NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)
Summary of Significant Accounting Policies
Basis
of Presentation and Organization
The
Company was incorporated in 1999 in the state of Utah under the name Datigen.com, Inc. On August 25, 2005, the Company changed
its state of incorporation from Utah to Nevada by the merger of the Company with and into its wholly-owned subsidiary, Canna Powder,
Inc., a Nevada corporation. As a result of such merger, the Company’s name was changed to Canna Powder, Inc. in order to
better reflect the Company’s business operations.
On
August 30, 2017, a new wholly-owned subsidiary was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”), with 100 common shares outstanding, 0.01 NIS par value (the “Subsidiary
Shares”), all of which were held in escrow on behalf of the Company by Israel attorney, Alon Nave. On September 27, 2017,
pursuant to board resolution, the 100 Subsidiary Shares held in escrow were transferred to the Company.
On
December 27, 2017, a board-resolution was adopted to issue an additional: (i) 800 Subsidiary Shares to the Company; and an additional
100 Subsidiary Shares to Rafi Ezra and, as a result, effective December 27, 2017, Canna Powder Ltd became a 90% owned subsidiary
of the Company and a minority interest of 10% owned by Rafi Ezra.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Mr. Ezra is a highly experienced pharmacist
with extensive knowledge of the cannabis sector and active experience of leading early-stage pharma companies from early-stage
development through commercial launch.
Development
is being conducted at the Hebrew University pursuant to the term of the Feasibility Study and Option Agreement under the supervision
of the inventor of the technology, Professor Shlomo Magdassi.
The
Company reasonably expects that the Development Program will be completed within three years, with commercial sales starting in
2021, there can be no assurance that the Development Program will, in fact, be successful notwithstanding the Company’s
success in its Equity Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement
its business plan and complete production of commercially viable products based on its technology which is the subject of the
Feasibility Study discussed below under “Planned Research and Development and Current Trends.”
In
the commercial stage, the Company’s plan is to establish and operate several production facilities, each located in separate
territories determined by the Company according to their size and regulatory environment that permits studies applicable to other
activities prerequisite to commercial exploitation of medical cannabis generally and the Company’s plan to develop cannabis-based
powders for medical uses. While there can be no assurance, at present the Company believes that it will be able to produce cannabis
powders for medical uses at a significant cost advantage.
The
accompanying unaudited financial statements of the Company are presented in accordance with the requirements of Form 10-Q and
Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been
condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for an air presentation have been made. The results for these interim periods
are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction
with the Company’s audited financial statements for the year ended December 31, 2017 and the notes thereto included in the
Company’s Report on Form 10-K12G filed with the SEC on April 30, 2018.
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. As of September 30, 2018, and December 31, 2017, we had cash and cash equivalents of $721,414
and $326,730 respectively.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact
on net earnings, financial position or cash flows.
Discontinued
Operations
The
Company follows the policy of segregating the assets and liabilities of subsidiaries or lines of business on its Balance Sheet
from the assets liabilities of continuing subsidiaries or lines of businesses when it is decided to close or dispose of a subsidiary
or line of business. The Company also, follows the policy of separately disclosing the assets and liabilities and the net operations
of a subsidiary or line of business in its financial statements when it is decided to close or dispose of a subsidiary or line
of business.
Revenue
Recognition
The
Company recognizes revenue ratably over the term of the contract in accordance with ASC 606. In 2018, we are implementing new
internal controls as part of our efforts to adopt the new revenue recognition standard. These internal controls include providing
global training to our finance team and holding regular meetings with management and the Audit Committee to review and approve
key decisions. Upon adoption, we expect to implement new internal controls related to our accounting policies and procedures.
We will require new internal controls to address risks associated with applying the five-step model, specifically related to judgments
made in connection to variable consideration and applying the constraint. Additionally, we will establish monitoring controls
to identify new sales arrangements and changes in our business environment that could impact our current accounting assessment.
During the second half of 2018, we expect to finalize our impact assessment and redesign impacted processes, policies and controls.
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.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are determined based on temporary
differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred
tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating
the differences.
The
Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based
upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial
position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence
of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the
related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable
judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the
Company could realize in a current market exchange. As of September 30, 2018 and December 31 2017, the carrying value of accounts
payable and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Deferred
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At
the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated,
deferred offering costs are charged to operations during the period in which the offering is terminated.
Impairment
of Long-Lived Assets
The
Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances
lead management to believe that the carrying value of an asset may not be recoverable. As of December 31, 2017, no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was required.
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 as of September 30, 2018 and December 31, 2017, and expenses
for the nine months ended September 30, 2018 and 2017. Actual results could differ from those estimates made by management.
Impact
of Recently Issued Accounting Standards
In
June 2018, the FASB issued Accounting Standards Update, or ASU 2018-07, Compensation - Stock Compensation (Topic 718), which simplifies
the accounting for non-employee share-based payment transactions. The new standard expands the scope of Topic 718 to include share-based
payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for fiscal years beginning
after December 15, 2018 (including interim periods within that fiscal year), with early adoption permitted. The Company adopted
the new standard in the second quarter of 2018 and determined that the application of the new standard did not have a material
impact on the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended
September 30, 2018.
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. Public
business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim
periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018,
and interim periods within annual periods beginning after December 15, 2019.
In
March 2017, the FASB issued Update 2017-08—Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium
Amortization on Purchased Callable Debt Securities.For public business entities, the amendments in this Update are effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December
15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
In
March 2017, the FASB issued Update 2017-07—Compensation—Retirement Benefits (Topic 715): Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Effective for public business entities for annual periods
beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments in
this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim
or annual) have not been issued or made available for issuance. That is, early adoption should be within the first interim period
if an employer issues interim financial statement. Disclosures of the nature of and reason for the change in accounting principle
are required in the first interim and annual periods of adoption.
Goodwill
and Intangible Assets
Goodwill
is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first
performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit
is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s
carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted
cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The
discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future
impairment of goodwill at the reporting unit.
Intangible
assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased
trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit
using the straight-line method and estimated useful lives ranging from two to twenty years. No significant residual value is estimated
for intangible assets.
Note
(2) Going Concern
The
Company has limited operations. The Company was previously engaged in activities including efforts to develop and market its Battery
Brain technology, which efforts ceased during the quarter ended September 30, 2009. On August 30, 2017, the Company formed a subsidiary
in Israel under the name of Canna Powder Ltd (“Canna Israel” or the “Subsidiary”) which is 90% owned by
the Company and the remaining 10% is owned by Rafi Ezra, co-founder and CTO of Canna Powder Ltd. The Subsidiary commenced efforts
to develop the formulation and process to produce medical products using new technology involving nano-powder derived from cannabis
oil. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a going concern. The Company has not yet generated
any revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors
raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern
.
Note
(3) Prepaid expenses
Prepaid
expenses repaid expenses of $14,517 at September 30, 2018 and $4,196 at December 31, 2017, consist of VAT paid to be refunded
from the Israel VAT authority.
Note
(4) Common Stock
On
October 17, 2017, the Company sold a total of 6,300,000 shares to 13 shareholders at $0.01 per share for a total cash consideration
of $63,000. Four of the shareholders are related parties.
On
October 24, 2017 the Company issued 666,667 shares to 1 shareholder at $0.075 per share for cash consideration of $50,000.
Between
November 15, 2017 and December 7, 2017, the Company sold a total of 1,000,000 units for cash consideration of $300,000 at price
of $.30 (the “Units”), each unit comprised of one share of common stock and one class A warrant exercisable at $0.50
per share with a term of 24 months. The relative fair value of the stock with embedded warrants was $132,458 for the common stock
and $167,542 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility of approximately
163% and discount rates ranging from 1.68% to 1.8%.
Between
March 20, 2018 and March 29, 2018, the Company sold a total of 206,000 units for cash consideration of $123,600 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $44,454 for the common stock and $
79,146
for the class B Warrants.
Between
April 3, 2018 and May 14, 2018, the Company sold a total of 1,150,500 units for cash consideration of $690,300 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $290,996 for the common stock and $399,304
for the class B Warrants.
On
September 30, 2018 and December 31, 2017 there were approximately 217 and 189 holders of record and 9,948,077 and 8,591,577 of
the Company’s common stock authorized with $0.00001 par value, respectively. All common shares are entitled to one vote
per share in all matters submitted to the shareholders. No preferred shares are issued and outstanding at September 30, 2018 and
December 31, 2017.
Dividends
The
Company has not declared or paid any cash dividends on its common stock nor does it anticipate paying any in the foreseeable future.
Furthermore, the Company expects to retain any future earnings to finance its operations and expansion. The payment of cash dividends
in the future will be at the discretion of its Board of Directors and will depend upon its earnings levels, capital requirements,
any restrictive loan covenants and other factors the Board considers relevant.
Securities
Authorized for Issuance under Equity Compensation Plans – None.
Following
is a table of warrant and options still outstanding and exercisable along with exercise price and range of remaining term.
Type
|
|
Quantity
|
|
|
Exercise Price
|
|
|
Remaining Term
|
Warrants Class A
|
|
|
1,000,000
|
|
|
$
|
0.50
|
|
|
18 Months
|
Warrants Class B
|
|
|
1,356,500
|
|
|
$
|
1.20
|
|
|
18-24 Months
|
Total
|
|
|
2,356,500
|
|
|
|
|
|
|
|
Note
(5) Income Taxes
The
Company had deferred income tax assets as of September 30, 2018 and December 31, 2017 as follows:
|
|
September 30, 2018
|
|
|
2017
|
|
Loss carryforwards
|
|
$
|
104,722
|
|
|
$
|
43,107
|
|
Less- Valuation allowance
|
|
|
(104,722
|
)
|
|
|
(43,107
|
)
|
Total net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company provided a valuation allowance equal to the deferred income tax assets for the period ended September 30, 2018 and December
31, 2017, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
As
of September 30, 2018, and December 31, 2017, the Company had approximately $498,677 and $123,164, respectively, in tax loss carryforwards
that can be utilized in future periods to reduce taxable income, and expire by the year 2030.
The
Company did not identify any material uncertain tax positions that will be filed. The Company did not recognize any interest or
penalties for unrecognized tax benefits during the year ended September 30, 2018 and December 31, 2017.
The
Company intends to file income tax returns in the United States. All tax years are closed by expiration of the statute of limitations.
Note
(6) Related Party Transactions
On
October 17, 2017 the issuer’s control persons, Amir Uziel, Attribute Ltd, Lavi Krasney and Kfir Silberman (controlling shareholder
of L.I.A. Pure Capital Ltd) purchased 650,000 additional shares each, or 2,600,000 total shares at $0.01 per share for a total
cash consideration of $26,000.
On
May 1, 2018 a services agreement for was signed with an entity controlled by a related party, no warrants or shares have been
issued as a result of this agreement.
Between
January 8, 2017 and August 25, 2017 three shareholders loaned the Company amounts totaling $16,403 in loans bearing 8% interest
which have no maturity dates. The loans which accrued interest of $879 were repaid on December 20, 2017. The three debt holders
confirmed they were owed no principal or interest as of December 31, 2017.
Note
(7) Notes Payable
During
the year ended December 31, 2017, the Company borrowed $100 and $800, respectively, which the loans bear an interest rate of 8%
and has no maturity date. The loans were repaid in the amount of $850 on May 5, 2017 and the Company recorded a gain on debt extinguishment
of $50.
On
May 12, 2016 a shareholder loaned the Company the sum of $5,000 to settle a vendor debt. The shareholder has subsequently forgiven
the debt resulting from this payment and has confirmed he is owed no principal or interest as of December 31, 2016 and December
31, 2017. As of December 31, 2016, the amount paid by the shareholder to the vendor was forgiven, as the shareholder is a related
party the forgiven debt resulted in an increase to additional paid in capital.
Between
January 8, 2017 and August 25, 2017 three shareholders loaned the Company amounts totaling $16,403 in loans bearing 8% interest
which have no maturity dates. The loans which accrued interest of $879 were repaid on December 20, 2017. The three debt holders
confirmed they were owed no principal or interest as of December 31, 2017.
On
December 22, 2017 a loan was made in the amount $2,687 the loan bears no interest and has no maturity date. The loan which accrued
interest of $0 was repaid in full on January 8, 2018
Note
(8) Subsequent Events
As
defined in FASB ASC 855-10, “Subsequent Events”, subsequent events are events or transactions that occur after the
balance sheet date but before financial statements are issued or available to be issued.
The
Company evaluated all transactions and events that occurred subsequent to the balance sheet date and prior to the date on which
the financial statements contained in this report were issued and determined that no such events or transactions necessitated
disclosure.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
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FORWARD-LOOKING
STATEMENTS
Certain
statements that the Company may make from time to time, including all statements contained in this report that are not statements
of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 and the safe harbor provisions set forth in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements may be identified by words such as “plans,” “expects,”
“believes,” “anticipates,” “estimates,” “projects,” “will,” “should,”
and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance,
product development and new product launches, market position and expenditures. The Company assumes no obligation to update any
forward-looking statements. Additional information concerning factors which could cause differences between forward-looking statements
and future actual results is discussed under the heading “Risk Factors” in the Company’s Annual Report on Form
10-12G, as filed with the SEC on April 30, 2018.
The
following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
is intended to help you understand our historical results of operations during the periods presented and our financial condition.
This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated
financial statements and contains forward-looking statements that involve risks and uncertainties. See section entitled “Forward-Looking
Statements” above.
Plan
of Operation
On
August 30, 2017, a 90% owned subsidiary of the Company was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”).
Development
is being conducted at the Hebrew University pursuant to the term of the Feasibility Study and Option Agreement under the supervision
of the inventor of the technology, Professor Shlomo Magdassi.
The
Company reasonably expects that the Development Program will be completed within three years, with commercial sales starting in
2021, there can be no assurance that the Development Program will, in fact, be successful notwithstanding the Company’s
success in its Equity Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement
its business plan and complete production of commercially viable products based on its technology which is the subject of the
Feasibility Study discussed below under “Planned Research and Development and Current Trends.”
In
the commercial stage, the Company’s plan is to establish and operate several production facilities, each located in separate
territories determined by the Company according to their size and regulatory environment that permits studies applicable to other
activities prerequisite to commercial exploitation of medical cannabis generally and the Company’s plan to develop cannabis-based
powders for medical uses. While there can be no assurance, at present the Company believes that it will be able to produce cannabis
powders for medical uses at a significant cost advantage.
Results
of Operations during the three and nine months ended September 30, 2018 as compared to the three and nine months ended September
30, 2017
During
the three and nine months ended September 30, 2018 we generated revenues of $0 and $0 as compared three and nine months ended
September 30, 2017 in which we also generated revenues of $0 and $0, respectively.
Our
research and development expenses during the three and nine months ended September 30, 2018 were $45,321 and $102,202 as compared
to the three and nine months ended September 30, 2017 in which the research and development expenses were $0 and $0, respectively.
The significant increase was due to research and development activities of the new subsidiary.
Our
general and administrative expenses during the three and nine months ended September 30, 2018 were $57,300 and $295,183, respectively
as compared to the three months ended September 30, 2017 in which we had general and administrative expense of $10,774 and nine
months ended September 30, 2017 in which we had general and administrative expenses of $14,724. The significant increase was mostly
due to general and administrative expenses in the new subsidiary.
Other
expenses during the three and nine months ended September 30, 2018 were $0 and $0, respectively compared to $362 and $484, respectively,
for the three and nine months ended September 30, 2017.
Other
expenses of $484 for the nine months ended September 30, 2017 were comprised of $534 interest expenses offset by $50 gain from
debt settlement during the same period in the prior year, while other expenses of $362 for the three months ended September 30,
2017 were comprised of $362 interest expenses.
We
incurred a net loss attributable to the company of $95,936 and $375,513, respectively, during the three and nine months ended
September 30, 2018 compared to $11,136 and $15,208, respectively, during the same periods in the prior year.
The
loss attributable to non-controlling interest for the three and nine months ended September 30, 2018 was $6,685 and $21,872, respectively,
compared to $0 and $0, respectively, during the same periods in the prior year.
Liquidity
and Capital Resources
Our
balance sheet as of September 30, 2018 reflects $735,931 in total assets consisting of cash and cash equivalents of $721,414 and
prepaid assets of $14,517. As of December 31, 2017, our balance sheet reflects $330,926 in total assets consisting of cash and
cash equivalents of $326,730 and prepaid assets of $4,196.
As
of September 30, 2018, we had total current liabilities of $0. As of December 31, 2017, we had total current liabilities of $800
consisting of accounts payable and accrued liabilities of $800 and long-term liabilities of $2,687 consisting of notes payable.
We
had positive working capital of $735,931 as of September 30, 2018 compared to $330,126 at December 31, 2017. Such working capital
has been sufficient to sustain our operations to date. Our total liabilities as of September 30, 2018 were $0 compared to $3,487
at December 31, 2017.
During
the nine months ended September 30, 2018, we used $408,506 in our operating activities. This resulted from a net loss of $375,513
attributable to Canna Powder, Inc. $21,872 loss attributable to non-controlling interest, decrease of $800 in account payable
and increase in prepaid expenses of $10,321.
During
the nine months ended September 30, 2017, we used $16,503 in our operating activities. This resulted from a net loss of $15,208,
increase in gain on settlement of notes payable of $50, decrease in account payable of $495 and decrease in accrued expense of
$750.
During
the nine months ended September 30, 2018, we financed our negative cash flow by financing activities through sale of common stock
in the amount of $813,900 offset by payments to notes payable of $2,687.
During
the nine months ended September 30, 2017, we financed our negative cash flow by financing activities through issuance of notes
payable of $16,503.
During
the nine months ended September 30, 2017 and nine months ended September 30, 2018 there were no investment activities.
While
management of the Company believes that the Company will be successful in its current and planned operating activities, there
can be no assurance that the Company will be successful in the achievement of sales of its products that will generate sufficient
revenues to earn a profit and sustain the operations of the Company. The Company intends to conduct additional capital formation
activities through the issuance of its common stock in 2018 unless and until we begin to generate revenues from licensing our
products which are in development.
Our
ability to create sufficient working capital to sustain us over the next twelve-month period, and beyond, is dependent on our
entering into additional licensing agreement and on our success in issuing additional debt or equity, or entering into strategic
arrangement with a third party. There can be no assurance that sufficient capital will be available to us. We currently have no
agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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We
have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.
ITEM
4. CONTROLS AND PROCEDURES
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Evaluation
of disclosure controls and procedures.
As of September 30, 2018, the Company’s chief executive officer and chief financial
officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined
in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief
executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the
end of the period covered by this report.
Changes
in internal controls.
During the quarterly period covered by this report, no changes occurred in our internal control over
financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.