Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995,
including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii)
our strategy for financing our business. Forward-looking statements are statements other than historical information or statements
of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”,
“intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete
financing and purchase capital expenditures, growth of our business including entering into future agreements with companies,
and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely
on our current expectations and projections about future events and financial trends that we believe may affect our financial
condition, results of operations, business strategy and financial needs.
Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the
bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections,
the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us
or any other person that our objectives or plans will be achieved.
We
assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions
affecting forward-looking statements.
Our
revenues and results of operations could differ materially from those projected in the forward-looking statements as a result
of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of
the company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and
changing government regulations domestically and internationally affecting our products and businesses.
You
should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and
the other financial data appearing elsewhere in this Quarterly Report.
US
Dollars are denoted herein by “USD”, “$” and “dollars”.
Overview
Intelligent
Cloud Resources Inc. (“Intelligent Cloud”) was incorporated on March 27, 2014 under the laws of the State of Nevada
as a development stage company. The Company aims to offer cloud enabler and cloud broker services to small and medium sized organizations
in Canada and plans to expand to such organizations in the United States in the future. The Company has a strong development team
who can build all types of applications on cloud computing and can perform cloud enabler and cloud broker services. Intelligent
Cloud Resources will help businesses to break away all of the barriers associated with installing software on to physical hardware
by making the software available from anywhere on the globe. For those enterprises that have security concerns for deploying their
applications on a public cloud, the Company can also build a private cloud accessible to only those persons who work within the
organization.
As
of the date of this prospectus, neither our website nor any other application has been developed to the point that we can describe
specifically its nature or its scope. We have started generating minimal revenue and anticipate an increase in revenue from the
sale of our cloud services to companies. Specifically, Intelligent Cloud plans to offer the best quality cloud computing services
to the SME (small and medium-sized enterprises) sector of Canada for a monthly service charge and eventually expand such services
to this sector in the United States.
As
of the date of this prospectus, the amounts of the prices for our range from $500 and up depending on the complexity of the software.
As our platform and services are developed, we will adjust the prices based upon our costs, the prices of competing services and
the terms of the contract with our clients.
We
have limited operational history. We have not yet generated significant revenue and we continue to incur substantial operating
loss and an accumulated deficit. These conditions raise substantial doubt about our ability to continue as a going concern. Our
ability to continue as a going concern is dependent upon our ability to develop additional sources of capital, our cloud services,
website and other applications, and ultimately, achieve profitable operations.
We
are currently a development stage company and have just started generating minimal revenue. We do not currently engage in significant
business activities that provide cash flow. The contracts we have secured are expected to be an assessment of our current capabilities
and will help us determine factors such as how many hours are put in and whether or not we should adjust our prices accordingly.
These contracts are still in progress, and are proving to be beneficial and informative experiences. We may require additional
capital to implement our business and fund our operations. See “Management’s Discussion and Analysis” on page
10.
On
July 21, 2017, Rehan Saeed and Fatima Khan resigned as officers and directors of Intelligent Cloud Resources, Inc. (the “Company”),
effective immediately. On July 21, 2017, Michael Anthony Paul accepted the appointment by the Board of Directors as a member of
the Board of Directors. On July 21, 2017, the Board of Directors of the Company resolved to appoint Mr. Paul as a member to the
Board of Directors of the Company.
The
Company’s fiscal year end is December 31. The Company’s principal executive office and mailing address is
8-
2657
Sherwood Heights Drive, Oakville, Ontario L6J7J9 CANADA. Our telephone number is (647)478-6385.
Our
Business
Plan
of Operations
Intelligent
Cloud has not had significant revenues generated from its business operations since inception. Intelligent Cloud expects that
the revenues generated from its business for the next 12 months will not be enough for its required working capital. Until Intelligent
Cloud is able to generate any consistent and significant revenue it may be required to raise additional funds by way of equity
or debt financing.
At
any phase, if Intelligent Cloud finds that it does not have adequate funds to complete a phase, it may have to suspend its operations
and attempt to raise more money so it can proceed with its business operations. If Intelligent Cloud cannot raise the capital
to proceed it may have to suspend operations until it has sufficient capital. Intelligent Cloud expects to raise the required
funds for the next 12 months with equity or debt financing.
During
the next 12 months, management anticipates spending approximately $420,000 on the development, marketing and sales of the Technology.
The
estimated breakdown is as follows:
|
Purpose
|
|
Amount
|
|
|
Payroll
|
|
$
|
180,000.00
|
|
|
Research and Development
|
|
$
|
28,000.00
|
|
|
Marketing
|
|
$
|
57,000.00
|
|
|
Professional and Consulting Fees
|
|
$
|
50,000.00
|
|
|
Office Lease Expenses
|
|
$
|
30,000.00
|
|
|
Travel Expenses
|
|
$
|
20,000.00
|
|
|
Management and Operational Costs
|
|
$
|
30,000.00
|
|
|
Miscellaneous Costs
|
|
|
25,000.00
|
|
|
Total
|
|
$
|
420,000.00
|
|
Results
of Operations – Three and Nine months ended September 30, 2017 and 2016
A
summary of our operations for the nine months ended September 30, 2017 and 2016 is as follows:
|
|
|
Nine months ended
September 30,
2017
|
|
|
Nine months ended
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
|
900
|
|
|
Professional Fees
|
|
|
2,359,904
|
|
|
|
28,399
|
|
|
Salaries and wages
|
|
|
105,500
|
|
|
|
13,559
|
|
|
Interest and Bank Charges
|
|
|
1,329
|
|
|
|
9,900
|
|
|
Change in fair value of derivatives
|
|
|
-
|
|
|
|
(2,578
|
)
|
|
General expenses
|
|
|
-
|
|
|
|
694
|
|
|
Write-off of prepayment
|
|
|
90,090
|
|
|
|
-
|
|
|
Advertising and marketing expenses
|
|
|
238,509
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
2,794,003
|
|
|
|
42,652
|
|
|
Net Loss
|
|
$
|
2,795,332
|
|
|
|
49,074
|
|
A
summary of our operations for the three months ended September 30, 2017 and 2016 is as follows:
|
|
|
Three months ended
September 30,
2017
|
|
|
Three months ended
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
|
-
|
|
|
Professional Fees
|
|
|
2,323,783
|
|
|
|
9,272
|
|
|
Salaries and wages
|
|
|
66,500
|
|
|
|
4,500
|
|
|
Interest and Bank Charges
|
|
|
605
|
|
|
|
4,090
|
|
|
Gain on Change in fair value of derivatives
|
|
|
-
|
|
|
|
(15,329
|
)
|
|
General expenses
|
|
|
-
|
|
|
|
200
|
|
|
Write-off of prepayment
|
|
|
90,090
|
|
|
|
-
|
|
|
Advertising and marketing expenses
|
|
|
84,967
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
2,565,340
|
|
|
|
13,972
|
|
|
Net Loss
|
|
$
|
2,565,945
|
|
|
|
2,733
|
|
Revenue
The
Company has conducted minimal operations since inception. Minimal revenue has been generated by the Company from March 27, 2014
(Inception) to September 30, 2017. The Company’s financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include
any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary
should the Company be unable to continue as a going concern.
Operating Expenses
Total operating expenses for the three
and nine months ended September 30, 2017 were $2,565,340 and $2,794,003 respectively.
Operating expenses for the three months
ended September 30, 2017 mainly comprised advertising and marketing expenses of $84,967, write-off of prepayment of $90,090,
professional fees of $2,323,783 including stock based compensation for services provided by a third party of $2,280,000 and salaries
and wages amounting to $66,500.
Operating expenses for the nine
months ended September 30, 2017 mainly comprised advertising and marketing expenses of $238,509, write-off of prepayment of
$90,090 stock based compensation $2,280,000, legal fee amounting $10,130, bookkeeping and review fee amounting to $11,110 and
other filing and edgarization fee amounting to $58,664, all included in Professional Fees above, along with salaries and
wages amounting to $105,500.
Total operating expenses for the three
and nine months ended September 30, 2016 were $13,972 and $42,652, respectively.
Operating expenses for the three months
ended September 30, 2016 mainly comprised, professional fees of $9,272, salaries and wages amounting to $4,500.
Operating expenses for the nine months
ended September 30, 2016 mainly comprised legal fee amounting to $9,145, bookkeeping and review fee amounting to $11,650 and other
filing and edgarization fee amounting to $7,604, all included in Professional Fees above, along with salaries and wages amounting
to $13,559.
Operating expenses are higher in the nine
months ended September 30, 2017 because of the stock based compensation, legal expenses in relation to the initial filings, salaries
and wages which were not booked in the comparative nine months.
The Company has a minimum cash balance
available for payment of ongoing operating expenses, has experienced losses from operations, and it does not have a significant
source of revenue. Its continued existence is dependent upon its ability to continue to execute its operating plan and to obtain
additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will
be available on terms acceptable to the Company.
Net Losses
For the nine months ended September 30,
2017 and 2016, the Company had a net loss of $2,795,363 and $48,986, respectively.
Liquidity
and Capital Resources
As of September 30, 2017, the Company had
cash of $0. The Company’s liabilities as of September 30, 2017 were $286,955, which comprised cash overdraft of $481, accrued
liabilities amounting to $137,220, and an amount of $149,254 due to related parties. As at September 30, 2017, the Company had
a working capital deficit of $284,455.
As of September 30, 2016, the Company had
cash of $28,091. The Company’s liabilities as of September 30, 2016 were $42,644, which comprised accrued liabilities amounting
to $19,512, an amount of $22,152 due to shareholders, and an amount of $980 due to related parties. As at September 30, 2016, the
Company had a working capital deficit of $14,553.
The
following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the
nine months ended September 30, 2017 and 2016:
|
|
|
For the nine months ended
September 30, 2017
$
|
|
|
For the nine months ended
September 30, 2016
$
|
|
|
Net Cash (Used in) Operating Activities
|
|
|
(203,613
|
)
|
|
|
(98,909
|
)
|
|
Net Cash Used In Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
Net Cash Provided by Financing Activities
|
|
|
176,001
|
|
|
|
52,273
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents
|
|
|
(27,643
|
)
|
|
|
(46,548
|
)
|
The
Company has incurred losses since inception and the ability of the Company to continue as a going concern depends upon its ability
to develop profitable operations and to continue to raise adequate financing. In order for the Company to meet its liabilities
as they become due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
Limited
Operating History
We
have generated no independent financial history and have not previously demonstrated that we will be able to expand our business.
Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection
of our business model and/or sales methods.
Going
Concern
Our
financial statements have been prepared on a going concern basis. As of September 30, 2017, we have not generated significant
revenues since inception. We expect to finance our operations primarily through our existing cash, our operations and any
future financing. However, there exists substantial doubt about our ability to continue as a going concern because we will
be required to obtain additional capital in the future to continue our operations and there is no assurance that we will be able
to obtain such capital, through equity or debt financing, or any combination thereof, or on satisfactory terms or at all. Additionally,
no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs. If adequate capital
cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted. Therefore,
our auditor has substantial doubt as to our ability to continue as a going concern. Our ability to complete additional offerings
is dependent on the state of the debt and/or equity markets at the time of any proposed offering, and such market’s reception
of the Company and the offering terms. There is no assurance that capital in any form would be available to us, and if available,
on terms and conditions that are acceptable.
Critical
Accounting Policies and Estimates
Basis
of Presentation
Our
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the SEC. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually
evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes, and the valuation of
equity transactions. We base our estimates on historical experience and on various other assumptions that we 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. Any future changes to these estimates and assumptions could cause a material
change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under
different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of the financial statements.
Our
financial statements do not include any comparative information as there were no significant transactions for the nine months
ended September 30, 2017.
Cash
and Cash Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less
to be cash and cash equivalents.
Revenue
Recognition
The
Company is in the development stage and has yet to realize revenues from operations. Once the Company has commenced operations,
it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence
of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated
terms and conditions, and collection of any related receivable is probable.
Loss
per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of
shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial
instruments issued or outstanding for the nine months ended September 30, 2017.
Estimates
The
financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
as of the date of the financial statements, and revenues and expenses for the nine months ended September 30, 2017. Actual results
could differ from those estimates made by management.
Recent
Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the financial statements upon adoption.
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, sales or expenses, results of operations, liquidity or capital expenditures, or capital
resources that are material to an investment in our securities.