ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Plan of Operation
Our plan of operations is to raise debt and, or, equity to meet our ongoing operating expenses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders.
There can be no assurance that we will successfully complete this series of transactions. In particular, there is no assurance that any such business will be located or that any stockholder will realize any return on their shares after such a transaction. Any merger or acquisition completed by us can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders
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At this time, we have little cash on hand or committed resources of debt or equity to fund these losses, and will be reliant, potentially, on advances from our principal shareholders or our directors and officers. There can be no guarantee that we will be able to obtain sufficient funding these sources.
We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors.
We intend to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to us by persons or firms which desire to seek the advantages of an issuer who has complied with the Securities Act of 1934 (the “1934 Act”). We will not restrict our search to any specific business, industry or geographical location, and we may participate in business ventures of virtually any nature. This discussion of our proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. We anticipate that we may be able to participate in only one potential business venture because of our lack of financial resources.
We may seek a business opportunity with entities which have recently commenced operations, or that desire to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex and risky. Due to general economic conditions, rapid technological advances being made in some industries and shortages of available capital, we believe that there are numerous firms seeking the benefits of an issuer who has complied with the 1934 Act. Such benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all stockholders and other factors. Potentially, available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We have, and will continue to have, essentially no assets to provide the owners of business opportunities. However, we will be able to offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in an issuer who has complied with the 1934 Act without incurring the cost and time required to conduct an initial public offering.
The analysis of new business opportunities will be undertaken by, or under the supervision of, our directors. We intend to concentrate on identifying preliminary prospective business opportunities which may be brought to our attention through present associations of our director, professional advisors or by our stockholders. In analyzing prospective business opportunities, we will consider such matters as (i) available technical, financial and managerial resources; (ii) working capital and other financial requirements; (iii) history of operations, if any, and prospects for the future; (iv) nature of present and expected competition; (v) quality, experience and depth of management services; (vi) potential for further research, development or exploration; (vii) specific risk factors not now foreseeable but that may be anticipated to impact the proposed activities of the company; (viii) potential for growth or expansion; (ix) potential for profit; (x) public recognition and acceptance of products, services or trades; (xi) name identification; and (xii) other factors that we consider relevant. As part of our investigation of the business opportunity, we expect to meet personally with management and key personnel. To the extent possible, we intend to utilize written reports and personal investigation to evaluate the above factors.
We will not acquire or merge with any company for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2019 COMPARED TO THE THREE MONTHS ENDED JANUARY 31, 2018
Revenue
We recognized no revenue during the three-month periods ended January 31, 2019 and 2018, as we have no business from which to generate revenue.
General and Administrative Expenses
During the three months ended January 31, 2019, we incurred $26,779 in general and administrative expenses compared to $36 in the three months ended January 31, 2018, an increase of $26,743. During the three months ended January 31, 2019, while we were working to ensure the Company remained fully SEC reporting and seeking a potential merger candidate, we incurred $15,000 in director’s fees, $9,000 in accounting fees, $1,500 in auditing fees, $630 in filing fees and $649 in other administrative costs. By comparison, during the three months ended January 31, 2018, while the Company was completely dormant, we incurred just $36 in sundry administrative costs.
Other Income (Expense)
We recognized no other income (expense) during the three-month periods ended January 31, 2019 and 2018.
Provision for Income Tax
No provision for income taxes was recorded in the three-month periods ended January 31, 2019 or 2018 as we incurred tax losses in both periods.
Net Loss
During the three months ended January 31, 2019, we incurred a net loss of $26,779 compared to a net loss of $36 in the three months ended January 31, 2018, an increase of $26,743, due to the factors discussed above.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JANUARY 31, 2019 COMPARED TO THE NINE MONTHS ENDED JANUARY 31, 2018
Revenue
We recognized no revenue during the nine-month periods ended January 31, 2019 and 2018, as we have no business from which to generate revenue.
General and Administrative Expenses
During the nine months ended January 31, 2019, we incurred $81,960 in general and administrative expenses compared to $92 in the nine months ended January 31, 2018, an increase of $81,868. During the nine months ended January 31, 2019, while we were working to make the Company fully SEC reporting once again and seeking a potential merger candidate, we incurred $45,000 in director’s fees, $27,000 in accounting fees, $8,000 in auditing fees, $1,752 in filing fees and $208 in sundry other administrative costs. By comparison, during the nine months ended January 31, 2018, while the Company was completely dormant, we incurred just $92 in sundry administrative costs.
Other Income (Expense)
We recognized no other income (expense) during the nine-month periods ended January 31, 2019 and 2018.
Provision for Income Tax
No provision for income taxes was recorded in the nine-month periods ended January 31, 2019 or 2018, as we incurred tax losses in both periods.
Net Loss
During the nine months ended January 31, 2019, we incurred a net loss of $81,960 compared to a net loss of $92 in the nine months ended January 31, 2018, an increase of $81,868, due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2019, we had cash or cash equivalents of $25, no other assets, no operating business or other source of income and outstanding liabilities and a stockholders’ deficit of $8,603,892.
Consequently, we are now dependent on raising additional equity and/or debt to meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and/or debt that we will need to fund our ongoing operating expenses.
It is our current intention to seek to raise debt and, or, equity financing to meet ongoing operating expenses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There is no assurance that this series of events will be satisfactorily completed.
Future losses are likely to occur as, until we are able to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders, we have no sources of income to meet our operating expenses.
As a result of these, among other factors, we received from our registered independent public accountants in their report for the financial statements for the years ended April 30, 2018 and 2017, an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
Our primary sources (uses) of cash for the nine months ended January 31, 2019 and 2018 are as follows:
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Nine-months ended
January 31, 2019
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Nine-months ended
January 31, 2018
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Net Cash Used in Operating Activities
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$
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(7,694
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$
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(2,014
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Net Cash from Investing Activities
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-
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-
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Net Cash from Financing Activities
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6,130
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-
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Net Change in Cash and Cash Equivalents
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$
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(1,564
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)
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$
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(2,014
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Operating Activities
During the nine-months ended January 31, 2019, we recognized a net loss of $81,960, which was decreased for cash flow purposes by a $29,472 increase in accounts payable and a $44,794 increase in accruals for related parties resulting in net cash flow used in operating activities of $7,694. By comparison, during the nine-months ended January 31, 2018, we recognized a net loss of $92 which was decreased for cash flow purposes by a $1,922 reduction in accruals for related parties resulting in net cash flow used in operating activities of $2,014.
We neither generated nor used funds in investing activities during the nine-months ended January 31, 2019 and 2018.
Financing Activities
During the nine months ended January 31, 2019, we received $6,130 by way of loans from our principal shareholders to fund our working capital requirements. By comparison, we neither generated nor used funds in financing activities during the nine-months ended January 31, 2018.
We are 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 our controlling shareholder to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
None
ITEM 3.
QUANTATIVE AND QUALATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management conducted an evaluation, with the participation of our Chief Executive Officer, who is our principal executive officer and our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this registration statement on Form 10. Based on that evaluation, we concluded that because of the material weakness and significant deficiencies in our internal control over financial reporting described below, our disclosure controls and procedures were not sufficient as of January 31, 2019.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present accurately, in material respects, our financial position and results of operations in fairness and conformity with generally accepted accounting principles.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate, and that the assumptions and opinions in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management’s and directors’ authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.
We conducted an evaluation of the effectiveness of our internal control over financial reporting, based on the framework in “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and published in 2013, and subsequent guidance prepared by COSO specifically for smaller public companies. Based on that evaluation, management concluded that our internal control over financial reporting was not sufficient as of January 31, 2019 for the reasons discussed below.
A significant deficiency is a deficiency, or combination of deficiencies in internal control over financial reporting, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Management identified the following material weakness and significant deficiencies in its assessment of the effectiveness of internal control over financial reporting as of January 31, 2019:
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Significant Deficiency - The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked personnel with accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements.
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Material Weakness – Inadequate segregation of duties.
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We expect to be materially dependent on a third party that can provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements, which could lead to a restatement of those financial statements. Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and maintained, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must account for resource constraints. In addition, the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, can and will be detected.
This quarterly review on Form 10Q does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Commission that permit us to provide only management’s report in this quarterly review on Form 10Q.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended January 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.