This Quarterly Report includes forward looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward looking statements include the information concerning our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward looking statements. Readers are cautioned not to put undue reliance on any forward looking statements.
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
Summary Overview
Going Concern
As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended November 30, 2016 and 2015 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern we must effectively balance many factors and begin to generate revenue so that we can fund our operations from our sales and revenues. If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, our cash on hand will last less than one month, and thus we must raise capital by issuing debt or through the sale of our stock. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.
Results of Operations
Introduction
On April 13, 2016, and again on February 6, 2017 new management was appointed in connection with changes of control of the Company. At this time, we do not have an established business plan. However, we are taking steps to provide capital and minimize losses in the absence of a revenue producing business, including: (1) minimizing expenses, (2) raising equity financing, and (3) developing and implementing a new business model. Our management is actively seeking an operating business to acquire or with which to complete a merger.
Revenues
The Company was established on September 18, 2014 and had no revenues for the six months ended May 31, 2017 and May 31, 2016.
General and Administrative
General and administrative expenses were $8,066 and $22,441 respectively for the three months ended May 31, 2017 and May 31, 2016 and $14,361 and $42,254 for the six months ended May 31, 2017 compared to May 31, 2016. The reduction was due to the lack of legal fees, not required due to the reduced level of activity.
Net Loss
Our net operating loss was $8,066 for the three months ended May 31, 2017, compared to $22,441 for the three months ended May 31, 2016, a decrease of $14,375, or 64%. Net operating loss decreased, as set forth above, primarily due to the decrease in legal fees, which, due to the inactivity, were no longer required. Net loss from operations for the six months ended May 31, 2017 decreased by $28,143, or 67% compared to the net loss from operations for the six months ended May 31, 2016. That decrease was the result of reduced business activity and the lack of need for legal services as a result of the reduced business activity.
Liquidity and Capital Resources
Introduction
During the six months ended May 31, 2017, because we did not generate any revenues, we had $0. operating cash flows. Our cash on hand as of May 31, 2017 was $0.. Our monthly cash flow burn rate for the six months ended May 31, 2017 was approximately $2,400 per month. Advances from related parties has been our source of capital for the six months ended May 31, 2017. In addition to the $35,043 received through November 30, 2016, in loans from related parties, the same parties advanced an additional $8,914 during the six months ended May 31, 2017, and a current officer and director advanced $1,650 during the six months ended May 31, 2017. Although we have moderate short term cash needs, as we implement our business plan and our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as we can begin a business that will generate revenues and our cash flows from operations will satisfy our cash flow needs.
Our cash and total current assets decreased because we paid operating expenses with loans from related parties and did not generate revenues or raise additional capital, other than the advances referred to above and our total stockholders’ deficit increased to $52,363.
We do not expect to generate revenues until we are able to develop and implement our business plan. In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.
Cash Requirements
Our cash on hand as of May 31, 2017 was $0. Based on our lack of revenues and current monthly burn rate of approximately $2,400 per month, we will not be able to fund our operations for the next 12 months unless we are able to raise capital from the sale of our stock and/or debt financings.
Sources and Uses of Cash
Operations
We had net cash used in operating activities of $0. for the six months ended May 31, 2017 compared to net cash used of $26,407 for the six months ended May 31, 2016. For the six months ended May 31, 2017, the net cash used in operating activities consisted of our net loss of $14,361 minus an increase in accounts payable of $3,797 and minus $8,914 overhead items paid directly by a former officer and director. All of our outstanding payables, incurred during the six months ended May 31, 2017 were paid directly by related parties, subsequent to the current quarter. For the six months ended May 31, 2016, the net cash used in operating activities consisted of our net loss of $42,254 less the increase of $15,517 of accounts payable.
Financing
Our net cash provided by financing activities for the six months ended May 31, 2017 and May 31, 2016 was $0. and $6,302 respectively.
ITEM 4 Controls and Procedures
(a) Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation 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, or the Exchange Act, as of May 31, 2017, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of May 31, 2017, our disclosure controls and procedures were not effective.
Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of 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, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, the six month period ended May 31, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.