended March 31, 2017
(Unaudited)
|
|
Preferred
Stock Series A
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
Earnings (Accumulated
|
|
|
Total
Stockholders’
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
114,202,944
|
|
|
$
|
114,203
|
|
|
$
|
(106,103
|
)
|
|
$
|
26
|
|
|
$
|
8,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
944,120
|
|
|
|
944
|
|
|
|
(4,944
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for three months ended March 31,2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,712
|
)
|
|
|
(26,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at March
31, 2017
|
|
|
4,000,000
|
|
|
$
|
4,000
|
|
|
|
115,147,064
|
|
|
$
|
115,147
|
|
|
$
|
(111,047
|
)
|
|
$
|
(26,686
|
)
|
|
$
|
(18,586
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements
PetroTerra
Corp. and Subsidiary
Consolidated
Statement Of Cash Flows
(Unaudited)
|
|
For the three
months ended
March 31, 2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(26,712
|
)
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
Increase (decrease) in cash resulting from changes in:
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
1,950
|
|
Accounts payable
|
|
|
23,047
|
|
Deferred revenue
|
|
|
(2,800
|
)
|
Payroll tax payable
|
|
|
(2,107
|
)
|
|
|
|
|
|
Net Cash Provided By (Used In) Operating Activities
|
|
|
(6,622
|
)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Restricted cash acquired
|
|
|
10,000
|
|
|
|
|
|
|
Net Cash Provided by Investing Activities
|
|
|
10,000
|
|
|
|
|
|
|
Net Increase in Cash, Cash Equivalents and Restricted Cash
|
|
|
3,378
|
|
|
|
|
|
|
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
|
|
|
11,725
|
|
|
|
|
|
|
Cash, Cash Equivalents and Restricted Cash at End of Period
|
|
$
|
15,103
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income Taxes
|
|
$
|
-
|
|
The following
table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial
position that sum to the total of the same such amounts shown in the statement of cash flows
|
|
|
March 31, 2017
|
|
Cash and cash equivalents
|
|
$
|
5,103
|
|
Restricted Cash
|
|
|
10,000
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
15,103
|
|
The
accompanying notes are an integral part of these consolidated financial statements
PETROTERRA
CORP.
Notes
To The Consolidated Financial Statements
March
31, 2017
(Unaudited)
Note
1 – Organization and Business Operations
PetroTerra
Corp. (the “Company”) was incorporated under the laws of the State of Nevada, on July 25, 2008 and prior to the reverse
merger discussed below, was inactive.
Save
On Transport Inc. (“Save On”) was incorporated in the state of Florida and started business on July 12, 2016 (“Inception
Date”). Save On is a provider of integrated transportation management solutions consisting of brokerage and logistic services
such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other
freight. Save On has generated nominal revenue to date and consequently its operations are subject to all risks inherent in the
establishment of a new business enterprise.
On
March 30, 2017 (the “Closing Date”), Petroterra Corp. and Save On entered into a Share Exchange Agreement, dated as
of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, Save On
became a wholly-owned subsidiary of Petroterra Corp. on the Closing Date (the “Reverse Merger”). The
Combined companies are hereafter referred to as the “Company”.
The
transaction is being accounted for as a reverse merger between a private company and an inactive public company in which Save
On, the private company, is considered to be the acquirer of Petroterra Corp. since the sole shareholder of Save On obtained approximately
99% voting control and management and board control. Accordingly, the reverse merger is accounted for as a recapitalization of
Save On in which the assets and liabilities of both companies, on the transaction date, are recorded at their historical book
values, the equity of Save On is retroactively restated to give effect to the exchange of the Save On shares for Petroterra Corp.
shares, the historical activity of the combined entity is that of Save On and the activity of Petroterra Corp. is recorded only
from the date of the transaction.
Note
2 – Going Concern
The
accompanying unaudited consolidated financial statements are prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is in an
early stage and the net loss and cash used in operations for the three months ended March 31, 2017 was $26,712 and $6,622, respectively.
The company had a working capital deficit, accumulated deficit and stockholders’ deficit of $18,586, $26,686, and $18,586
as of March 31, 2017, respectively, and further losses are anticipated in the development of its business. It is management’s
opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve
months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon increasing
revenues both organically, with increased marketing efforts, and potential acquisition targets, which would be accretive to the
Company. Additional capital may be required for the Company to meet its revenue growth plans. The consolidated financial statements
do not include any adjustments relating to recovery of recorded assets or classification of liabilities should the Company be
unable to continue as a going concern.
Note
3 – Summary of Significant Accounting Policies
Basis
of Presentation
The
unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting
principles in the United States of America and the rules and regulations of the United States Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive
presenation of financial position, results of operations or cash flow.
PETROTERRA CORP.
Notes
To The Consolidated Financial Statements
March
31, 2017
(Unaudited)
However,
these unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which,
in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these
unaudited interim consolidated financial statements be read in conjunction with the financial statements of Save On Transport,
Inc. for the year ended December 31, 2016, and notes thereto included in the Company’s current report on Form 8-K, filed
on April 5, 2017. The Company follows the same accounting policies in the preparation of its annual and interim reports. The results
of operations in interim periods are not necessarily an indication of operating results to be expected for the full year.
Principles
of Consolidation
The
unaudited consolidated financial statements of the Company include the consolidated accounts of Petroterra Corp. and its wholly
owned subsidiary, Save On. All intercompany accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of the unaudited consolidated financial statements, in accordance with United States Generally Accepted Accounting
Principles, requires management to make estimates and assumptions about future events that affect the amounts reported in the
Company’s consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates and periodically
adjusts its estimates and assumptions, based on historical experience, the impact of the current economic environment, and other
key factors. Volatile energy markets, as well as changes in consumer spending, have increased the inherent uncertainty in such
estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ
significantly from these estimates. Significant estimates included in the accompanying unaudited consolidated financial statements
and footnotes include the valuation of derivative instruments.
Revenue
Recognition and Cost of Revenue
The
Company recognizes operating revenues and the related direct costs of such revenue as of the date the freight is delivered by
the carrier. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees
if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 605-45, Principal Agent Considerations,
the Company recognizes revenue on a gross basis.
PETROTERRA
CORP.
Notes
To The Consolidated Financial Statements
March
31, 2017
(Unaudited)
Note
3 – Summary of Significant Accounting Policies (Continued)
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Basic
and Diluted Loss Per Share
The
Company computes loss per share in accordance with ASC-260, “Earnings per Share” which requires presentation of both
basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing
net loss available to common stockholders by the weighted average number of outstanding shares of common stock during the period.
Diluted loss per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive loss
per share excludes all potential shares of common stock if their effect is anti-dilutive. The Company has no potential dilutive
instruments and accordingly basic loss and diluted loss per share are equal.
PETROTERRA
CORP.
Notes
To The Consolidated Financial Statements
March
31, 2017
(Unaudited)
Recent
Accounting Pronouncements
In
August 2015, FASB issued ASU 2015-14, Deferral of the Effective Date, which amends ASC Topic 606, Revenue from Contracts with
Customers. ASC Topic 606 was established by previously-issued ASU 2014-09, discussed below. For public business entities, the
amendments in ASU 2015-14 defer the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017.
Early adoption of ASU 2014-09 is permitted. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers , which
established ASC Topic 606. The new revenue recognition standard eliminates all industry-specific guidance and provides a five-step
analysis of transactions to determine when and how revenue is recognized. The premise of the guidance is that a company should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. The amendments in this ASU may be applied
retrospectively to each period presented, or as a cumulative effect adjustment as of the date of adoption. Management is currently
evaluating the accounting, transition and disclosure requirements of the standard and expects to know the financial statement
impact upon adoption in 2018.
PETROTERRA
CORP.
Notes To The Consolidated Financial Statements
March 31, 2017
(Unaudited)
Note
4 - Deferred Expenses
The
following table presents the composition of deferred expenses:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Carrier Fees
|
|
$
|
—
|
|
|
$
|
1,950
|
|
Deferred expenses
|
|
$
|
—
|
|
|
$
|
1,950
|
|
Note
5 - Accounts Payable and Accrued Liabilities
The
following table presents the composition of accounts payable and accrued liabilities:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Accounts Payable
|
|
$
|
24,365
|
|
|
$
|
1,318
|
|
Accrued Expenses
|
|
|
10,000
|
|
|
|
—
|
|
Accounts payable and accrued expense
|
|
$
|
34,365
|
|
|
$
|
1,318
|
|
PETROTERRA
CORP.
Notes To The Consolidated Financial Statements
March 31, 2017
(Unaudited)
Note
6 – Commitments and Contingencies
From
time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business.
As of March 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect
on results of our operations.
Note
7 – Stockholders’ Equity
Preferred
The
preferred stock is designated Series A Convertible Preferred Stock. Each share of preferred stock has a par value of $.001
and a stated value of $1.00. Dividends are payable at the rate per share of 7% per annum cumulative. The Series A
preferred shares have no voting rights, except as required by law. Each share of preferred stock is convertible at a conversion
price of $.0833 at the option of the holder; provided, however, if a triggering event occurs, as defined in the document, the
conversion price shall thereafter be reduced, and only reduced, to equal forty percent of lowest VWAP during the thirty consecutive
trading day period prior to the conversion date . The beneficial ownership limitation attached to conversion is 4.99% which
can be decreased or increased, upon not less than 61 days notice to the Company, but in no event exceeding 19.99% of the number
of shares of common stock outstanding immediately after giving effect to the issuance of common stock upon conversion of the preferred
stock. After 36 months the Company has the right to redeem all, but not less than all, of the outstanding preferred shares
in cash at a price equal to 130% of the stated value plus any accrued but unpaid dividends thereon. Total shares issuable upon conversion shall not exceed 48,000,000 in the aggregate.
Recapitalization
On
March 30,2017, the Company closed the Share Exchange Agreement between Save on and Petroterra Corp. and is deemed to
have issued 4,000,000 Series A convertible preferred shares and 944,120 common shares to the original shareholders of
Petroterra Corp. The Company acquired assets of $10,000 and assumed liabilities of $10,000.
PETROTERRA
CORP.
Notes
To The Consolidated Financial Statements
March
31, 2017
(Unaudited)
Note
8 – Related Party Transactions
The
Company executed a sublease agreement with an affiliate for office space for a one year term. The sublease commenced on August
1, 2016 at a rate of $300 per month.
Note
9 – Subsequent Events
On
April 25, 2017, the Company entered into a Securities Purchase Agreement with RedDiamond Partners LLC
(“RedDiamond”) pursuant to which the Company would issue to RedDiamond Convertible Promissory Notes in an
aggregate principal amount of up to $355,000, which includes a purchase price of $350,000 and transaction costs of $5,000. On
April 25, 2017, the Company received the initial Tranche of $95,000, which is a loan amount of $100,000, net of the $5,000
fee, recorded as convertible note payable. The initial Tranche matures on April 25, 2018 and each tranche will mature 1
year after the date of such funding. The second Tranche will be for $85,000 and will occur upon the later of: (i) thirty
(30) days after the First Closing; and (ii) the Filing Date of the Registration Statement. The third Tranche will be for
$85,000 and will occur sixty (60) days after the First Closing. The fourth Tranche will be for $85,000 and will occur ninety
(90) days after the First Closing. The Purchaser shall not be required to fund any Tranche subsequent to the first Tranche if
there is an event of default as described in the promissory notes. The RedDiamond Note bears interest at a rate of 12%
per annum and is convertible into shares of the Company’s common stock at RedDiamond’s option at 65% of the
lowest VWAP for the previous ten trading days preceding the conversion.
In
connection with the issuance of the Convertible Promissory Note above, the Company determined that the terms of the Convertible
Promissory Note included a down-round provision under which the conversion price could be affected by future equity offerings
undertaken by the Company.
Accordingly,
under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”,
the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date
of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion
option derivatives were determined using the Black-Scholes valuation model. On the initial measurement date, the fair value
of the embedded conversion option derivatives of $132,702 was recorded as derivative liabilities and was allocated as a debt discount
up to the net proceeds of the Convertible Promissory Note of $95,000 with the remainder of $37,702 charged as initial derivative
expense.
On
April 25, 2017, initial measurement date, the fair value of the derivative liabilities was estimated using the Black-Scholes valuation
model with the following assumptions: dividend rate 0%, expected term 1.0 year, expected volatility 404.5%,
risk-free interest rate 1.09%.
FORWARD
LOOKING STATEMENTS
Statements
made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to
the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements often can be identified
by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,”
“estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking
statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s
best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and
important factors beyond our control that could cause actual results and events to differ materially from historical results of
operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or
unanticipated events.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Overview
We
were originally incorporated under the laws of the State of Nevada on July 25, 2008 under the name Loran Connection Corp. We were
formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently
filed a resale registration statement with the SEC on May 28, 2009, which was declared effective on October 28, 2009. On January
25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra
Corp.” and effect a one-for-thirty-two reverse split of our outstanding shares of common stock. We changed our name to reflect
a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of
the Company, the Company began business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of
change to effect a one-for-two reverse stock split of our outstanding shares of common stock and preferred stock. On July 1, 2015,
we filed a certificate of change to effect a one-for-two and one half reverse stock split of our outstanding shares of common
stock. Since January 2016, as a result of the decline in the oil and gas markets, we generated minimal sales revenue and our operations
were subject to all the risks inherent in the establishment of a new business enterprise. Since January 2016, we have not engaged
in any operations and our business has been dormant. As such, we have been a “shell” company, as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Reverse
Merger
On
March 30, 2017 (the “Closing Date”), our company and Save on Transport entered into a Share Exchange Agreement dated
as of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, Save
on Transport became a wholly-owned subsidiary of ours on the Closing Date (the “Reverse Merger”). In the Reverse Merger,
we purchased all of the issued and outstanding common stock of Save on Transport from Steven Yariv, and in exchange, we issued
114,202,944 shares of our common stock, par value $0.001 per share (the “Common Stock”), to Steven Yariv, and Steven
Yariv was appointed Chief Executive Officer and elected as the Chairman of our Board of Directors.
Save
on Transport operates as an automobile shipping company that provides transportation, brokerage, and logistics services relating
to vehicle shipping.
At
the closing of the Reverse Merger, Lawrence Sands, our former Chief Executive Officer, Chief Financial Officer and sole director,
resigned from all of his positions. Steven Yariv was also elected as the Chairman of our Board of Directors and appointed Chief
Executive Officer.
As
a result of the Reverse Merger and the change in business and operations of our company from a public “shell” company
to a company engaged in the business of automobile shipping, a discussion of the past financial results of our company is not
pertinent, and under generally accepted accounting principles in the United States the historical financial results of Save on
Transport, the accounting acquirer, prior to the Reverse Merger are considered the historical financial results of our company.
The Reverse Merger was accounted for as a recapitalization effected by a Reverse Merger, wherein Save on Transport is considered
the acquirer for accounting and financial reporting purposes.
The
following discussion highlights the results of operations of Save on Transport and the principal factors that have affected its
financial condition as well as its liquidity and capital resources for the periods described, and provides information that management
believes is relevant for an assessment and understanding of the financial condition and results of operations presented herein.
The following discussion and analysis is based on the unaudited financial statements contained in this Quarterly Report, which
has been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion
and analysis together with such financial statements and the related notes thereto.
Basis
of Presentation
The
unaudited financial statements for the period for the three months ended March 31, 2017 include a summary of our significant accounting
policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary
to present fairly the results of operations for such periods have been included in these unaudited financial statements. All such
adjustments are of a normal recurring nature.
RESULTS
OF OPERATIONS
Our
financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be
unable to continue our operation.
We
expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital
through, among other things, the sale of equity or debt securities.
For
the three months ended March 31, 2017
The
following table sets forth our revenues, expenses and net loss for the period ended March 31, 2017. The financial information
below is derived from our unaudited financial statements included as an exhibit to this Quarterly Report.
|
|
For the three months ended March 31, 2017
|
|
Revenue
|
|
$
|
26,272
|
|
Cost of Sales
|
|
$
|
17,900
|
|
Gross Profit
|
|
$
|
8,372
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
Legal and professional
|
|
$
|
31,650
|
|
Rent - affiliate
|
|
$
|
900
|
|
General and administrative expenses
|
|
$
|
2,534
|
|
Total Operating Expenses
|
|
$
|
35,084
|
|
|
|
|
|
|
Operating Loss
|
|
$
|
(26,712
|
)
|
Net Loss
|
|
$
|
(26,712
|
)
|
Revenues
The
Company’s revenues were $26,272 for the three month period ended March 31, 2017. The revenue consists of individual customers
contracting to transport a vehicle from location to location.
Cost
of Revenue
Our
cost of revenue was $17,900 for the three month period ended March 31, 2017 consisting primarily of $17,450 in carrier fees.
Operating
Expenses
Total
operating expenses were $35,084 for the three months ended March 31, 2017, including legal and professional fees of $31,650, rent
to an affiliate of $900 and general and administrative expenses of $2,534.
Operating
Income and Net Income
The
Company’s operating loss and net loss were $26,712 for the three months ended March 31, 2017.
Weighted
average number of shares
The
weighted average number of shares outstanding was 114,213,434 for the three-month period ended March 31, 2017.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. At March 31, 2017, we had a cash balance of $5,103 and restricted cash of $10,000. Our working capital
deficit was $18,586 at March 31, 2017.
We
reported a net increase in cash for the three months ended March 31, 2017 of $3,378.
Operating
activities
Net
cash flows used in operating activities for the three months ended March 31, 2017 amounted to $6,622 and was primarily attributable
to net loss of $26,712, offset by an increase in cash due to prepaid expenses and other current assets of $1,950 and an increase
in accounts payable of $23,047, less a decrease in cash from deferred revenue of $2,800 and payroll tax payable of $2,107.
Investing
activities
Net
cash flows provided by investing activities for the three months ended March 31, 2017 was comprised of a $10,000 cash escrow acquired
on March 30, 2017 in connection with the reverse merger, to be held for a six month period to pay unpaid liabilities in conjunction
with the Reverse Merger. At the end of the six months, any remaining balance will be due to the former CEO.
Going
Concern Consideration
Our
operations and financial results are subject to numerous various risks and uncertainties that could adversely affect our business,
financial condition and results of operations. The Company is in an early stage and the net loss and cash used in operations for
the three months ended March 31, 2017 was $26,712 and $6,622, respectively. The company had a working capital deficit, accumulated
deficit and shareholders’ deficit of $18,586, $26,686 and $18,586 as of March 31, 2017, respectively, and further losses
are anticipated in the development of its business. It is management’s opinion that these matters raise substantial doubt
about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. The
ability of the Company to continue as a going concern is dependent upon increasing revenues both organically, with increased marketing
efforts, and potential acquisition targets, which would be accretive to the Company. Additional capital may be required for the
Company to meet its revenue growth plans. Our future financial results are also uncertain due to a number of factors, some of
which are outside our control. These risk factors include, but are not limited to, our ability to raise additional funding and
the results of our proposed operations.
Contractual
Obligations
We
may have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business
needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates.
We cannot provide certainty regarding the timing and amounts of payments.
OFF-BALANCE
SHEET ARRANGEMENTS
As
of the date of this Quarterly Report, 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, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to investors.
Significant
Accounting Policies and Critical Accounting Estimates
The
methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that
we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments,
often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting
estimates include:
Derivative
Financial Instruments –
The Company does not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine
if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued
at each reporting date, with changes in the fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Revenue
Recognition –
We recognize revenue in accordance with ACS - 605, “Revenue recognition”, ASC-605 requires
that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery
has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably
assured. The Company recognizes operating revenues and the related direct costs of such revenue as of the date the freight is
delivered by the carrier. Customer payments received prior to delivery are recorded as a deferred revenue liability and related
carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 605-45,
Principal
Agent Considerations,
the Company recognizes revenue on a gross basis.
Recently
Enacted Accounting Standards
For
a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects,
if any, on our consolidated financial statements, see “Note 3: Recent Accounting Pronouncements” in the financial
statements filed with this Quarterly Report.