U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number: 333-222288

CAT9 Group Inc.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act: 

Registrant’s telephone number, including area code: 86-028-85594777 

N/A 

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

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

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒   

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 13, 2019,12, 2020, the issuer had 102,166,400 shares of its common stock issued and outstanding.

TABLE OF CONTENTS

  PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Contents

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAT9 GROUP, INC.and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

June 30, 20192020

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY

Description of business

CAT9 Group Inc., (the “Company”) formerly known as ANDES 4 Inc. ("ANDES 4"), was incorporated under the laws of the State of Delaware on January 26, 2015. On December 27, 2016, the Company and its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing CAT9 Industry Company Ltd, a company organized under the laws of the People's Republic of China closed a share exchange transaction pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing CAT9 Industrial Company Ltd.

CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.

Chongqing CAT9 Industrial Company Ltd. is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Chongqing Field Industrial Company Ltd. operates through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery sales.

Prior to the events above, the Company on July 31, 2015, the sole officer and director of the Company entered into a Share Purchase Agreement (the “SPA”) pursuant to which he entered into an agreement to sell an aggregate of 10,000,000 shares of his shares of the Company’s common stock to Chongqing Field Industrial Company Ltd. at an aggregate purchase price of $40,000. These shares represent 100% of the Company’s issued and outstanding common stock. Effective upon the closing date of the Share Purchase Agreement, August 12, 2015, the sole officer and director of the Company executed the agreement and owned no shares of the Company’s stock and Chongqing Field Industrial Company Ltd. was the sole stockholder of the Company.

On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and MeiHong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to MeiHong "Sanya" Qian.

On May 3, 2016, the sole shareholder of the Company, Chongqing Field Industrial Ltd., ("CQFI") consented to a redemption of its 10,000,000 shares of common stock at a price of $0.0001 per share for an aggregate redemption price of $1,000. As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares.

With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company.

NOTE 2-2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanyingCompany’s unaudited condensed consolidated financial statements of CAT9 Group Inc. have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required byin accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for complete financial statements. Thea fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the auditedconsolidated financial statements of CAT9 Group Inc. in our Form 10-K.

The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of June 30, 2019, and the results of operations and cash flows presented herein have beenrelated notes included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operationsCompany’s Annual Report on Form 10-K for the full year.year ended December 31, 2019.

The Company's functional currency for Chongqing CAT9 is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CAT9 Cayman, and its subsidiaries, including CAT9 Investment China, Chongqing CAT9 Industrial Co., Ltd: Chongqing Yubei Branch Company of Chongqing CAT9 Industrial Co., Ltd; Chengdu First Branch Company of Chongqing CAT9 Industrial Co., Ltd; and Chengdu Second Branch Company of Chongqing FieldCAT9 Industrial CompanyCo., Ltd.All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.eliminated in consolidation.

Translation Adjustment

For the three and six months ended June 30, 2192020 and for the year ended December 31, 2018,2019, the accounts of the Chongqing CAT9 were maintained, and its financial statements were expressed, in RMB.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital.  Transaction gains and losses are reflected in the income statement.

Comprehensive Income

The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220).  Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members. Comprehensive income for the three and six months ended June 30, 2020 and 2019 is included net income and foreign currency translation adjustments.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.

NOTE 3 - SIGNIFICANT CONCENTRATION

Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk consist of cash and accounts receivable as of June 30, 2020 and December 31, 2019. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure collections and minimize losses.

The major part of the Company’s cash at June 30, 2020 and December 31, 2019 is maintained at financial institutions in the PRC which provide insurance on deposit for no more than 500,000 yuan for each depositor in a bank.  The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

NOTE 3 –INVENTORYGeographic Concentration

InventoryFor the three and six months ended June 30, 2020 and 2019, the Company’s sales were mainly made to customers located in the PRC.In addition, total accounts receivables as of June 30, 2020 and December 31, 2019 also arose from customers located in the PRC.

Major parts of net assets of the Company are also located in the PRC.

Customer Concentration

On April 7, 2020, the Company’s largest distributor of its products which it received 90% of its revenues doing business under the trade names Zhongjun Jilian (Shanghai) Tech Development Co., Ltd., Shanghai Hanan E-business Co., Lt., and Nanjing Hemu E-business Co., Ltd. ceased all operations. Due to this event, the Company has uncollectible accounts receivables in the amount of $466,954 (3,299,058 RMB) which it does not believe is recoverable.  

The following table sets forth information as to the revenue derived from those customers that accounted for more than 10% of our revenue for the three and six months ended June 30, 2020:

The following table sets forth information as to the accounts receivable derived from those customers that accounted for more than 10% of our accounts receivable as of June 30, 2020:

NOTE 4 - ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

NOTE 4 –5 - INVENTORIES

Inventories consist of the following:

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

Depreciation expense was $5,932 and $6,559 for the six months ended June 30, 2020 and 2019, respectively.

NOTE 7 - CAPITALIZED SOFTWARE COSTS

Capitalized software costs consist of the following as of:

Amortization expense was $7,948 and $0 for the six months ended June 30, 2020 and 2019, respectively.

NOTE 8 - LOAN PAYABLE

On June 16, 2018, the Company entered a loan agreement with an individual in the amount of $74,500$70,771 (RMB $500,000). The maturity date is June 15, 2019. The loan is unsecured, non-interest bearing.

On July 10, 2018, the Company entered a loan agreement with an individual in the amount of $14,538 (RMB $100,000). The maturity date is July 9, 2019. The This loan is unsecured and bears 10% annual interest rate. The loan was paid offcurrently in January 2019.default.

NOTE 59 - RELATED PARTY TRANSACTIONS

Loan payable, related parties

On January 1, 2018,2020, the Company entered into a loan agreement with Sichuan CAT9 Technology, the company under control of Wenfa Sun, the Company’s President, Chief Executive Officer and Chairman. The loan agreement offers the Company $728,262$706,228 (RMB 5,000,000) credit line. The maturity date is December 31, 2018.2020. The loan is unsecured, non-interest bearing. As of June 30, 2019,2020, the balance of the loan is $559,528$110,077 and unused credit line is $168,733.$597,631.

Due to related parties

During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.

As of June 30, 20192020 andDecember 31, 2018,2019, the Company was indebted to related parties that advanced loans to the Company without any formal repayment terms. As of June 30, 20192020 andDecember 31, 20182019, the Company owed the aforementioned related parties $403,345$417,562 and $330,518,$416,807, respectively.

NOTE 6 - STOCKHOLDERS’ EQUITY

NOTE 7 –10 - ACCUMULATED OTHER COMPREHENSIVE INCOME

(LOSS)

Balance of related after-tax components comprising accumulated other comprehensive income (loss) included members’ capital were as follows:

NOTE 8 –11 - SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our unaudited financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual resultsresults. 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand CAT9 Group, Inc., our operations and our present business environment. MD&A is provided as a supplement to—and should be read in conjunction with—our consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q for the second quarter-ended June 30, 2020. The audited financial statements for our fiscal year ended December 31, 2019 filed with the Securities Exchange Commission on Form 10-K on April 27, 2020 and Form 10-K/A May 11, 2020 should be read in conjunction with the discussion below. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these unaudited financial statements. 

We were incorporated in the State of Delaware on January 26, 2015 and on February 6, 2015 as ANDES 4, Inc.; we filed our registration statement on Form 10 to register with the U.S Securities and Exchange Commission (the “SEC”) as a public company. We were organized as a vehicle to explore and acquire a target company or business that sought to find value with perceived advantages of being a publicly held corporation.

On July 31, 2015, the sole officer of ANDES 4, Inc., entered into a Share Purchase Agreement (“SPA”) with Chongqing Field Industrial Company Ltd (“CQFI”) whereby the sole officer then resigned and sold his entire position on August 12, 2015. On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and Meihong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to its President, CEO and Chairman, Wenfa "Simon"“Simon” Sun and 4,000,000 shares of restricted common stock to its CFO, Meihong "Sanya" Qian.

On“Sanya” Qian via employment agreements, further, on May 3, 2016, the sole shareholder of the Company, Chongqing Field Industrial Ltd., ("CQFI")CQFI consented to a redemption of its 10,000,000 shares held in the Company, with the redemption, the control over the Company was transferred to Wenfa “Simon” Sun and Meihong “Sanya” Qian.

On December 27, 2016, the Company entered into a merger agreement (the “Merger”) via CAT9 Group, Inc., CAT9 Holdings, a company organized under the laws of the Cayman Islands, CAT9 Investment China Limited, a company organized under the laws of Hong Kong (“CAT9 HK”) and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd. (“CQFI”).

On December 26, 2017, the Company filed its Form S-1 with the SEC and became effective on April 4, 2018. The Company was issued the trading symbol “CATN” by Financial Industry Regulatory Authority (“FINRA”) and began trading on the Over-the-Counter market pink venue, owned by OTC Markets Group Inc.

On December 7, 2018, our President, CEO and Chairman, Wenfa “Simon” Sun gifted 20,000,000 shares of his personal common stock in our Company to Guofu Industry Development Ltd in a private transaction fully disclosed on Form 13D. These shares represented approximately 19.6% of the shares in CAT9 Group, Inc.

On August 23, 2019, our President, CEO and Chairman, Wenfa “Simon” Sun acquired 10,000,000 shares of common stock atheld by our former CFO, Meihong “Sanya” Qian who resigned on May 14, 2019. The acquisition of these common shares was done as a priceprivately negotiated transaction and post-purchase, Wenfa “Simon” Sun held 78.3% of $0.0001 per share for an aggregate redemption priceCAT9 Group, Inc.

On April 7, 2020, the Company’s largest distributor of $1,000. As aits products which it received 90% of its revenues doing business under the trade names Zhongjun Jilian (Shanghai) Tech Development Co., Ltd., Shanghai Hanan E-business Co., Lt., and Nanjing Hemu E-business Co., Ltd. ceased all operations. Due to this event, the Company has uncollectible accounts receivables in the amount of 3,299,612.55 RMB which it does not believe is recoverable.  

The result of this action by CQFI, managementevent will likely place a significant limitation on our sales and revenues for the near future as we seek new distributor relationships for our products.

We also continue to face uncertainty operating under the conditions of COVID-19, the novel coronavirus which began in Wuhan, China. During the first quarter of 2020, China placed several areas under mandatory quarantine which during this period our employees and staff worked from home. As China is slowly relaxing its quarantine measures, there has been additional quarantine lockdowns as COVID-19 infections have been found in other parts of the Company now control 100% ofcountry. We cannot make any assurances that COVID-19 will not reappear with new infections and to the issued and outstanding shares.

With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company.extent that COVID-19, or another virus appears, we may encounter prolonged operational lockdown measures that would disrupt our business operations.

Results of Operations

Three months ended June 30, 20192020 compared to the three months ended June 30, 20182019

Sales Revenue

Sales revenue for the three months ended June 30, 2019,2020, was $1,655,995,$227,423, compared to $8,318$1,655,995 for the three months ended June 30, 2019, an increasea decrease of $1,647,677. During$1,428,572. We have experienced a significant decrease in revenue primarily due to the current quarter the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.largest distributor of our products ceasing all operations.

Cost of Goods Sold

Cost of goods sold for the three months ended June 30, 2019,2020, was $557,891,$96,866, compared to $4,490$557,891 for the three months ended June 30, 2018, an increase2019, a decrease of $553,401. $461,025 or 82.6%. The increasedecrease in cost of goods is directly related to the increasedecrease in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

Operating Expenses

Professional fees were $13,441 for the three months ended June 30, 2020, compared to $14,374 for the three months ended June 30, 2019, compared to $16,201 for the three months ended June 30, 2018, a decrease of $1,827$933 or 11.3%6.5%.Professional fees consist mostly of legal and audit expense.

ConsultingSelling, general and administrative expense (“SG&A”) was $15,740$360,120 for the three months ended June 30, 2019,2020, compared to $24,713, for the three months ended June 30, 2018, a decrease of $8,973 or 36.3%. Consulting expense has decreased due to decreased use of one of the Company’s consultants for which they incurred higher fees in the prior period.

General and administrative expense was $622,891 for the three months ended June 30, 2019, compared to $95,114a decrease of $262,771 or 42.2%. The decrease is the result of the overall decrease in operations including salaries and wages, rent, freight and marketing expense.

Other income/expenses

We had total other expenses for the three months ended June 30, 2018, an increase2020 of $527,777 or 554.9%.The increase is the result$11,665, compared to total other income of the hiring of additional sales and other support staff as well as other costs associated with the increase in business.

Net Income (Loss)

Net income$272 for the three months ended June 30, 2019, was $445,369, compared2019. The increase in other expense is due to a netan increase in asset impairment loss.

Net Loss

Net loss of $131,854 for the three months ended June 30, 2018. The increase from the net loss2020, was $265,568, compared to net income of $445,371 for the three months ended June 30, 2019. The change from net income in the prior period to a net loss in the current period is the direct result of the increaseprimarily due to our significant decrease in sales.revenue as discussed above.

Six months endedJune 30, 2019,2020 compared to the six months ended June 30, 20182019

Sales Revenue

Sales revenue for the six months endedJune 30, 2019, was $1,989,246, compared to $28,427 for the six months ended June 30, 2018, an increase2020, was $1,281,438, compared to $1,989,246 for the six months ended June 30, 2019, a decrease of $1,960,819. During$707,808. We have experienced a significant decrease in revenue primarily due to the current quarter the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.largest distributor of our products ceasing all operations.

Cost of Goods Sold

Cost of goods sold for the six months endedJune 30, 2019,2020, was $744,304,$606,458, compared to $14,185$744,304 for the six months ended June 30, 2018, an increase2019, a decrease of $730,119. $137,846 or 18.5%. The increasedecrease in cost of goods is directly related to the increasedecrease in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

Operating Expenses

Professional fees were $71,231 for the six months ended June 30, 2020, compared to $33,929 for the six months ended June 30, 2019, compared to $56,634 for the six months ended June 30, 2018, a decreasean increase of $22,705$37,302 or 40.1%109.9%.Professional fees consist mostly of legal and audit expense. The decrease is the result of decreased audit and legal expense.

ConsultingSG&A expense was $50,330$1,004,017 for the six months ended June 30, 2020, compared to $873,080 for the six months ended June 30, 2019, comparedan increase of $130,937 or 15%. The increase is mainly due to $42,023an increase in bad debt expense.

Other income/expenses

We had total other expenses for the six months ended June 30, 2018, an increase2020 of $8,307 or 19.8%.

General and administrative expense was $873,080 for the six months endedJune 30, 2019,$24,299, compared to $285,540$416 for the six months ended June 30, 2018,2019. The increase in other expense is due to an increase of $587,540 or 205.8%.The increase is the result of the hiring of additional sales and other support staff as well as other costs associated with the increase in business.asset impairment loss.

Net Income (Loss)Loss

Net income for the six months endedJune 30, 2019, was $287,187, compared to a net loss of $367,331 for the six months ended June 30, 2018. The increase from the net loss2020, was $541,864, compared to net income of $287,187 for the six months ended June 30, 2019. The change from net income in the prior period to a net loss in the current period is the direct result of the increaseprimarily due to our significant decrease in sales.revenue as discussed above.

Liquidity and Capital Resources 

During the six months ended June 30, 2019,2020, we used $297,119 of cash in operating activities providedcompared to $233,198 of cash. We used $572 in investing activities and had net cash of $151,831 provided by financing activities.operating activities in the prior period.

Operating Capital and Capital Expenditure Requirements

Our controlling shareholders expectDuring the six months ended June 30, 2020, we used $0 for investing activities compared to advance us additional funding$572 for operating coststhe purchase of property and equipment in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.prior period.

Plan of Operation and Funding

We do not currently engage in enough business activities that provide cash flow. During the next twelvesix months ended June 30, 2020, we anticipate incurring costs related to:

  (i) Filing of Exchange Act reports, and

  (ii) Costs relatingreceived $109,794 from financing activities compared to developing our business plan

We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested$151,831 received in us by our controlling shareholder and or other means of financing that may be available to us.the prior period.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

None.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, June 30, 2019.2020. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to a material weakness in our internal control over financial reporting, which is described below.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of June 30, 2019,2020, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2019:2020: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 20192020 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by 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.