Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended October 31, 2018

 

OR

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________to _________

 

Commission file number: 000-55423

 

GRAND PERFECTA, INC.
(Exact name of Registrant as Specified in its Charter)

 

Nevada 46-5732930
(State or Other Jurisdiction
of Incorporation or Organization)
(I.R.S. Employer
Identification Number)

 

123 West Nye Lane, Suite 129

Carson City, NV 89706


(Address of Principal Executive Offices including Zip Code)

 

(801)560-6969
(Registrant's Telephone Number, Including Area Code)


NA
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x     NO  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  x     NO  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  o Accelerated filer  o
   
Non-accelerated filer  o   (Do not check if a smaller reporting company) Smaller reporting company x
   
Emerging growth company  x     
   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  o     NO  x

 

As of February 14, 2019, 4,977,332 shares of the issuer's common stock, par value of $0.001 per share, were outstanding.

 

 

     

 

 

 

GRAND PERFECTA, INC.

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION 3
   
ITEM 1 – FINANCIAL STATEMENTS 3
   
ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
   
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20
   
ITEM 4 – CONTROLS AND PROCEDURES 20
   
PART II – OTHER INFORMATION  
   
ITEM 1 – LEGAL PROCEEDINGS 21
ITEM 1A – RISK FACTORS 21
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 21
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4 – MINE SAFETY DISCLOSURES 21
ITEM 5 – OTHER INFORMATION 21
ITEM 6 – EXHIBITS 21
   
SIGNATURES 22

 

 

 

 

 

 

  2  

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1 – FINANCIAL STATEMENTS

 

Consolidated Balance Sheets at October 31, 2018 (Unaudited) and July 31, 2018

 

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) — Three Months Ended October 31, 2018 and 2017

 

Consolidated Statements of Cash Flows (Unaudited) — Three Months Ended October 31, 2018 and 2017

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  3  

 

 

GRAND PERFECTA, INC.

CONSOLIDATED BALANCE SHEETS

 

    October 31, 2018     July 31, 2018  
    (Unaudited)        
         
Assets  
Current assets                
Cash   $ 18,024     $ 52,716  
Accounts receivable, net     6,634       8,632  
Total current assets     24,658       61,348  
                 
Total assets   $ 24,658     $ 61,348  
                 
Liabilities and Stockholders' Equity (Deficit)  
Current liabilities                
Accounts payable and accrued expenses   $ 619,735     $ 627,666  
Deferred revenues     5,203       8,462  
Taxes payable     337        
Total current liabilities     625,275       636,128  
Total liabilities     625,275       636,128  
                 
Commitments and contingencies            
                 
Stockholders' equity (deficit)                
Preferred stock, $0.001 par value, 100,000,000 shares authorized, zero shares issued and outstanding            
Common stock, $0.001 par value, 500,000,000 shares authorized, 4,977,332 shares issued and outstanding     4,977       4,977  
Additional paid-in capital     4,594,285       4,594,285  
Accumulated deficit     (5,178,148 )     (5,152,172 )
Accumulated other comprehensive income     (21,731 )     (21,870 )
Total stockholders' equity (deficit)     (600,617 )     (574,780 )
Total liabilities and stockholders' equity (deficit)   $ 24,658     $ 61,348  

 

See accompanying notes to unaudited consolidated financial statements

 

 

 

  4  

 

 

GRAND PERFECTA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

  For the Three Months Ended  
  October 31, 2018     October 31, 2017  
Net sales   $ 30,662     $ 88,446  
Total revenues     30,662       88,446  
                 
Operating expenses:                
Cost of sales     26,396       88,446  
General and administrative expenses     30,242       186,909  
Total operating expenses     56,638       275,355  
                 
Net loss before provision for income taxes     (25,976 )     (186,909 )
Provision for (benefit from) income taxes            
Net loss from continuing operations     (25,976 )     (186,909 )
Loss from operations of discontinued operations           (35,297 )
Benefit from income taxes from discontinued operations           (77,772 )
Net income from discontinued operations           42,475  
Net loss   $ (25,976 )   $ (144,434 )
                 
Net loss per share from continuing operations, basic and diluted   $ (0.01 )   $ (0.01 )
Net loss per share from discontinued operations, basic and diluted   $     $ 0.00  
Net loss per share, basic and diluted   $ (0.01 )   $ (0.00 )
                 
Weighted average number of common shares outstanding, basic and diluted     4,977,332       31,800,000  
                 
Other comprehensive income (loss)                
Foreign currency translation adjustments     139       32,347  
Comprehensive loss     (25,837 )     (112,087 )
Comprehensive loss attributable to non-controlling interest           (6,750 )
Comprehensive loss attributable to GPI stockholders   $ (25,837 )   $ (118,837 )

 

See accompanying notes to unaudited consolidated financial statements

 

 

 

  5  

 

 

GRAND PERFECTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  For the Three Months Ended  
  October 31, 2018     October 31, 2017  
Cash flows from operating activities                
                 
Net loss   $ (25,976 )   $ (144,434 )
Less: net income from discontinued operations           (42,475 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Changes in operating assets and liabilities:                
Accounts receivable     1,826       3,373  
Prepaid expenses and other current assets           2,176  
Accounts payable and accrued expenses     (10,424 )     101,175  
Operating cash flows from discontinued operations           127,215  
Net cash provided by (used in) operating activities     (34,574 )     47,030  
                 
Cash flows from investing activities                
Investing activities of discontinued operations           (50,420 )
Net cash used in investing activities           (50,420 )
                 
Cash flows from financing activities                
Financing activities of discontinued operations           (54,000 )
Net cash used in financing activities           (54,000 )
                 
Effect of exchange rate fluctuations on cash     (118 )     (1,203 )
                 
Net change in cash     (34,692 )     (58,593 )
Cash, beginning of the period     52,716       102,954  
Cash, end of the period     18,024       44,361  
Less cash of discontinued operations, end of period           38,308  
Cash of continuing operations, end of period   $ 18,024     $ 6,053  
                 
Supplemental disclosure of cash flow information:                
Interest paid   $     $ 195,007  
Income taxes paid   $     $  

 

See accompanying notes to unaudited consolidated financial statements

 

 

 

  6  

 

 

GRAND PERFECTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1.  DESCRIPTION OF BUSINESS

 

Organization

 

Grand Perfecta, Inc. (“Grand Perfecta”) was incorporated in the State of Nevada on March 25, 2002, as STI Holdings, Inc. (“STI”). On May 12, 2012, Grand Perfecta completed an Agreement and Plan of Reorganization whereby it acquired 100% of the issued and outstanding shares of Link Bit Consulting Co, Ltd. (“LBC”), a Japanese corporation, for 25,000,000 common shares in a transaction accounted for as a recapitalization of LBC. Effective March 29, 2013, STI amended its Articles of Incorporation to change its name to Grand Perfecta, Inc. On May 27, 2013, Grand Perfecta issued 272,668 shares in exchange for 100% of the issued and outstanding shares of Umajin Hong Kong Ltd. (“Umajin HK”), a Hong Kong corporation. In August 2015, Grand Perfecta formed Sports Perfecta, Inc. (“SPI”), as a California subsidiary to pursue development of a fantasy sports offering to horse racing fans. The operations of Grand Perfecta, LBC, Umajin HK, and SPI are collectively referred to as the “Company.”

 

On December 16, 2015, LBC acquired 100% of the outstanding shares of Basougu Shokuninkai Co., Ltd. (“Basougu”), a Japanese corporation. On January 7, 2016, SPI acquired 100% of the outstanding stock of Just Mobile Sdn. Bhd. (“Just Mobile”), a Malaysian company. On January 20, 2016, Just Mobile changed its name to Sports Perfecta Technologies Sdn Bhd (“SPT”). The operations of Just Mobile are referred to as SPT after the acquisition date of January 7, 2016.

 

In June 2018, Grand Perfecta completed a disposition of a substantial portion of its assets and operations through two transactions.

 

On June 26, 2018, the Company transferred 100% of the common stock of Sports Perfecta, Inc., a California corporation and subsidiary of the Company, and a receivable representing a sum owing to the Company by SPI in the amount of JPY 185,540,908 to Neo Sports Ltd., a Japanese company (“Neo Sports”), in exchange for (a) 23,600,000 shares of Company common stock, (b) 100,000 shares of Company Series A Convertible Preferred Stock, and (c) an outstanding contract option right to purchase 3,000,000 shares of the common stock of Company at a price of $1.00 per share (the “SPI Transaction”). After this transaction, Neo Sports did not own any securities of the Company. All common and preferred shares delivered to the Company as part of the SPI Transaction were immediately cancelled.

 

On June 27, 2018, the Company sold 100% of the capital stock of Link Bit Consulting Co, Ltd., a Japanese company and subsidiary of the Company, to IS Digital Ltd., a Cayman Islands company (“ISD”) for $420,000 in cash, and a sale to ISD of a receivable representing a sum owing to the Company by LBC in the amount of JPY 8,089,625 for $80,000 in cash (the “LBC Transaction”).

 

After the foregoing transactions, the Company continues to own as subsidiaries Umajin HK and WRN Co. Ltd. (“WRN”).

 

Nature of Business

 

The Company is engaged in the business of gathering, publishing and disseminating horse racing information and other content related to horse racing in Japan and the Japanese horse racing industry through its wholly owned subsidiaries WRN, a Japanese corporation. Umajin Hong Kong had been delivering information on horse racing to its users through its website, however, it terminated its services at the end of June 2017. Historically, through June 27, 2018, our operations were conducted in Japan through wholly-owned subsidiary, LBC Consulting Co, Ltd. LBC historically had six different websites that it owned and operated through its various subsidiaries, which comprised substantially all of the Company’s revenue.

 

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of the Company as of October 31, 2018, and for the three months ended October 31, 2018 and 2017, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. In the opinion of management, such financial information includes all adjustments considered necessary for a fair presentation of the Company's financial position at such date and the operating results and cash flows for such periods. Operating results for the interim period ended October 31, 2018 are not necessarily indicative of the results that may be expected for the entire year.

 

Certain information and footnote disclosure normally included in financial statements in accordance with GAAP have been omitted pursuant to the rules of the United States Securities and Exchange Commission ("SEC"). These unaudited financial statements should be read in conjunction with our audited financial statements and accompanying notes for the years ended July 31, 2018 and 2017 included in the Company's Form 10-K filed on January 25, 2019.

 

 

 

  7  

 

 

The accompanying unaudited consolidated financial statements include the accounts of Grand Perfecta and its wholly-owned subsidiaries LBC, Umajin HK, WRN and SPI. The Company discontinued the operations of its wholly-owned subsidiaries LBC and SPI in June 2018. The accounts for these subsidiaries have been presented in the discontinued operations in the accompanying consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The Company has determined that three affiliated entities, Space Cultivation Mobile, Japan Horse Circle and Basougu Shokuninkai, which LBC conducts business with were variable interest entities and that the Company was the primary beneficiary of each entity. As a result, the Company has consolidated the accounts of these variable interest entities into the accompanying consolidated financial statements. As the Company does not have any ownership interest in these variable interest entities, the Company has allocated the contributed capital in these variable interest entities as a component of non-controlling interest. These three variable interest entities did business with LBC. Therefore, these three entities have also been presented in the discontinued operations in the accompanying consolidated financial statements. After the discontinued operations, the Company consists of Grand Perfecta and its two remaining wholly-owned subsidiaries, Umajin HK and WRN. There are no variable interest entities since the Company discontinued operations in June 2018.

 

Financial Statement Reclassification

 

Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications. The prior year amounts have also been modified in these financial statements to properly report amounts under current operations and discontinued operations (see note 6).

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Amounts could materially change in the future. 

 

Going Concern

 

Based on operating losses and negative cash from operations and the discontinued operations of most of the Company’s operations, substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plan in this regard is to find new operations to enter into and focus on building profitable operations. To finance operations while it finds new operations, the Company will continue financing activity such as taking loans and issuing new shares of the Company’s common stock.

 

As of October 31, 2018, we had cash of $18,024 and a working capital deficit of $600,617 as compared to cash of $52,716 and a working capital deficit of 574,780 as of July 31, 2018.

 

We continue to have a significant working capital deficit that adversely affects our business by limiting the resources we have available to pursue the promotion of our information services and develop new service opportunities for potential customers. Historically, we have relied on extensions of note payment due dates and new debt financing to repay note obligations as they came due in order to continue operations. Going forward we will continue to use extensions and new debt financing to address note obligations that come due, endeavor to gradually reduce obligations with cash flow provided by operations, and pursue over the next 12 months equity financing that we can apply to debt reduction and business development. Nevertheless, the shortage of working capital adversely affects our ability to develop, sponsor, or participate in activities that promote our information services to prospective customers and to develop new content, because a substantial portion of cash flow goes to reduce debt rather than to advance operating activities. There is no assurance that our plans for addressing our working capital shortages will be successful, and our failure to be reasonably successful should be expected to result in a significant contraction of our operations and potentially a failure of the business.

  

Foreign Exchange

 

The Company’s primary operations are conducted in Japan and performed by its wholly owned subsidiaries WRN and until sold, LBC. The Company also conducted operations through SPI, and its Malaysian subsidiary SPT. A wholly owned subsidiary, Umajin HK, had been delivering information on horse racing to its users through its website similar to LBC, however it terminated its service at the end of June 2017. WRN and LBC’s functional currency is the Japanese Yen and Umajin HK’s functional currency is the Hong Kong Dollar. SPT’s functional currency is the Malaysian Ringgit.

 

The financial statements of each entity are prepared using the applicable functional currencies, and have been translated into U.S. dollars (“USD”). Assets and liabilities are translated into USD at the applicable exchange rates at period-end. Stockholders’ equity is translated using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation adjustments are included as foreign currency translation adjustments in accumulated other comprehensive income in the Company’s stockholders’ equity.

 

 

 

  8  

 

 

The following rates were used to translate the accounts of Umajin HK and WRN into USD at the following balance sheet dates.

 

    Balance Sheet Dates  
    October 31, 2018     July 31, 2018  
Japanese Yen to USD     0.0088       0.0090  
Hong Kong Dollars to USD     0.1275       0.1274  

 

The following rates were used to translate the accounts of LBC, Umajin HK, SPT and WRN into USD for the following operating periods.

 

    For the Three Months Ended  
    October 31, 2018     October 31, 2017  
Japanese Yen to USD     0.0089       0.0090  
Hong Kong Dollars to USD     0.1275       0.1280  
Malaysian Ringgit to USD      N/A       0.2356  

 

Cash and Cash Equivalents

 

The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents. The Company had no cash equivalents as of October 31, 2018 and July 31, 2018.

 

Accounts Receivable

 

Accounts receivable are carried at net realizable value, representing the outstanding balance less an allowance for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering each customer's financial condition and credit history, as well as current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company had no allowance for doubtful accounts as of October 31, 2018 and July 31, 2018.

 

Fair Value of Financial Instruments

 

In accordance with ASC 820, the carrying value of cash and cash equivalents and accounts payable approximates fair value due to the short-term maturity of these instruments. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2- Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3- Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company has determined that the book value of its outstanding financial instruments as of October 31, 2018 and July 31, 2018 approximates the fair value.

 

Concentration of Credit Risk

 

Financial instruments that potentially expose the Company to concentration of credit risk include cash and accounts receivable. The Company maintains its cash in banks located in Japan, Hong Kong and the United States in financial institutions with high credit ratings. Substantially all of the Company’s revenues are generated from customers in Japan. The Company conducts periodic reviews of the financial condition and payment practices of its customers. The Company had no losses related to the write off of accounts receivable during the three months ended October 31, 2018 and 2017.

 

 

 

  9  

 

 

Revenue Recognition

 

Effective August 1, 2018 we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606-10, Revenue from Contracts with Customers (“ASC 606-10”). The adoption of ASC 606-10 had no impact on prior year or previously disclosed amounts. In accordance with ASC 606-10, revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract.

 

The Company’s revenue consists primarily of sales of comprehensive horse racing information through multiple websites focusing on all aspects of the horse racing industry in Japan. Publication of horse racing digital magazines, and participating in other public events and media programs related to the horse racing industry do not generate significant revenue directly. These activities are undertaken for the purpose of increasing the number of horse racing fans and driving potential customers to our websites so as to hopefully eventually convert them to paying customers.

 

The majority of the Company’s revenue is generated by per-item sales. For certain users, payment is received at the time of purchase and for others it is received after purchase. In either case, our performance obligation is to provide the requested information to users. Therefore, we recognize revenue for per-item sales when the requested information is supplied to the user or for information packages that span a period of time, ratably over the subscription period. Revenues are presented net of refunds, credits and known and estimated credit card chargebacks. The Company reports revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Rights to information purchased by customers in advance of the information being provided are recorded as deferred.

 

As of October 31, 2018, the Company had $5,203 in deferred revenues. The Company will amortize these deferred revenues based on the monthly subscriptions and record revenue in line with the amortization of these advance payments.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising costs incurred amounted to $0 and $37,059 (all from discontinued operations) for the three months ended October 31, 2018 and 2017, respectively.

 

Basic and Diluted Earnings Per Share

 

In accordance with ASC 260, Earnings Per Share, the basic income per common share is computed by dividing the net income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock. No dilutive potential common shares were included in the computation of diluted net income per share because their impact was anti-dilutive. As of October 31, 2017, the Company had total options of 3,000,000 which were excluded from the computation of net income per share because they are anti-dilutive. As of October 31, 2018, the Company did not have any convertible notes or the options of 3,000,000. As a result, the basic and diluted earnings per share were the same for each of the periods presented.

 

 

 

  10  

 

 

Recent Accounting Pronouncements  

 

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

 

3. STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

The Company is authorized to issue up to 100,000,000 shares of preferred stock with a par value of $0.001, with 100,000 shares designated as Series A Preferred Stock. The Series A Preferred Stock receive a 10 to 1 voting preference over common stock. Accordingly, for every share of Series A Preferred Stock held, the holder receives the voting rights equal to 10 shares of common stock. As such, the holders of the Series A Preferred Stock have the equivalent voting capability of 1,000,000 shares of common stock. The Series A Preferred Stock also has a $0.05 per share liquidation preference over common stock, and can be redeemed by the Company at any time, upon thirty days’ notice, for $0.05 per share.

 

The Company had zero shares of Series A Preferred Stock issued and outstanding as of October 31, 2018 and July 31, 2018.

 

Common Stock

 

The Company had 4,977,332 shares of Common Stock issued and outstanding as of October 31, 2018 and July 31, 2018.

 

4. COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

Prior to June 27, 2018, the Company was leasing its corporate headquarters and administrative offices in Tokyo, Japan, as well as the administrative offices of SPT in Kuala Lumpur, Malaysia under non-cancelable operating leases extending through April 15, 2019. These leases were transferred with the discontinued operations. The Company also leases other office space as needed on a month-to-month basis.

 

The Company incurred rent expense of $0 for the three months ended October 31, 2018 and $0 for continuing operations and $100,273 for discontinued operations for the three months ended October 31, 2017.

  

Litigation

 

In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this annual report, there have been no material legal proceedings relating to the Company.

 

5. RELATED PARTY TRANSACTIONS

 

In June 2018, the Company entered into a consulting agreement with its new CEO and sole director. The agreement was for five months from June through October. The Company agreed to pay him $3,000 per month for his services in running the Company and making sure that the required audit and filings get completed. During the three months ending October 31, 2018 the Company had expensed $9,000 in consulting fees for this agreement.

 

The following related party transactions were all related to the Company’s previous management and the discontinued operations. These related party transactions all were eliminated with the discontinuation of LBC and SPI:

 

The Company and Umajin Co., Ltd.(“Umajin Japan”), a related party entity owned by a former director, modified the service agreement between them effective November 1, 2015, to set the monthly fee payable by the Company to Umajin Japan for providing horserace information at 16 million Yen per month (inclusive of consumption tax), and to set the monthly fee payable for providing a horseracing related email magazine and web page content at 7 million Yen per month (inclusive of consumption tax) for a total of 23 million Yen per month. The Company and Umajin Japan agreed to reduce the monthly fees from 23 million Yen to 11 million Yen subsequent to October 2016. Subsequent to February 2017, the Company and Umajin Japan agreed to reduce the fee to 8 million Yen per month through October 2017.

 

  11  

 

  

Total fees paid to Umajin Japan for the three months ended October 31, 2018 and 2017 amounted to $0 and $216,029, respectively. The fees paid to Umajin Japan are included in discontinued operations under cost of sales in the accompanying consolidated statements of operations.

 

During the three months ended October 31, 2018 and 2017, the Company received consulting services from Cheval Attache Co., Ltd. (“Cheval Attache”), a related party entity owned by a former director (inclusive of consumption tax) of $0 and $29,160, respectively, which are included in discontinued operations under cost of sales in the accompanying consolidated statements of operations.

 

G-Liberta, a subsidiary of Cheval Attache, performed certain advertising and research services for the Company. Total expenses related to G-Liberta during the three months ended October 31, 2018 and 2017 amounted to $0 and $948, respectively, and are reflected as part of discontinued operations under cost of sales in the accompanying consolidated financial statements.

 

6. DISCONTINUED OPERATIONS

 

During the year ended July 31, 2018, the Company decided to discontinue operations of most of its operating activities. These discontinued operations consisted of two transactions as follows:

 

On June 26, 2018, the Company exchanged all the issued and outstanding shares of common stock of its wholly owned subsidiary, Sports Perfecta, Inc. to Neo Sports, Ltd, a Japanese company, for 100,000 shares of the Company’s series A preferred stock, 23,600,000 shares of the Company’s common stock and an option contract right for 3,000,000 shares of the Company’s common stock. This transaction included SPI’s wholly owned subsidiary, Sports Perfecta Technologies Sdn Bhd.

 

On June 27, 2018, the Company exchanged all the issued and outstanding shares of common stock of its wholly owned subsidiary, Link Bit Consulting Co. Ltd. to IS Digital Ltd., a Cayman Island company for $420,000 in cash and 100% of the account receivable balance owed to the Company by LBC for $80,000 in cash. This transaction included all of LBC’s subsidiaries, except for WRN Co. Ltd. WRN’s issued and outstanding common stock was transferred to the Company from LBC on this date.

 

In accordance with the provisions of ASC 205-20, the results of operations for these entities have been reflected as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for the three months ended October 31, 2018 and 2017, and consist of the following: 

 

    For the Three Months Ended  
    October 31, 2018     October 31, 2017  
REVENUES OF DISCONTINUED OPERATIONS   $     $ 2,482,633  
                 
OPERATING EXPENSES OF DISCONTINUED OPERATIONS:                
Cost of sales           556,598  
Depreciation and amortization expense           6,894  
Advertising expense           37,059  
Rent expense           100,273  
Salaries and wages expense           878,920  
Other general and administrative expenses           705,446  
            2,285,190  
OPERATING INCOME OF DISCONTINUED OPERATIONS           197,443  
                 
OTHER (INCOME) EXPENSE OF DISCONTINUED OPERATIONS                
Other (income) expense           (35 )
(Gain) loss on foreign exchange           (6,906 )
Interest income           (1,603 )
Interest expense           241,284  
            232,740  
                 
LOSS BEFORE INCOME TAXES OF DISCONTINUED OPERATIONS           (35,297 )
Benefit from income taxes of discontinued operations           (77,772 )
NET INCOME OF DISCONTINUED OPERATIONS   $     $ 42,475  

 

 

 

  12  

 

 

In accordance with the provisions of ASC 205-20, the cash flow activity from discontinued operations have been reflected as discontinued operations in the Consolidated Statements of Cash Flows for the three months ended October 31, 2018 and 2017, and consist of the following: 

 

    For the Three Months Ended  
    October 31, 2018     October 31, 2017  
DISCONTINUED OPERATING ACTIVITIES                
Net income             42,475  
Adjustments to reconcile net income to net cash provided by operating activities of discontinued operations:                
Depreciation and amortization   $     $ 6,894  
Amortization of debt discount           16,333  
Changes in operating assets and liabilities:                
Accounts receivable           148,741  
Accounts receivable - related party           27,000  
Prepaid expenses and other current assets           (9,758 )
Other assets           (3,710 )
Accounts payable and accrued expenses           (156,883 )
Accounts payable to related party           19,277  
Deferred revenue           13,160  
Taxes payable           23,687  
Net cash provided by operating activities of discontinued operations   $     $ 127,215  
                 
INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS                
Purchase of property and equipment   $     $ (4,212 )
Proceeds from collection of notes receivables           86,250  
Payments for notes receivable lending           (132,458 )
Net cash used in investing activities of discontinued operations   $     $ (50,420 )
                 
FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS                
Proceeds from notes payable   $     $ 180,000  
Payments on note payable           (324,000 )
Payments on notes payable - related parties           (117,000 )
Proceeds from notes payable - related parties           207,000  
Net cash used in financing activities of discontinued operations   $     $ (54,000 )

 

7. SUBSEQUENT EVENTS

 

 

Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the consolidated financial statements were issued and there are no material subsequent events.

 

 

 

 

 

  13  

 

 

ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should know that there are many factors, both within and outside our control, that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

General

 

Grand Perfecta is engaged in the business of transmitting and providing horse racing information via various types of media, including a website owned and operated by the wholly owned subsidiary WRN. Prior to the SPI Transaction and the LBC Transaction, the Company was pursuing development of a fantasy sports offering for a number of different sports, including horse racing, through its wholly-owned subsidiary, SPI. A wholly owned subsidiary, Umajin HK, had been delivering information on horse racing to its users through its website similar to LBC, however it terminated its services at the end of June 2017.

 

Critical Accounting Policies

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require that we make certain assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. On an ongoing basis, management evaluates its estimates, including those related to collection of receivables, impairment of goodwill, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in material differences from the estimated amounts in the financial statements. Our significant accounting policies are more fully described in the notes to our consolidated financial statements.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of the Company as of October 31, 2018, and for the three months ended October 31, 2018 and 2017, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. In the opinion of management, such financial information includes all adjustments considered necessary for a fair presentation of the Company's financial position at such date and the operating results and cash flows for such periods. Operating results for the interim period ended October 31, 2018 are not necessarily indicative of the results that may be expected for the entire year.

 

Certain information and footnote disclosure normally included in financial statements in accordance with GAAP have been omitted pursuant to the rules of the United States Securities and Exchange Commission ("SEC"). These unaudited financial statements should be read in conjunction with our audited financial statements and accompanying notes for the years ended July 31, 2018 and 2017 included in the Company's Form 10-K filed on January 25, 2019.

 

The accompanying unaudited consolidated financial statements include the accounts of Grand Perfecta and its wholly-owned subsidiaries LBC, Umajin HK, WRN and SPI. The Company discontinued the operations of its wholly-owned subsidiaries LBC and SPI in June 2018. The accounts for these subsidiaries have been presented in the discontinued operations in the accompanying consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The Company has determined that three affiliated entities, Space Cultivation Mobile, Japan Horse Circle and Basougu Shokuninkai, which LBC conducts business with were variable interest entities and that the Company was the primary beneficiary of each entity. As a result, the Company has consolidated the accounts of these variable interest entities into the accompanying consolidated financial statements. As the Company does not have any ownership interest in these variable interest entities, the Company has allocated the contributed capital in these variable interest entities as a component of non-controlling interest. These three variable interest entities did business with LBC. Therefore, these three entities have also been presented in the discontinued operations in the accompanying consolidated financial statements. After the discontinued operations, the Company consists of Grand Perfecta and its two remaining wholly-owned subsidiaries, Umajin HK and WRN. There are no variable interest entities since the Company discontinued operations in June 2018.

 

 

 

  14  

 

 

Financial Statement Reclassification

 

Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications. The prior year amounts have also been modified in these financial statements to properly report amounts under current operations and discontinued operations (see note 6).

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Amounts could materially change in the future. 

 

Going Concern

 

Based on operating losses and negative cash from operations and the discontinued operations of most of the Company’s operations, substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plan in this regard is to find new operations to enter into and focus on building profitable operations. To finance operations while it finds new operations, the Company will continue financing activity such as taking loans and issuing new shares of the Company’s common stock.

 

As of October 31, 2018, we had cash of $18,024 and a working capital deficit of $600,617 as compared to cash of $52,716 and a working capital deficit of 574,780 as of July 31, 2018.

 

We continue to have a significant working capital deficit that adversely affects our business by limiting the resources we have available to pursue the promotion of our information services and develop new service opportunities for potential customers. Historically, we have relied on extensions of note payment due dates and new debt financing to repay note obligations as they came due in order to continue operations. Going forward we will continue to use extensions and new debt financing to address note obligations that come due, endeavor to gradually reduce obligations with cash flow provided by operations, and pursue over the next 12 months equity financing that we can apply to debt reduction and business development. Nevertheless, the shortage of working capital adversely affects our ability to develop, sponsor, or participate in activities that promote our information services to prospective customers and to develop new content, because a substantial portion of cash flow goes to reduce debt rather than to advance operating activities. There is no assurance that our plans for addressing our working capital shortages will be successful, and our failure to be reasonably successful should be expected to result in a significant contraction of our operations and potentially a failure of the business.

  

Foreign Exchange

 

The Company’s primary operations are conducted in Japan and performed by its wholly owned subsidiaries WRN and until sold LBC. The Company also conducted operations through SPI, and its Malaysian subsidiary SPT. A wholly owned subsidiary, Umajin HK, had been delivering information on horse racing to its users through its website similar to LBC, however it terminated its service at the end of June 2017. WRN and LBC’s functional currency is the Japanese Yen and Umajin HK’s functional currency is the Hong Kong Dollar. SPT’s functional currency is the Malaysian Ringgit.

 

The financial statements of each entity are prepared using the applicable functional currencies, and have been translated into U.S. dollars (“USD”). Assets and liabilities are translated into USD at the applicable exchange rates at period-end. Stockholders’ equity is translated using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation adjustments are included as foreign currency translation adjustments in accumulated other comprehensive income in the Company’s stockholders’ equity.

 

The following rates were used to translate the accounts of Umajin HK and WRN into USD at the following balance sheet dates.

 

    Balance Sheet Dates  
    October 31, 2018     July 31, 2018  
Japanese Yen to USD     0.0088       0.0090  
Hong Kong Dollars to USD     0.1275       0.1274  

 

 

 

  15  

 

 

The following rates were used to translate the accounts of LBC, Umajin HK, SPT and WRN into USD for the following operating periods.

 

    For the Three Months Ended  
    October 31, 2018     October 31, 2017  
Japanese Yen to USD     0.0089       0.0090  
Hong Kong Dollars to USD     0.1275       0.1280  
Malaysian Ringgit to USD      N/A       0.2356  

 

Cash and Cash Equivalents

 

The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents. The Company had no cash equivalents as of October 31, 2018 and July 31, 2018.

 

Accounts Receivable

 

Accounts receivable are carried at net realizable value, representing the outstanding balance less an allowance for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering each customer's financial condition and credit history, as well as current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company had no allowance for doubtful accounts as of October 31, 2018 and July 31, 2018.

 

Fair Value of Financial Instruments

 

In accordance with ASC 820, the carrying value of cash and cash equivalents and accounts payable approximates fair value due to the short-term maturity of these instruments. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2- Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3- Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company has determined that the book value of its outstanding financial instruments as of October 31, 2018 and July 31, 2018 approximates the fair value.

 

Concentration of Credit Risk

 

Financial instruments that potentially expose the Company to concentration of credit risk include cash and accounts receivable. The Company maintains its cash in banks located in Japan, Hong Kong and the United States in financial institutions with high credit ratings. Substantially all of the Company’s revenues are generated from customers in Japan. The Company conducts periodic reviews of the financial condition and payment practices of its customers. The Company had no losses related to the write off of accounts receivable during the three months ended October 31, 2018 and 2017.

 

 

 

  16  

 

 

Revenue Recognition

 

Effective August 1, 2018 we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606-10, Revenue from Contracts with Customers (“ASC 606-10”). The adoption of ASC 606-10 had no impact on prior year or previously disclosed amounts. In accordance with ASC 606-10, revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract.

 

The Company’s revenue consists primarily of sales of comprehensive horse racing information through multiple websites focusing on all aspects of the horse racing industry in Japan. Publication of horse racing digital magazines, and participating in other public events and media programs related to the horse racing industry do not generate significant revenue directly. These activities are undertaken for the purpose of increasing the number of horse racing fans and driving potential customers to our websites so as to hopefully eventually convert them to paying customers.

 

The majority of the Company’s revenue is generated by per-item sales. For certain users, payment is received at the time of purchase and for others it is received after purchase. In either case, our performance obligation is to provide the requested information to users. Therefore, we recognize revenue for per-item sales when the requested information is supplied to the user or for information packages that span a period of time, ratably over the subscription period. Revenues are presented net of refunds, credits and known and estimated credit card chargebacks. The Company reports revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Rights to information purchased by customers in advance of the information being provided are recorded as deferred.

 

As of October 31, 2018, the Company had $5,203 in deferred revenues. The Company will amortize these deferred revenues based on the monthly subscriptions and record revenue in line with the amortization of these advance payments.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising costs incurred amounted to $0 and $37,059 (all from discontinued operations) for the three months ended October 31, 2018 and 2017, respectively.

 

 

 

  17  

 

 

Basic and Diluted Earnings Per Share

 

In accordance with ASC 260, Earnings Per Share, the basic income per common share is computed by dividing the net income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock. No dilutive potential common shares were included in the computation of diluted net income per share because their impact was anti-dilutive. As of October 31, 2017, the Company had total options of 3,000,000 which were excluded from the computation of net income per share because they are anti-dilutive. As of October 31, 2018, the Company did not have any convertible notes or the options of 3,000,000. As a result, the basic and diluted earnings per share were the same for each of the periods presented.

 

Recent Accounting Pronouncements  

 

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

 

Results of Operations for the Three Months Ended October 31, 2018 and 2017

 

The following are the results of our operations for the three months ended October 31, 2018 as compared to the three months ended October 31, 2017:

 

    For the Three Months Ended        
    October 31,
2018
    October 31,
2017
    $ Change  
Net sales   $ 30,662     $ 88,446     $ (57,784 )
Total revenue     30,662       88,446       (57,784 )
                         
Operating Expenses                        
Cost of sales     26,396       88,446       (62,050 )
Other general and administrative expenses     30,242       186,909       (156,667 )
Total operating expenses     56,638       275,355       (218,717 )
                         
Loss from operations     (25,976 )     (186,909 )     160,933  
                         
Net loss before provision for income taxes     (25,976 )     (186,909 )     160,933  
Provision for (benefit from) income taxes                  
Net loss from continuing operations     (25,976 )     (186,909 )     160,933  
Loss from operations of discontinued operations           (35,297 )     35,297  
Benefit from income taxes of discontinued operations           (77,772 )     77,772  
Net loss   $ (25,976 )   $ (144,434 )   $ 118,458  

 

Net Sales

 

Our net sales consist primarily of information and other content relating to the horse racing industry in Japan sold to customers through our websites. Overall, our net sales decreased during the three months ended October 31, 2018 as compared to the same period in 2017 due primarily to the content and platforms in certain of our service lines requiring new materials or methods to fulfill our customers’ needs. On June 28, 2018, the Company discontinued operating most of its operations (see note 6). The Company now is focusing efforts to locate and acquire new operations. The remaining operations are from its wholly owned subsidiary, WRN, which will continue providing sales to the Company for the foreseeable future.

 

 

 

  18  

 

 

Operating Expenses

 

Total operating expenses for the three months ended October 31, 2018 were $56,638, which represented a decrease of $218,717 as compared to the same period in 2017. Our operating expenses decreased due primarily to lower cost of sales from a reduction in sales volume. Our general and administrative expenses were also lower primarily due to the decrease of operations and disposal of the majority of its subsidiaries (see note 6).

 

Going Concern and Capital Resources

 

As of October 31, 2018, we had cash of $18,024 and a working capital deficit of $600,617 compared to cash of $52,716 and a working capital deficit of 574,780 as of July 31, 2018.

 

Based on operating losses and negative cash from operations and the discontinued operations of most of the Company’s operations, substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plan in this regard is to find new operations to enter into and focus on building profitable operations. To finance operations while it finds new operations, the Company will continue financing activity such as taking loans and issuing new shares of the Company’s common stock.

 

We continue to have a significant working capital deficit that adversely affects our business by limiting the resources we have available to pursue the promotion of our information services and develop new service opportunities for potential customers. Historically, we have relied on extensions of note payment due dates and new debt financing to repay note obligations as they came due in order to continue operations. Going forward we will continue to use extensions and new debt financing to address note obligations that come due, endeavor to gradually reduce obligations with cash flow provided by operations, and pursue over the next 12 months equity financing that we can apply to debt reduction and business development. Nevertheless, the shortage of working capital adversely affects our ability to develop, sponsor, or participate in activities that promote our information services to prospective customers and to develop new content, because a substantial portion of cash flow goes to reduce debt rather than to advance operating activities. There is no assurance that our plans for addressing our working capital shortages will be successful, and our failure to be reasonably successful should be expected to result in a significant contraction of our operations and potentially a failure of the business.

 

The following is a summary of our cash flows from operating, investing and financing activities for the three months ended October 31, 2018 and 2017.

 

    For the Three Months Ended  
    October 31, 2018     October 31, 2017  
Cash flows used in operating activities   $ (34,574 )   $ 47,030  
Cash flows used in investing activities   $     $ (50,420 )
Cash flows provided by financing activities   $     $ (54,000 )

 

Net cash flows used in operating activities for the three months ended October 31, 2018 amounted to $34,574, compared to cash flows provided by operating activities of $47,030 for the three months ended October 31, 2017. Our cash used in operations was greater during the three months ended October 31, 2018 due to a decrease in accounts payable and accrued expenses of $10,424 compared to $127,215 in cash provided by the discontinued operations during the three months ended October 31, 2017.

 

Net cash used in investing activities during the three months ended October 31 2018 was $0, compared to net cash used in investing activities of $(50,420) for the three months ended October 31, 2017. There were no investing activities during the three months ended October 31, 2018. During the three months ended October 31, 2017, we had proceeds of $86,250 from the collection of notes receivables, offset payments of $132,458 for note receivable lending and $4,212 of property and equipment purchases.

 

Net cash used in financing activities for the three months ended October 31, 2018 amounted to $0, compared to net cash used of $(54,000) for the three months ended October 31, 2017. There were no financing activities during the three month ended October 31, 2018. During the three months ended October 31, 2017, the cash used in financing activities was the result of payments of outstanding notes payable of $324,000 and payments on outstanding related party notes payable of $117,000 offset by proceeds of $180,000 from additional note payable borrowing and borrowings of $207,000 from related parties.

 

 

 

  19  

 

 

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4 – CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) of the Exchange Act, the Company's management, under the supervision of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based upon such evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective at October 31, 2018.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended October 31, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  20  

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending legal proceedings against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to include disclosure under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6 – EXHIBITS

 

The following exhibits are filed as part of this Report:

 

Exhibit No.   Description
     
31.1   Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
101.DEF   XBRL Taxonomy Extension Definition Linkbase
101.LAB   XBRL Taxonomy Extension Label Linkbase
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

  21  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  GRAND PERFECTA, INC.  
       
       
February 14, 2019 By: /s/ Steve Ketter  
    Steve Ketter  
    Chief Executive Officer,
(Principal Executive Officer)
 
       
       
February 14, 2019 By: /s/ Steve Ketter  
    Steve Ketter  
    Chief Financial Officer
(Principal Financial Officer)
 

 

 

 

 

 

 

 

  22