Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Following information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-Looking and Cautionary Statements
Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.
Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “Eight Dragons” refer to Eight Dragons Company.
Our Ability to Continue as a Going Concern
Our independent registered public accounting firm has issued its report dated March 15, 2017, in connection with the audit of our annual financial statements as of December 31, 2016, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the unaudited financial statements for the period ended June 30, 2017 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
Our Business
Eight Dragons Company (OTCQB: EDRG) is a technology-investment company that invests in and operates companies to support a full-stack development eco-system. Headquartered in Miami, Florida and commencing operations in 2017, we seek to help companies using innovation and vision to address the world’s biggest challenges and realize exponential opportunities. For more information on Eight Dragons, please visit our website at www.edrg.com, or follow us on Twitter at @edrgco (both of which are expressly not incorporated into this filing).
Park Road, Inc.
Park Road Solutions, a Miami based company, specializes in outsourced Chief Technology Officer, Chief Security Officer, and information technology managed services. Their experience spans all major verticals including retail, education, finance, and healthcare with core competency and focus on Financial Service Providers such as Hedge Funds and Broker Dealer clients. Park Road Solutions provides unique domain expertise in Financial Regulatory, Compliance, Product Development and Managed IT Services. By utilizing bespoke and turnkey methodologies within its product offering, they ensure every solution is right sized and designed around client needs.
In the second quarter of 2017, we completed a purchase of
18.72% ownership stake in Rokk3r Labs LLC. Specifically, on April 30, 2017, we purchased a minority non-consolidating interest in Rokk3r Labs, LLC., specifically an aggregate of 18.72% of the Member Interests of Rokk3r Labs, LLC. for a purchase price of $1,000,000 (provided at the direction
of an entity controlled by Una Taylor for the benefit of our company
) and the issuance of 9,677,208 shares of our common stock. Rokk3r Labs is a venture builder and the world’s first ‘co-building’ platform for entrepreneurs, corporations and investors to create exponential startups. Our management believes that Rokk3r Labs increases value, mitigates risk and helps to remain at the edge of innovation. With a focus on leveraging exponential technologies (e.g., the blockchain, artificial intelligence, and Internet of Things) and implementing new-age methods of raising capital, Rokk3r Labs, we believe, is harnessing the global collective genius to co-build companies that change the world. Currently, we are informed that Rokk3r Labs’ portfolio includes over 40 companies.
We will continue to explore other merger or acquisition targets throughout fiscal 2017, although no assurances can be provided that we will complete such acquisitions or that such acquisitions will be profitable.
Because we currently have limited cash, it may be necessary for officers, directors or stockholders to advance funds and we will most likely accrue expenses until additional funding can be accomplished. Management intends to hold expenses to a minimum and to obtain services on a contingency basis when possible. Further, we expect directors to defer any compensation until such time as we have sufficient funds. We have not yet entered into any arrangements or definitive agreements to use outside advisors or consultants or to raise any capital.
We are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of this time. If we are unable to raise the necessary funding, our expansion plans will be delayed indefinitely. There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to our company, or at all.
Results of Operations
Three Months Ended June 30, 2017, Compared to Three Months Ended June 30, 2016.
Revenues totaled $7,284 for the three months ended June 30, 2017, compared to $-0- for the three months ended June 30, 2016, derived from the business acquired June 1, 2017, Park Road Solutions.
General and administrative expenses (“SG&A”) totaled $34,348,790 for the three months ended June 30, 2017, compared to $9,358 for the three months ended June 30, 2016. SG&A costs in 2017 include the professional and consulting fees, accrued salary of our officers, and rent. A significant portion of the SG&A is a result of the payment of stock and its valuation based on the market price.
Interest expense was $5,000 for the three months ended June 30, 2017, compared to $26,369 for the three months ended June 30, 2016. Interest expense includes accrued and unpaid interest on our debt with principal balances totaling approximately $305,000 at June 30, 2017.
Six Months Ended June 30, 2017, Compared to Six Months Ended June 30, 2016.
Revenues totaled $7,284 for the three months ended June 30, 2017, compared to nil for the three months ended June 30, 2016, derived from the business acquired June 1, 2017, Park Road Solutions.
General and administrative expenses (“SG&A”) totaled $34,356,360 for the six months ended June 30, 2017, compared to $31,404 for the six months ended June 30, 2016. SG&A costs in 2017 include the professional and consulting fees, accrued salary of our officers, and rent. A significant portion of the SG&A is a result of the payment of stock and its valuation based on the market price.
Interest expense was $24,506 for the six months ended June 30, 2017, compared to $49,874 for the six months ended June 30, 2016. Interest expense includes accrued and unpaid interest on our debt with principal balances totaling approximately $305,000 at June 30, 2017.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at June 30, 2017 were $17,737,837, compared with $-0- at December 31, 2016. There was $17,327 in cash, compared to $-0- at December 31, 2016.
Total liabilities at June 30, 2017 were $310,301, consisting of $5,301 in accrued expenses, and $305,000 in a note payable. At December 31, 2016, total liabilities were $1,865,702.
Because we currently have limited revenues and limited available cash, for the immediate future we believe we will have to rely on potential advances from stockholders to continue to implement our business activities.
There is no assurance that our stockholders will continue indefinitely to provide additional funds or pay our expenses.
It is likely the only other source of funding future operations will be through the private sale of our securities, either equity or debt.
At June 30, 2017, we had stockholders’ equity of $17,427,536 compared to stockholders’ deficit of $1,865,702 at December 31, 2016.
Off-balance Sheet Arrangements
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.