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ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS.
This Quarterly Report includes
“forward-looking statements” within the meaning of Section 27A of the Exchange Act which represent the expectations
or beliefs concerning future events that involve risks and uncertainties, including but not limited to the demand for Company
products and services and the costs associated with such goods and services. All other statements other than statements of historical
fact included in this Quarterly Report including, without limitation, the statements under “Management’s Discussion
and Analysis or Plan of Operations” and elsewhere in the Quarterly Report, are forward-looking statements. While the
Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct.
The following discussion of the
results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing
in this report.
EnXnet, Inc.
(the “Company”) was formed under the laws of the State of Oklahoma on March 30, 1999. On August 7, 2015, the Company
incorporated EnXnet Energy Company LLC. in the State of Colorado as a wholly owned subsidiary. EnXnet Inc. and its wholly owned
subsidiary, EnXnet Energy Company, LLC. (“the Company”) is a natural gas and petroleum exploitation, development and
production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. The Company’s
principal business strategy is to enhance stockholder value by generating and developing high-potential exploitation resources
in these areas. The Company’s principal business is the acquisition of leasehold interests in petroleum and natural gas
rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. The Company
has leased property in Colorado and is currently searching for additional opportunities in the natural gas and petroleum industry.
Our goal is to lease the oil and gas properties of acreage that has a high likelihood of becoming a producing property. We will
require additional funding to drill and complete a producing natural gas and petroleum well.
The Company
currently can satisfy its current cash requirements for approximately 90 days and will raise additional working capital by the
sale of shares of the Company common stock to select perspective individuals and from additional borrowings. This plan should
provide the additional necessary funds required to enable the Company to initiate its drilling program on the oil and gas lease
properties.
The Company
does not anticipate any significant cash requirements for the purchase of any facilities.
The Company
currently has no full-time employee on the payroll.
Results of Operations –
Three months ended June 30, 2018 and 2017.
The Company incurred operating
expenses of $35,848 and $ 10,227 for the three months ended June 30, 2018 and 2017, respectively, an increase of $25,621. The
increase in operating expenses for the three months ended June 30, 2018 when compared to the three-month period ended June 30,
2017 consist of:
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Increase
in the impairment of oil and gas properties of $17,128
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Impairment of oil and gas properties, unproved increased $17,128 for the three months ended June 30, 2018 from the previous year.
In the current period the Company determined that carrying value of the unproved oil and gas properties was not supported as we
have not been able to raise funds to complete a drilling program on these properties.
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Increase
in professional services of $9,084
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Professional services in the three months ended June 30, 2018 includes fees for our year end reporting cycle. Similar fees for
the prior year’s annual reporting cycle were not recorded until the following quarter when the annual report was filed.
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And
other decreases of $591
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During the three months ended June
30, 2018 and 2017 we incurred net losses of $46,731 and $23,596, respectively.
Liquidity and Capital Resources.
From inception through June 30,
2018, the Company has issued 55,276,518 shares of its Common Stock to officers, directors and outside shareholders. The
Company has little operating history and no material assets other than the oil and gas cash bond and 22,507 acres of mineral lease
properties. The Company has $11,726 of unrestricted cash and $2,489 of restricted cash as of June 30, 2018.
The Company has incurred operating
losses each year since its inception and has a working capital deficit at June 30, 2018. At June 30, 2018 and March 31, 2018,
the working capital deficit was $2,055,147 and $2,008,416, respectively. The working capital deficit and operating losses raise
substantial doubt about the Company’s ability to continue as a going concern. As a result of these factors, the Company’s
independent certified public accountants have included an explanatory paragraph in their reports on the Company’s March
31, 2018 financial statements which expressed substantial doubt about the Company’s ability to continue as a going concern.
Contractual Obligations.
At the present time, the Company
has no material commitments for capital expenditures. If capital expenditures are required after operations commence,
the Company will pay for the same through the sale of common stock, or through loans from third parties. There is no
assurance, however, that such financing will be available and in the event such financing is not available, the Company may have
to cease operations.
CRITICAL ACCOUNTING POLICIES
AND ESTIMATES.
Management’s discussion and
analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements
have been prepared in accordance with generally accepted accounting principles in the United States of America.
Use of estimates in preparation
of financial statements
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and 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. The following critical accounting policies rely upon assumptions, judgments and estimates
and were used in the preparation of our consolidated financial statements:
Cash and cash equivalents
Cash equivalents are highly liquid
investments with an original maturity of three months or less.
Use of estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates
and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based
on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Under FASB ASC 825 the Company
is required to disclose the fair value of financial instruments for which it is practicable to estimate value.
The Company’s financial instruments
consist of cash, accounts receivable, accounts payable, accrued liabilities and debt. The Company believes that the
carrying amounts approximate fair value for all such instruments.
FASB ASC 820 defines fair value,
establishes a framework for measurement, and expands disclosure about fair value measurements. Topic No. 820 defines
fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date (exit price). Topic No. 820 classifies the inputs used to measure fair
value into the following hierarchy:
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Level 1:
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Quoted prices for identical
assets or liabilities in active markets.
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Level 2:
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Quoted market prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived
valuations whose inputs are observable or whose significant value drivers are observable.
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Level 3:
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Pricing inputs are unobservable for the assets
and liabilities, including situations in which there is little to no market activity.
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Stock Based Compensation
FASB ASC 718 requires that measurement
of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value
of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.
Income taxes
Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
We have net operating loss carryforwards
available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the
extent that realization of these benefits is considered more likely than not. To the extent that we will not realize a future
tax benefit, a valuation allowance is established.
Basic and diluted net loss per
share
Basic loss per share is computed
using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the
dilutive effects of common stock equivalents on an “as if converted” basis. For the periods ended June 30, 2018 and
2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per
common share
Recent Accounting Pronouncements
In November 2016, the FASB issued
ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). ASU
2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted
cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period
and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for all interim and annual reporting
periods beginning after December 15, 2017. The attached financial statements include the adoption of ASU 2016-18. The adoption
did not have a material impact on the Company’s Consolidated Financial Statements “, other than certain reclassifications
have been made in the Company’s consolidated statements of cash flows to conform with the current period presentation.
The Company does not expect the
adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation,
financial position or cash flows.
Unaudited Financial Statements
The accompanying unaudited financial
statements for the three months ended June 30, 2018 have been prepared in accordance with generally accepted accounting principles
for interim financia1 information. In the opinion of management all adjustments considered necessary for a fair presentation,
which consist of normal recurring adjustments, have been included. The accompanying unaudited financial statements
should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2018 Annual
Report on Form 10-K.
Off Balance Sheet Arrangements
We currently have no off-balance
sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CURRENT TRADING MARKET FOR THE
COMPANY’S SECURITIES.
Currently the Company’s stock
is traded under the symbol “EXNT” on the OTC PINK. There can be no assurance that an active or regular trading market
for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes
in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors
may have a significant impact on the market of the Company securities. The market price for the securities of public companies
often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such
as high interest rates or impact of overseas markets.