ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this quarterly report. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this quarterly report should be read as applying to all related forward-looking statements wherever they appear in this quarterly report. From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements.
The following discussion and analysis of our plan of operations should be read in conjunction with our financial statements and related notes appearing in our filings with the Securities and Exchange Commission. This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those presented under the heading of “Risk Factors” and elsewhere in this prospectus.
The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.
The discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (or “GAAP”). The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities at the date of its financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Our Ability to Continue as a Going Concern
Our financial statements as of August 31, 2017 have been prepared under the assumption that we will continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We are a development stage company and have extremely limited financial resources. We have not established a source of equity or debt financing. Our independent registered public accounting firm included an explanatory paragraph in their report emphasizing the uncertainty of our ability to remain a going concern.
Management anticipates the Company will attain profitable status and improve liquidity through continued business development and additional debt or equity investment in the Company. Management is pursuing sources of financing. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the financial statements. The financial statements do not include any adjustments relating to the recoverability of recorded assets amount that might be necessary should the Company be unable to continue in existence.
Financial Condition and Results of Operation
Results of Operations for the Nine Month Period ended August 31, 2017 and August 31, 2016.
Expenses
Expenses for the nine months ended August 31, 2017 were $54,389. We incurred $11,000 for development costs, which includes consultants and travel expenses on behalf of the Company, $42,499 for audit/review services and other expenses associated with our being a publicly reporting registrant with the SEC, and $890 for general and administrative costs. Expenses for the nine months ended August 31, 2016 were $100,753. We incurred $74,563 for product development costs, which includes both consultants and travel expense on behalf of the Company, $18,150 for audit/review services and other expenses associated with being a publicly reporting registrant with the SEC, and $8,040 for general and administrative costs. The Company will continue to incur ever increasing product development costs into the foreseeable future. The Company intends to actively manage its product development, outside consultants and other expenses to coincide with its business plan execution and product development. The Company began operations in November 2014.
Gain (Loss) before provision for income taxes
Loss before provision for incomes taxes for the nine months ended August 31, 2017 was $54,389. We recorded no provision for federal or state income taxes in the nine months. Loss before provision for incomes taxes for the nine months ended August 31, 2016 was $100,753. We recorded no provision for federal or state income taxes. We have not generated any revenues from our intended products or services.
Basic and diluted loss per share
Basic and diluted loss per share for the nine months ended August 31, 2017 was $0.68 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock. Basic and diluted loss per share for the nine months ended August 31, 2016 was $1.26 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock.
Results of Operations for Three Month Period ended August 31, 2017 and August 31, 2016
Expenses
Expenses for the three months ended August 31, 2017 were $12,000. We incurred $4,500 for development costs, which includes both consultants and travel expense on behalf of the Company, $7,000 for audit/review services and other expenses associated with our being a publicly reporting registrant with the SEC, and $500 for general and administrative costs. Expenses for the three months ended August 31, 2016 were $25,670. We incurred $18,013 for product development costs, which includes both consultants and travel expense on behalf of the Company, $5,345 for audit/review services and other expenses associated with being a publicly reporting registrant with the SEC, and $2,312 for general and administrative costs.
Loss before provision for income taxes
Loss before provision for income taxes for three months ended August 31, 2017 was $12,000. We recorded no provision for federal or state income taxes. Loss before provision for income taxes for the three months ended August 31, 2016 was $25,670. We recorded no provision for federal or state income taxes. We have not generated any revenues from our intended products or services.
Basic and diluted loss per share
Basic and diluted loss per share for the three months ended August 31, 2017 was $0.15 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock. Basic and diluted loss per share the three months ended August 31, 2016 was $0.32 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock.
Liquidity
We have paid all costs related to our offering. Total offering costs were $23,577. Excess proceeds were used for general working capital purposes. Amounts related to non-offering costs will generally be paid when due and or otherwise accrued on the books and records or until we are able to pay the amounts in full either from revenues or from loans from related or nonrelated third parties. Obligations for expenses, when recorded as liabilities for lengthy periods of time, could preclude us from assistance from other sources, or at a minimum, make further financing difficult for the Company.
Loan Related Party – For the nine months ended August 31, 2017 the Company received $28,788 in loan proceeds from Mr. James Oliver, an officer and director of the Company. The related party loan was entered into in order to pay for certain working capital expenses. The loan is unsecured and carries no interest rate or repayment terms at this time.
Loan Nonrelated Party – For the nine months ended August 31, 2017 the Company received $20,000 in loan proceeds from a nonrelated entity. The nonrelated party loan was entered into in order to pay for certain working capital expenses. The loan is unsecured and carries no interest rate or repayment terms at this time.
As of August 31, 2017, we owed approximately $13,654 in accounts payable to various vendors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future.
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies. The continuation of our business is dependent upon obtaining further financing, a successful program of development, marketing and distribution of product and services, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long
-
term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Company History
The Company was incorporated under the laws of the State of Nevada on November 25, 2014, at which time it acquired a certain all-natural product based skincare formula to be used with a regimen of procedures using home-care micro-needle devices to remove unwanted tattoos through a do-it-yourself program from Kyle Markward, our former president. Mr. Markward resigned from his positions as an officer and director of the Company in connection with the change in control described below. Mr. Markward’s resignation was not due to any disagreements of any nature with the Company.
The Company issued 3,000,000 (30,000 post reverse stock split effective February 27, 2017, see Note 1 to the Company’s financial statements) shares of its common stock to Mr. Markward at inception in exchange for organizational services incurred upon incorporation. Following our formation, we issued an additional 1,000,000 (10,000 post reverse stock split) shares of our common stock to Mr. Markward, in exchange for a certain all-natural product based formula to be used with a regimen of home-care micro-needle devices to remove unwanted tattoos through a DIY or do-it-yourself program. (See Note 1 to the Company’s financial statements.).
On October 13, 2016, a change in control of the Company occurred by virtue of the Company’s largest shareholder, our founder, selling 4,000,000 (40,000 post reverse stock split) shares of the Company’s common stock to James Oliver, an individual residing in Florida, which represents 50% of the Company’s total issued and outstanding shares of common stock. Such 4,000,000 (40,000 post reverse stock split) shares sold represented all of the shares of the Company’s common stock owned by Mr. Markward.
Effective October 13, 2016, the Board of Directors (the “Board”) of the Company appointed Mr. James Oliver as President, Secretary and as a member of the Company’s Board. On the same day the Board elected Mr. Benjamin Teare as the Company’s Chief Operations Officer.
With the change in control certain liabilities of the Company were forgiven and/or paid for on behalf of the Company by our founder, former president and chief executive officer, Mr. Markward. Total liabilities approximated $165,000 which included legal fees owed to our legal counsel of $2,500. On October 18, 2016, the Company, reported on a Form 8-K that it had filed Articles of Merger with the Nevada Secretary of State, whereby it entered into a statutory merger with its wholly-owned subsidiary, with the effect being that the Company changed its name to from “Remove-By-You, Inc.” to “Gain Cities Limited” (the “Name Change”).
The Company is a development stage company and has no financial resources. We have not established or attempted to establish a source of equity or debt financing. Our independent registered public accounting firm has included an explanatory paragraph in their report emphasizing the uncertainty of our ability to remain a going concern.
Business
In connection with the change in control, the Company has decided to enter into the business of sports betting arbitrage and expects to sell analytics used by customers in placing legal bets on sporting events.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing periods specified in the SEC’s rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company’s certifying officer has concluded that the Company’s disclosure controls and procedures are effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
As of August 31, 2017, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the criteria established by COSO management concluded that the Company’s internal control over financial reporting was effective as of August 31, 2017.
This Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting as smaller reporting companies are not required to include such report and EGC’s are exempt from this requirement entirely until they are no longer an EGC. Management’s report is not subject to attestation by the Company’s independent registered public accounting firm.
Limitations on the Effectiveness of Controls
Management has confidence in its internal controls and procedures. The Company’s management believes that a control system, no matter how well designed and operated can provide only reasonable assurance and cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all internal control systems, no evaluation of controls can provide absolute assurance that all control issuers and instances of fraud, if any, within the Company have been detected.
Changes in Internal Controls
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended August 31, 2017 that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.