MCTC Holdings, Inc.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
February 28,
|
|
August 31,
|
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,632
|
|
|
$
|
4,652
|
|
Total Current Assets
|
|
|
4,632
|
|
|
|
4,652
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
4,632
|
|
|
$
|
4,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDER'S DEFICIT
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
14,756
|
|
|
$
|
11,688
|
|
Accounts Payable - Related Party
|
|
|
7,200
|
|
|
|
6,200
|
|
Accrued Interest
|
|
|
31,777
|
|
|
|
28,306
|
|
Accrued Interest - Related Party
|
|
|
2,568
|
|
|
|
857
|
|
Notes Payable - Related Party
|
|
|
37,910
|
|
|
|
22,554
|
|
Note Payable to Shareholder
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
164,211
|
|
|
|
139,605
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
164,211
|
|
|
|
139,605
|
|
|
|
|
|
|
|
|
|
|
Stockholder's Deficit
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.0001,
|
|
|
|
|
|
|
|
|
10,000,000 shares Authorized, 0 shares Issued and
|
|
|
|
|
|
|
|
|
Outstanding at February 28, 2019 and August 31, 2018
|
|
|
—
|
|
|
|
—
|
|
Common Stock, par value $0.0001,
|
|
|
|
|
|
|
|
|
290,000,000 shares Authorized, 183,864,600 shares Issued and
|
|
|
|
|
|
|
|
|
Outstanding at February 28, 2019 and August 31, 2018
|
|
|
18,386
|
|
|
|
18,386
|
|
Additional Paid-In Capital
|
|
|
584,665
|
|
|
|
584,665
|
|
Accumulated Deficit
|
|
|
(762,630
|
)
|
|
|
(738,004
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholder's Deficit
|
|
|
(159,579
|
)
|
|
|
(134,953
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT
|
|
$
|
4,632
|
|
|
$
|
4,652
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
MCTC Holdings, Inc.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
|
February 28,
|
|
February 28,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
2,354
|
|
|
|
4,431
|
|
|
|
14,854
|
|
|
|
20,995
|
|
General and administrative expense
|
|
|
2,328
|
|
|
|
747
|
|
|
|
4,589
|
|
|
|
8,387
|
|
Total Operating Expenses
|
|
|
4,682
|
|
|
|
5,178
|
|
|
|
19,443
|
|
|
|
29,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(4,682
|
)
|
|
|
(5,178
|
)
|
|
|
(19,443
|
)
|
|
|
(29,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,661
|
|
|
|
1,856
|
|
|
|
5,183
|
|
|
|
3,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(7,343
|
)
|
|
$
|
(7,034
|
)
|
|
$
|
(24,626
|
)
|
|
$
|
(32,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & Diluted Loss per Common Share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
183,864,600
|
|
|
|
53,864,600
|
|
|
|
183,864,600
|
|
|
|
53,864,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
MCTC Holdings, Inc.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
February 28,
|
|
|
2019
|
|
2018
|
CASH FLOWS FROM OPERATING
|
|
|
|
|
|
|
|
|
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(24,626
|
)
|
|
|
(32,983
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
|
|
Changes In:
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
3,068
|
|
|
|
15,574
|
|
Accounts Payable - Related Party
|
|
|
1,000
|
|
|
|
8,500
|
|
Accrued Interest
|
|
|
3,471
|
|
|
|
3,471
|
|
Accrued Interest - Related Party
|
|
|
1,711
|
|
|
|
130
|
|
Net Cash Used in Operating Activities
|
|
|
(15,376
|
)
|
|
|
(5,308
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
|
|
|
|
|
|
|
|
|
Proceeds from Note Payable - Related Party
|
|
|
15,356
|
|
|
|
5,218
|
|
Net Cash Provided by Financing Activities
|
|
|
15,356
|
|
|
|
5,218
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash
|
|
|
(20
|
)
|
|
|
(90
|
)
|
Cash at Beginning of Period
|
|
|
4,652
|
|
|
|
4,832
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period
|
|
|
4,632
|
|
|
|
4,742
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Franchise Taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
MCTC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
Note 1. Organization and Description of
Business
MicroChannel Technologies Corporation (the
“Company”) was formed as a wholly-owned subsidiary of New Energy Technologies, Inc. (“New Energy”). New
Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007. The Company was incorporated
under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to its existing name
on April 4, 2005.
On or about June 27, 2018 we changed domiciles
from the State of Nevada to the State of Delaware and thereafter reorganized under the Delaware Holding Company Statute Delaware
General Corporation Law Section 251(g). On or about July 12, 2018, two subsidiaries were formed for the purpose of effecting the
reorganization. We incorporated MCTC Holdings, Inc. and MCTC Holdings Inc. incorporated MicroChannel Corp.. We then effected a
merger involving the three constituents and under the terms of the merger we were merged into MicroChannel Corp., with MicroChannel
Corp. surviving and our separate corporate existence ceasing. Following the merger MCTC Holdings, Inc. became the surviving publicly
traded issuer and all of our assets and liabilities were merged into MCTC Holdings, Inc.’s wholly owned subsidiary MicroChannel
Corp.. Our shareholders became the shareholders of MCTC Holdings, Inc. on a one for one basis.
The Company is not currently engaged in any
business operations. It is, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial
opportunities.
Note 2. Going Concern Uncertainties
The Company has not generated any revenues,
has an accumulated deficit of $762,630 as of February 28, 2019, and does not have positive cash flows from operating activities.
The Company expects to incur additional losses as it continues to identify and develop new commercial opportunities. The Company
will be subject to the risks, uncertainties, and difficulties frequently encountered by early-stage companies. The Company may
not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause the Company’s
business, results of operations, and financial condition to suffer. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern for a period of one year from the issuance date of these financial statements.
The Company’s ability to continue as
a going concern is an issue due to its net losses and negative cash flows from operations, and its need for additional financing
to fund future operations. Management plans to identify commercial opportunities and to obtain necessary funding from outside sources.
There can be no assurance that such funds, if available, can be obtained on terms reasonable to the Company. The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that
may result from the outcome of this uncertainty. Based on the Company’s current level of expenditures, management believes
that cash on hand is adequate to fund operations for at least the next twelve months.
Note 3. Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying interim financial statements
have been prepared in accordance with U.S. GAAP and should be read in conjunction with the audited financial statements and notes
thereto contained in the Company's latest Annual Report filed with the SEC on Form 10-K for the year ended August 31, 2018. In
the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have been reflected herein. The results of operations
for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim
financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most
recent fiscal year as reported in the Form 10-K have been omitted..
Estimates
The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes
may differ materially from the estimates as additional information becomes known.
Cash and Cash Equivalents
Cash and cash equivalents includes highly liquid
investments with original maturities of six months or less. On occasion, the Company has amounts deposited with financial
institutions in excess of federally insured limits.
Fair Value of Financial Instruments
The Company measures certain financial assets
and liabilities at fair value based on 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.
The carrying value of cash and cash equivalents and accounts payable approximate their fair value because of the short-term nature
of these instruments and their liquidity. Management is of the opinion that the Company is not exposed to significant interest
or credit risks arising from these financial instruments.
Income Taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of
the previous years ended August 31, 2019 and 2018, the Company has not recorded any unrecognized tax benefits.
Segment Reporting
The Company’s business currently operates
in one segment.
Net Loss per Share
The computation of basic net loss per common
share is based on the weighted average number of shares that were outstanding during the year. The computation of diluted net loss
per common share is based on the weighted average number of shares used in the basic net loss per share calculation plus the number
of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury
stock method. See Note 4. Net Loss Per Share.
Recently Issued Accounting Pronouncements
The Company reviews new accounting standards
as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal
year may be applicable to the Company, it has not identified any standards that it believes merit further discussion. The Company
does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position,
results of operations, or cash flows.
Note 4. Net Loss Per Share
During the nine months ended February 28, 2019 and February 28,
2018, the Company recorded a net loss. The Company does not have any potentially dilutive securities outstanding. Therefore, basic
and diluted net loss per share is the same for those periods.
Note 5. Note Payable to Shareholder
On January 9, 2014, the Company issued a $70,000
note payable to a shareholder of the Company. The note payable bears interest at an annual rate of 7%, which then increased to
10% after it was in default. Principal and accrued interest on the note payable were due on January 9, 2016, with a default annual
rate of 10% interest after that date. The outstanding balance of principal and accrued interest may be prepaid without penalty.
During the six months ended February 28, 2019, the Company recorded an interest expense of $1,745 related to the note payable.
As of February 28, 2019, the original principal balance of $70,000 on the note payable remained outstanding, with accrued interest
of $31,777. The note payable was not repaid on January 9, 2016 and is thus in default as of the date of this filing.
7
Note 6. Related Party
In October 2017 – February 28, 2019,
the Company incurred a related party debt in the amount of $11,000 to an entity related to the legal custodian of the Company for
professional fees . The debt is non-interest bearing. As of February 28, 2019, a balance of $7,200 remained outstanding.
In February 28, 2018 – February 28, 2019,
the Company issued a $34,954 in multiple notes payable to an entity related to the legal custodian of the Company for funds loaned.
The notes payable bear interest at an annual rate of 10% and are convertible to common shares of the Company at $0.0001 per share.
On May 8, 2018, $13,000 of the principal balance on notes payable was converted to common stock. As of February 28, 2019, $21,954
of the principal balance remained outstanding on the notes payable and $1,945 in accrued interest.
In August 2018 – November 2018, the Company
issued $15,956 in multiple notes payable to a legal custodian of the Company for funds loaned. The notes bear interest at an annual
rate of 10% and are payable upon demand. As of February 28, 2019, $15,956 of the principal balance remained outstanding on the
notes payable and $623 in accrued interest.
Note 7. Income Taxes
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the Company’s deferred tax assets at February 28, 2019 and August
31, 2018 are as follows:
|
|
February 28, 2019
|
|
August 31,
2018
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
137,042
|
|
|
$
|
131,871
|
|
Capitalized research and development
|
|
|
—
|
|
|
|
—
|
|
Research and development credit carry forward
|
|
|
1,963
|
|
|
|
1,963
|
|
Total deferred tax assets
|
|
|
139,005
|
|
|
|
133,834
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(139,005
|
)
|
|
|
(133,834
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The net decrease in the valuation allowance
for deferred tax assets was $5,171 for the six months ended February 28, 2019. The Company evaluates its valuation allowance on
an annual basis based on projected future operations. When circumstances change and this causes a change in management’s
judgment about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current
operations.
For federal income tax purposes, the Company
has net U.S. operating loss carry forwards at February 28, 2019 available to offset future federal taxable income, if any, of $652,581,
which will fully expire by the fiscal year ended August 31, 2035. Accordingly, there is no current tax expense for the three
ended February 28, 2019 and February 28, 2018. In addition, the Company has research and development tax credit carry forwards
of $1,963 at February 28, 2019, which are available to offset federal income taxes and fully expire by August 31, 2028.
The utilization of the tax net operating loss
carry forwards may be limited due to ownership changes that have occurred as a result of sales of common stock.
The effects of state income taxes were insignificant
for the three ended February 28, 2019 and February 28, 2018.
The following is a reconciliation between expected
income tax benefit and actual, using the applicable statutory income tax rate of 21% and 34%, respectively for the six months ended
February 28, 2019 and 2018:
|
|
February 28,
|
|
|
2019
|
|
2018
|
Income tax benefit at statutory rate
|
|
$
|
5,171
|
|
|
|
1,394
|
|
Change in valuation allowance
|
|
|
(5,171
|
)
|
|
|
(1,394
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
The fiscal years 2012 through 2018 remain open to examination by
federal authorities and other jurisdictions in which the Company operates.
Note 8. Subsequent Events
None
.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Except for the historical information presented
in this document, the matters discussed in this Form 10-Q for the quarter ended February 28, 2019, contain forward-looking statements
which involve assumptions and our future plans, strategies, and expectations. These statements are generally identified by the
use of words such as “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” or “project,” or the negative of these words or
other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable
basis when made, but there can be no assurance that these expectations will be achieved or accomplished.
Such forward-looking statements include
statements regarding, among other things, (a) our potential profitability and cash flows, (b) our growth strategies, (c) our future
financing plans, and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, performance, or achievements to be materially different from the future results,
performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-Q generally. Actual
events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including,
without limitation, the matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be
no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly
required to be included in this filing, we will provide such further material information, if any, as may be necessary to make
the required statements, in light of the circumstances under which they are made, not misleading.
Although forward-looking statements in this
report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown
risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those
discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements,
which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect
any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation.
Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities
and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial
condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying
assumptions prove incorrect, our actual results may vary materially from those expected or projected.
Except where the context otherwise requires
and for purposes of this Form 10-Q only, “we,” “us,” “our,” “Company,” “our
Company,” and “MCTC” refer to “MCTC Holdings, Inc.”.
Overview
The following discussion and analysis of our
financial condition and results of operations (“MD&A”) should be read in conjunction with our financial statements
and the accompanying notes to the financial statements included in this Form 10-Q.
The MD&A is based on our financial statements,
which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets
and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions
.
Description of Business
We were formed as a wholly-owned subsidiary
of New Energy Technologies, Inc. New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December
18, 2007. We were incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada,
and changed to our existing name, MicroChannel Technologies Corporation, on April 4, 2005.
On or about June 27, 2018 we changed domiciles
from the State of Nevada to the State of Delaware and thereafter reorganized under the Delaware Holding Company Statute Delaware
General Corporation Law Section 251(g). On or about July 12, 2018, two subsidiaries were formed for the purpose of effecting the
reorganization. We incorporated MCTC Holdings, Inc. and MCTC Holdings Inc. incorporated MicroChannel Corp.. We then effected a
merger involving the three constituents and under the terms of the merger we were merged into MicroChannel Corp., with MicroChannel
Corp. surviving and our separate corporate existence ceasing. Following the merger MCTC Holdings, Inc. became the surviving publicly
traded issuer and all of our assets and liabilities were merged into MCTC Holdings, Inc.’s wholly owned subsidiary MicroChannel
Corp.. Our shareholders became the shareholders of MCTC Holdings, Inc. on a one for one basis.
The Company is not currently engaged in any business operations.
It is, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.
Employees
As of February 28, 2019, we did not have any
employees.
Results of Operations
For the Six months Ended February 28, 2019 and February 28,
2018
The Professional fees decreased by $6,141,
from $20,995 for the six months ended February 28, 2018, to $14,854 for the six months ended February 28, 2019. General & Administrative
expenses decreased by $3,798, from $8,387 for the six months ended February 28, 2018, to $4,589 for the six months ended February
28, 2019. This was due to a decrease in business operations in 2019.
The interest expense was $3,601 and $5,183
for the six months ended February 28, 2018 and February 28, 2019, respectively, is related to a note payable that the Company issued
on January 9, 2014 in the amount of $70,000, to a shareholder of the Company and a multiple notes payable incurred from February
28, 2018 – February 28, 2019 in the amount of $50,910, to related parties. On May 8, 2018, $13,000 of the debt due to Related
Parties was converted into shares of common stock, with $37,910 remaining as of February 28, 2019. The $37,910 in multiple notes
payable to a related parties, bear interest at an annual rate of 10%. The outstanding balance of principal and accrued interest
may be prepaid on both without penalty. As of February 28, 2019, there cumulative interest due of $2,568 related to these notes.
The $70,000 note payable to a shareholder, bears interest at an annual rate of 7%, which then increased to 10% after it was in
default. Principal and accrued interest on the note payable of the company were due on January 9, 2016, with a default annual rate
of 10% interest after that date. As of February 28, 2019, there cumulative interest due of $31,777 related to this note.
Net cash used in operating activities was $15,376
for the six months ended February 28, 2019, compared to net cash used in operating activities of $5,308 for the prior six months
ended February 28, 2018. Based on our current level of expenditures, additional funding is required to cover our operations for
at least the next twelve months. The company is in the process of attempting to identify, locate, and if warranted, acquire new
commercial opportunities.
Liquidity and Capital Resources
As of the year ended August 31, 2018, we had
an accumulated deficit of $738,004 and cash and cash equivalents of $4,652. As of the current quarter ended February 28, 2019,
we had an accumulated deficit of $762,630 and cash and cash equivalents of $4,632.
In January 2014, we received funding by issuing
a $70,000 note payable to a shareholder. The $70,000 note payable was due on January 9, 2016 and has not been repaid as of the
date of this filing and is thus in default as of February 28, 2019. As of February 28, 2019, $70,000 remained outstanding.
In October 2017 – February 28, 2019,
the Company incurred a related party debt in the amount of $11,000 to an entity related to the legal custodian of the Company for
professional fees. As of February 28, 2019, a balance of $7,200 remained outstanding.
In November 2017 – November 2018 we received funding from
issuing $34,954 in notes payable to an entity related to the legal custodian of the Company. On May 8, 2018, $13,000 of this debt
was converted to shares of common stock. In connection with the above notes, the Company recognized a beneficial conversion feature
of $27,954, representing the intrinsic value of the conversion features at the time of issuance. This beneficial conversion feature
was accreted to interest expense during the year ended August 31, 2018. As of February 28, 2019, $21,954 remained outstanding.
In August 2018 – November 2018, we received
funding from issuing $15,956 in notes payable to a legal custodian of the Company. As of February 28, 2019, $15,956 remained outstanding.
Other Contractual Obligations
As of the six months ended February 28, 2019,
we do not have any contractual obligations other than the $70,000 note payable to a shareholder and $37,910 in notes payable to
related parties, a legal custodian of the company and an entity related to the legal custodian of the Company, with related accrued
interest on the notes. The $70,000 note payable was due on January 9, 2016 and has not been repaid as of this filing and is thus
in default.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
We review new accounting standards as issued.
Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to
the Company, we have not identified any standards that we believe merit further discussion. We do not expect the adoption of any
recently issued accounting pronouncements to have a significant impact on our financial position, results of operations, or cash
flows.