Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains
forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity,
cash flows, and business prospects. These statements include, among other things, statements regarding:
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our ability to diversify our operations;
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inability to raise additional financing for working capital;
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the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
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our ability to attract key personnel;
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our ability to operate profitably;
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our ability to generate sufficient funds to operate the US-DADI Fertilizer Industry International, Inc. operations, upon completion of our acquisition;
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deterioration in general or regional economic conditions;
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adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
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changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
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the inability of management to effectively implement our strategies and business plan;
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inability to achieve future sales levels or other operating results;
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the unavailability of funds for capital expenditures;
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other risks and uncertainties detailed in this report;
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as well as other statements regarding our future operations,
financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties
that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q,
and in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A and those discussed in
other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the
results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements.
References in the following discussion and throughout
this quarterly report to “we”, “our”, “us”, “US-DADI”, “the Company”,
and similar terms refer to US-DADI Fertilizer Industry International, Inc. unless otherwise expressly stated or the context otherwise
requires.
OVERVIEW AND OUTLOOK
Background
US-DADI Fertilizer Industry International,
Inc. is a development stage company incorporated in the State of California on August 11, 2010. Our stated business objective is
a fertilizer-related products and equipment exporter. Since our inception on August 11, 2010 through June 30, 2016, we generated
no revenues from that line of business.
According to the October 8, 2012, report in Harbin Tonghe
County television, after Dadi Fertilizer Technology International (USA) Ltd. and Harbin HaiXin Biological Fertilizer Co., Ltd.
reached an agreement, through the use of organic fertilizer from the cooperation projects of US Dadi Company, it had achieved great
success in helping Tonghe County water rice cooperatives to plant “Daohuaxiang #7.” The success caused a big
stir in Tonghe County. According to the introduction of Chairman Liu Haitao of Dadi Fertilizer Technology International (USA)
Ltd., the successful work of “seed transplant” owed thanks to the superb quality and performance of the company’s
fertilizer products, therefore each co-op is required to use 800 tons of “Hai Lu Xin” organic fertilizer next year,
the result is the cumulative increase sales will reach 10 million yuans or more.
November 20, 2012, Harbin City TV news channels reported:
Dadi Fertilizer Technology International (USA) Limited's "HaiXin water rice farmer cooperatives" collected a harvest
on the organic water rice, the total output of 2,000 hectares was up to 16,700 tons, yielding 9% more than other plots, thanks
to an antagonistic bio-organic fertilizer developed by the latest technology of Chinese Academy of Science, and produced by US
Dadi Company. The great harvest provided the most powerful protection to the supply of raw materials of "Ma Lang He"
brand of organic rice. The great harvest also will greatly stimulate next year’s fertilizer sales and the rapid expansion
of water rice production base.
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According to Harbin TV News Channels reports of two advanced
cases on December 8, 2012 and December 9, 2012: Teng Yanhua, a farmer from Harbin Tonghe County Fulin Township Chalin Village,
and Ba Zhanlong, another farmer from Tonghe County Xiangshun Town Xinglong Village, their 120 acres of paddy fields were applied
“Hai Lu Xin” brand bio-organic fertilizer produced by US Dadi Fertilizer Company for three consecutive years, and their
production had increased for three consecutive years. Two farmers have applied the fertilizer since 2010, the annual increase is
more than 10%, and have significantly improved the quality of rice. It is more gratifying that the land with application
of bio- fertilizer, the organic matter in the soil is increased by 0.4%, and the expansion of populations of beneficial microbes
in the soil is increased, the agricultural production of the ecological cycle begins to take shape. To this end, the county propaganda
department instructed Tonghe County television stations to broadcast the news in "Tonghe News" and "Country Voice
Playback".
According to the reports of Heilongjiang satellite television
and Heilongjiang provincial government website, on January 17 & 18, 2013, Heilongjiang Governor Wang Xiankui , Deputy Governor
Lv Weifeng , Harbin Mayor Song XiBin and other leaders visited Tonghe County, and conducted research on agricultural farming structure
along the Songhua River, production development planning and construction of industrial projects. In the modern agriculture
demonstration area of Tonghe County Nong River Sun Valley, Governor Wang Xiankui and other leaders listened to Haixin water
rice planting cooperatives affiliated of US Dadi Fertilizer Company, on the experience of extracting Songhua River water to increase
rice production, Wang Xiankui governor was very pleased of the report, and suggested to make the full use of resources along Sonhua
River, to convert the resource advantages into economic advantages, optimizing planting structure, carrying water to expand rice
production, forming large farmers' cooperative association , to expand the cultivation of new agricultural subject "cold field
black soil, green and organic agricultural products,” and to establish a plan in 2013 to bear the tasks to expand the five
millions and four hundred thousand acres of water rice fields.
On April 3, 2013, Chinese government network and CCTV "News
Network" reported: In order to implement the 2013 central document #1, the State Council determined that Heilongjiang Province
would be the first to conduct the modern agriculture advance reform pilot program. The launch of this important policy will
provide a golden opportunity of development for US Dadi Company, which is based in Heilongjiang to engage bio-organic fertilizer
production and organic rice production. Therefore the company will accomplish a great deal.
In February 2013, Chairman Liu Haitao of US Dadi Fertilizer
Company and Mr. Li Jingtao, Manager of Bayer Company of Germany signed a contract to act as a regional sales agent in Tonghe area
for some of Bayer agricultural products. Bayer is the world's leading large enterprises, a world leader in agricultural product
quality. The cooperation can provide worldwide superior agricultural products to local farmers, and services to the development
of local farmers.
The cooperation project team of Dadi Fertilizer Technology
International (USA) Limited successfully developed a wonder drug to effectively eradicate river barnyardgrass, and it solved the
long-lasting unsolved problem in the rice fields. According to the introduction of Chairman Liu Haitao, the company, after three
consecutive years of field application and technical improvement, is actively planning trademark registrations and product patents
applications. The products not only ensure the organic rice farm production and stable income of "Haixin water rice farmer
cooperatives,” which is the affiliated agency of US Dadi Company, it also increases the quality of “Ma Lang He”
brand organic rice, a product of Dadi Company, at the same time it brings the benefits to the majority of rice farmers. Therefore,
it is a good product which is beneficial to the company as well as to the others.
Liu Haitao, Chairman of US Dadi Fertilizer Company, and Liu
Zhaorong, Chairman of Harbin Hai Xin Biological Fertilizer Co., Ltd. arrived in Hong Kong on August 6, 2013. Under the arrangement
of Liu Cheng Qingxin, President of American Sino-US New Rural Development Advocacy Association, both chairmen engaged in a wide
range of communication and negotiation with Hong Kong World SMEs Trade Association on the issues such as how to improve production
standards ( European standards ) of organic fertilizer produced by US Dadi Fertilizer Company, fertilizer product sales,
development and sales of green organic rice , Heilongjiang green non-genetically modified soybeans, crush-type technology to produce
soybean oil (without adding any chemical substances ), and to enter the international markets. Hong Kong businessmen had made three
suggestions toward US Dadi Fertilizer Company: First, hoping the produced fertilizer able to pass " European certification
standards;” second, hoping to reduce the excessive heavy metals in fertilizers for the production of traditional Chinese
medicine "Schisandra;” third, hoping to produce a lower nuclear leak contaminated soil fertilizer. After consulting
with Mr. He Suicheng, who is from Shenyang Research Institute of Applie Ecology of Chinese Academy of Science, Liu Zhaorong of
Harbin HaiXin Company gave satisfactory answers to Hong Kong businessmen: I. making fertilizer products as early as possible to
meet EU standards in order to facilitate access for the products to international markets; II. with the Chinese Academy of Science's
advanced technology, developing a product which can purifying, degrading, and reducing absorption of heavy metals by plants and
nuclear elements of pollution. The talks achieved satisfactory results.
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August 7, 2013, Hong Kong World SMEs and Trade Union news:
To work together to promote and carry out in Hong Kong to establish Heilongjiang high-quality agricultural organic fertilizer sales
base, and to promote organic fertilizer products produced by US Dadi Fertilizer Company in order to enter the international market,
by mutual agreement, both parties in Hong Kong signed a cooperation framework agreement. Following the spirit of honesty,
long-term stability, gradual development, and the principle of mutual benefit, before the project was officially launched and implemented,
both parties signed a specific trade cooperation contract.
On August 10, 2013 , Chairman Liu Zhaorong of Harbin
HaiXin Biological Fertilizer Co. Ltd., and Chairman Liu Haitao of US Dadi Fertilizer Company, on their way back from Hong
Kong, had made a special trip to Chinese Academy of Science Shenyang Institute of Applied Ecology, discussed research issues with
the researcher He Suicheng, deputy director of the new fertilizer center, on the development of manufacturing organic fertilizer
which can be decomposed, purifying heavy metals and some core elements of contaminated soil bio-organic fertilizer. Director He
Suicheng pointed out that he can assist Harbin Haixin Biological Fertilizer Co. Ltd. to develop and produce the kind of organic
fertilizer with special features, and hope that through the Hong Kong World SMEs Trade Association, this special function of bio-organic
fertilizer can be recommended to Japan Fukushima nuclear leakage area in order to apply experiments.
On November 19, 2013, Hong Kong time, US-Dadi Fertilizer
Industry International Inc. held a press conference in Hong Kong to announce that US-Dadi has gone public on OTCQB market. The
press conference was well received by its audience. Attendees included representatives of partners of US-Dadi, namely, Harbin Haixin
Biological Fertilizer Company Limited, Saturnus Agri-Tech US International Inc, World SME Trade Alliance Limited, and South China
Securities Limited, as well as more than 50 investors.
Introduction by World SME Trade Alliance Limited, US-Dadi
started to work with Saturnus Agri-Tech US International Inc. on the cooperation of US-Dadi with Harbin Haixin Biological Fertilizer
Company Limited to develop the brand name “Haixin” and to market its bio-organic fertilizer products to South-East
Asia. Recently, the cooperation had reached an initial sales agreement with clients in Surabaya, Indonesia.
In November of 2013, US-Dadi joined Southeast Asian Agricultural
experts from Saturnus Agri-Tech US International Inc to visit an Indonesian farm cooperative in Surabaya. Indonesian farmers expressed
strong interest in US-Dadi's products and proposal to increase local agricultural production. The company planned to ship out its
newly developed organic fertilizer for local farmer to try out in February. Since then, the interest has spread to whole regency.
US-Dadi decides to reinspect larger area of local farmland in March for the best result of soil improvement.
On February 19, 2014 -- US-Dadi Fertilizer Industry
International Inc. has developed its South Asian organic fertilizer focus market in Indonesian Magetan Regency. The area is in
populous East Java province, nearby city of Surabaya, with population of over 600,000.
In November 2014, US-Dadi and Saturnus Agri-tech Limited
signed contact that commit to provide 25 tonnes bio-organic fertilizers as sample.
In February 2015, US-Dadi and Haixin company signed agreement
that Haixin will be the supplier that provide Rose tea resource, US-DADI proposed to purchase 150 tonnes rose tea in a year. Haixin
and US-DADI were studying other product such as Gingseng Flower tea and Japanese Tree Lilac tea at the same time in aims to extend
product series.
Going Concern
The Company’s financial statements are prepared using
generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and allow it to continue as a going concern. As of June 30, 2016 the Company
had an accumulated deficit of $659,676. The ability of the Company to continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations.
The Company is currently contemplating an offering of its
equity or debt securities to finance continuing operations. There are no agreements or arrangements currently in place or under
negotiation to obtain such financing, and there are no assurances that the Company will be successful and without sufficient financing
it would be unlikely for the Company to continue as a going concern. The ability of the Company to continue as a going concern
is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations.
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RESULTS OF OPERATIONS
During the three months ended June 30,
2017, we generated revenue of $0. During the three months ended June 30, 2016, we generated revenue of $0.
Operating expenses during the three months
ended June 30, 2017 were $6,807 all of which consisted of general and administrative expenses such as accounting, professional
and miscellaneous office expenditures. In comparison, operating expenses for the period ended June 30, 2016 were $7,515 all of
which consisted of general and administrative expenses such as accounting, professional and miscellaneous office expenditures.
We have not been profitable from our
inception in 2010 through June 30, 2017, and our accumulated deficit amounts to $659,976. There is significant uncertainty projecting
future profitability due to our history of losses and lack of revenues. In our current state we have no recurring or guaranteed
source of revenues and cannot predict when, if ever, we will become profitable. There is significant uncertainty projecting future
profitability due to our minimal operating history and lack of guaranteed ongoing revenue streams.
Liquidity and Capital Resources
As of June 30, 2017, we had $0 in cash
and did not have any other cash equivalents. The following table provides detailed information about our net cash flow for all
financial statement periods presented in this Quarterly Report. To date, we have financed our operations through the issuance of
stock and borrowings.
The following table sets forth a summary of our cash flows
for the three months ended June 30, 2016 and the period ending June 30, 2017:
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Six Months Ended June 30, 2017
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Six Months Ended
June 30, 2016
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Net cash used in operating activities
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$
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(9,898
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$
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(12,806
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Net cash used in investing activities
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Net cash provided by financing activities
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9,898
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12,806
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Net increase (decrease) in Cash
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Cash, beginning
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Cash, ending
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$
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$
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Since inception, we have financed our
cash flow requirements through issuance of common stock. As we expand our activities, we may, and most likely will, continue to
experience net negative cash flows from operations, pending receipt of listings or some form of advertising revenues. Additionally
we anticipate obtaining additional financing to fund operations through additional common stock offerings, to the extent available,
or to obtain additional financing to the extent necessary to augment our working capital.
We anticipate that we will incur operating
losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain.
Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not
limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other
things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and
upgrade our website, provide national and regional industry participants with an effective, efficient and accessible website on
which to promote their products and services through the Internet, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to
do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Operating activities
Net cash used in operating activities
was $9,898 for the period ended June 30, 2016, as compared to $12,806 used in operating activities for the period ended June 30,
2017. The increase in net cash used in operating activities was primarily due to an increase in professional fees.
Investing activities
Net cash used in investing activities
was $0 for the period ended June 30, 2016, as compared to $0 used in investing activities for the same period in 2017.
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Financing activities
Net cash provided by financing activities
for the period ended June 30, 2016 was $9,898 as compared to $12,806 for the same period of 2017. The increase of net cash provided
by financing activities was mainly attributable to an increase in related party loans.
We believe that cash flow from operations
will not meet our present and near-term cash needs and thus we will require additional cash resources, including the sale of equity
or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months. We will require
additional cash resources due to changed business conditions, implementation of our strategy to expand our sales and marketing
initiatives, increase brand awareness, or acquisitions we may decide to pursue. If our own financial resources and then current
cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt
securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders.
The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and
financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available
in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at
all, will limit our ability to expand our business operations and could harm our overall business prospects.
Off-Balance Sheet Arrangements
We did 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 is material to
investors.