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 December 31, 2014
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: 001-34858
PARADIGM RESOURCE MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 98-0568076 | ||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||
1900 South Norfolk Street, Suite 350 San Mateo, CA | 94403 | ||
| (Address of principal executive offices) | (Zip Code) |
(650) 577-5933
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such 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 or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting 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 |
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yesx No o
As of January 28, 2015 the registrant had 323,202,300 shares of its Common Stock, $0.001 par value, outstanding.
PARADIGM RESOURCE MANAGEMENT CORPORATION
FORM 10-Q
DECEMBER 31, 2014
INDEX
| PART I -- FINANCIAL INFORMATION | Page | |
| Item 1. | Financial Statements | 3 |
| Balance Sheets as of December 31, 2014 (unaudited) and September 30, 2014 | 3 | |
| Statements of Operations for the Three Months ended December 31, 2014 and 2013 (unaudited) | 4 | |
| Statements of Cash Flows for the Three Months Ended December 31, 2014 and 2013 (unaudited) | 4 | |
| Notes to Financial Statements (unaudited) | 5 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 11 |
| Item 4. | Controls and Procedures | 11 |
| PART II -- OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 12 |
| Item 1.A. | Risk Factors | 12 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
| Item 3. | Defaults Upon Senior Securities | 12 |
| Item 4. | Mine Safety Disclosures | 12 |
| Item 5. | Other Information | 12 |
| Item 6. | Exhibits | 12 |
| 12 | ||
| SIGNATURE | 13 | |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM RESOURCE MANAGEMENT CORPORATION
Balance Sheets
| December 31, | September 30, | |||||||
| 2014 | 2014 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,954 | $ | – | ||||
| Total current assets | 2,954 | – | ||||||
| Investment in TOSS Plasma Technologies Ltd. | 7,173 | 7,173 | ||||||
| Total assets | $ | 10,127 | $ | 7,173 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 49,773 | $ | 35,072 | ||||
| Notes payable | 22,127 | 17,049 | ||||||
| Accrued interest | 2,027 | 1,247 | ||||||
| Amount due to shareholder | 311,973 | 311,973 | ||||||
| Total current liabilities | 385,900 | 365,341 | ||||||
| Other liabilities | – | – | ||||||
| Total liabilities | 385,900 | 365,341 | ||||||
| Stockholders' deficit: | ||||||||
| Common stock, $.001 par value, 1,600,000,000 shares authorized, 323,202,300 and 323,202,300 shares issued and outstanding at December 31, 2014 and September 30, 2014, respectively | 323,202 | 323,202 | ||||||
| Paid-in capital (deficiency) | (232,312 | ) | (233,572 | ) | ||||
| Common stock issuable | 7,093 | 7,093 | ||||||
| Accumulated deficit | (473,756 | ) | (454,891 | ) | ||||
| Total stockholders' deficit | (375,773 | ) | (358,168 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 10,127 | $ | 7,173 | ||||
See accompanying notes to financial statements.
| 2 |
PARADIGM RESOURCE MANAGEMENT CORPORATION
Statements of Operations
(unaudited)
| For the Three Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Net revenue | $ | – | $ | – | ||||
| Cost of revenue | – | – | ||||||
| Gross profit | – | – | ||||||
| General and administrative expenses | 16,786 | 38,033 | ||||||
| Loss from operations | (16,786 | ) | (38,033 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (2,079 | ) | – | |||||
| Total other income (expense) | (2,079 | ) | – | |||||
| Loss before income taxes | (18,865 | ) | (38,033 | ) | ||||
| Provision for income taxes | – | – | ||||||
| Net loss | $ | (18,865 | ) | $ | (38,033 | ) | ||
| Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of shares outstanding - Basic and Diluted | 323,202,300 | 322,800,000 | ||||||
See accompanying notes to financial statements.
| 3 |
PARADIGM RESOURCE MANAGEMENT CORPORATION
Statements of Cash Flows
(Unaudited)
| For the Three Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (18,865 | ) | $ | (38,033 | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Interest accrued on note payable | 780 | – | ||||||
| Accretion of beneficial conversion feature as interest | 1,299 | – | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Deposits | – | (861 | ) | |||||
| Accounts payable | 14,701 | 20,895 | ||||||
| Net cash used in operating activities | (2,085 | ) | (17,999 | ) | ||||
| Cash flows from investing activities: | – | – | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loan payable | 5,039 | – | ||||||
| Proceeds from loans from shareholder | – | 17,999 | ||||||
| Net cash provided by financing activities | 5,039 | 17,999 | ||||||
| Net increase in cash | 2,954 | – | ||||||
| Cash and cash equivalents at beginning of period | – | – | ||||||
| Cash and cash equivalents at end of period | $ | 2,954 | $ | – | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | – | $ | – | ||||
| Cash paid for taxes | $ | – | $ | – | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Accounts payable paid by shareholder | $ | – | $ | 26,030 | ||||
| Beneficial conversion feature on convertible note payable | $ | 1,260 | $ | – | ||||
See accompanying notes to financial statements.
| 4 |
PARADIGM RESOURCE MANAGEMENT CORPORATION
Notes to Financial Statements
December 31, 2014
(unaudited)
Note 1 – Nature of Business, Presentation and Going Concern
Organization
Paradigm Resource Management Corporation (the "Company") was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation. The principal business of the Company was its web based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 11,500,000 shares of the Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 2,440,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owns a total of 13,940,000 shares of the Company’s common stock representing 91.54%.
On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 35,866,667 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provides AMSA an option to acquire an additional 44,833,333 shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company has the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 229,866,667 shares of common stock of the Company. The options expired June 2, 2014.
The Company continues to explore new investment opportunities with a focus in technology, mining and applied materials. Management is also currently assessing and evaluating new strategic partnership opportunities for TPT to develop its customer base.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
These unaudited financial statements should be read in conjunction with our 2014 annual financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on January 13, 2015.
Going Concern
The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $18,865 for the three months ended December 31, 2014 and has incurred cumulative losses since inception of $473,756. The Company has a stockholders’ deficit of $375,773 at December 31, 2014. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.
The unaudited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
| 5 |
PARADIGM RESOURCE MANAGEMENT CORPORATION Statements of Operations (unaudited)
|
Note 2 – Related Party Transactions
As of September 30, 2013, $231,885 was due to Canton. During the year ended September 30, 2014, Canton paid $36,029 of accounts payable plus $44,059 of expenses in connection with the Company’s operations, resulting in an amount due to Canton of $311,973 at September 30, 2014. The balance due to Canton remains at $311,973 at December 31, 2014.
Mr. David Price, the Company’s Secretary and son of its former Chief Executive Officer and Director, is paid $2,500 per month for his services. At December 31, 2014 and September 30, 2014, $30,000 and $22,500, respectively, were due to Mr. Price and included in accounts payable. $7,500 and $7,500 are included in general and administrative expenses for the three months ended December 31, 2014 and 2013, respectively.
Note 3 – Investment in TOSS Plasma Technologies Ltd.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 35,866,667 restricted shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provided AMSA an option to acquire an additional 44,833,333 shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
The value of the investment of $7,173, or 35,866,667 shares of the Company’s common stock at a fair value of $0.0002 per share, was based on the price of shares previously sold to investors.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 229,866,667 shares of common stock of the Company. The options expired on June 2, 2014.
| 6 |
PARADIGM RESOURCE MANAGEMENT CORPORATION Statements of Operations (unaudited)
|
Note 4 – Notes Payable
Notes payable consisted of the following at December 31, 2014 and September 30, 2014:
| December 31, 2014 | September 30, 2014 | |||||||||||||||||||||||
| Principal | Unamortized Discount | Principal, net of Discounts | Principal | UnamortizedDiscount | Principal, net of Discounts | |||||||||||||||||||
| On May 1, 2014 the Company entered into a convertible promissory note with an investor in the amount of $19,961. Terms include simple interest at fifteen percent (15.0%), the note is due on May 1, 2015 and is convertible at the option of the holder at a price calculated at a twenty percent discount to the average VWAP of the last 30 days trading prior to the date of conversion. | $ | 19,961 | $ | (1,654 | ) | $ | 18,307 | $ | 19,961 | $ | (2,912 | ) | $ | 17,049 | ||||||||||
| On December 19, 2014 the Company entered into a convertible promissory note with an investor in the amount of $5,039. Terms include simple interest at fifteen percent (15.0%), the note is due on December 19, 2015 and is convertible at the option of the holder at a price calculated at a twenty percent discount to the average VWAP of the last 30 days trading prior to the date of conversion. | 5,039 | (1,219 | ) | 3,820 | – | – | – | |||||||||||||||||
| $ | 25,000 | $ | (2,873 | ) | $ | 22,127 | $ | 19,961 | $ | (2,912 | ) | $ | 17,049 | |||||||||||
As of December 31, 2014 and September 31, 2014, accrued interest on the above loans was $2,027 and $1,247, respectively. Interest expense was $2,079 (including accretion of beneficial conversion feature of $1,299) and $-0- for the three months ended December 31, 2014 and 2013, respectively.
Note 5 – Stockholders’ Deficit
The Company has authorized 1,600,000,000 shares of Common Stock, $0.001 par value. As of December 31, 2014 and September 30, 2014, the Company had 323,202,300 shares of Common Stock issued and outstanding.
Pursuant to the Agreement dated July 24, 2013, the Company was obligated to issue 35,866,667 restricted shares of its common stock to AMSA in exchange for 402,300 shares of TPT (see Note 3 – Investment in TOSS Plasma Technologies Ltd.). The value of the shares of $7,173, or $0.0002 per share, was based on the price of shares previously sold to investors and is included in common stock issuable in the balance sheet at September 30, 2013. During the year ended September 30, 2014, 402,300 of the shares due to AMSA were issued, reducing the amount of common stock issuable to $7,093 at September 30, 2014 and December 31, 2014.
Note 6 – Subsequent Events
On January 1, 2015, the Company issued a convertible promissory note to South Riverside Group, Inc. in the amount of $22,000. The note is due January 5, 2016, bears interest at 15% per annum, and is convertible into common shares of the Company at a 20% discount to the average VWAP of the last 30 days trading prior to the date of conversion.
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements.
| 7 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially from the forward-looking statements.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
Paradigm Resource Management Corporation (the "Company", “we”, “us” or “our”) was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation (“CDVC”) and was in the web based telecom services business in China. The Company's mission was to acquire, own and manage a portfolio of "technology", "media" and "telecommunication" assets in China. During the periods presented all revenue was derived from the telecom business sector.
In July 2009, the Company acquired a 76.8% interest in China Integrated Media Corporation Limited ("CIMC"), a public company in Australia.
In February 2010, the Company decided to divest from its investment in CIMC due to its inability to raise the capital necessary to pursue this investment on a timely manner and concerns on its internal liquidity. On April 30, 2010 the Company disposed of CIMC for $50,000 and realized a gain on the disposal of $92,975. The proceeds from the disposal were used to pay debts of the Company.
On June 20, 2010, the Company disposed of its subsidiary company, Lead Concept Limited, which operated its web based VOIP business as the Company was no longer competitive in this market segment. After the disposal, the Company had no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 1,150,000,000 shares of the Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 244,000,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 1,394,000,000 shares of the Company’s common stock representing 91.54%.
In accordance with the change in control Mr. Bing HE resigned as the Company's President, CEO, and any other positions held by him on July 23, 2010. The resignation was not the result of any disagreement with the Company or any matter relating to the Company's operations, policies or practices. The same date Mr. Robert M. Price was named as the new Director, Chief Executive Officer and Chief Financial Officer.
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On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On September 10, 2012, CIL contributed 1,200,000,000 shares of common stock to the Company’s treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 194,000,000 shares of the Company’s common stock representing 60.1%.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 35,866,667 restricted shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provided AMSA an option to acquire an additional 44,833,333 restricted shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 229,866,667 shares of common stock of the Company. The options expired June 2, 2014.
Management continues to explore new investment opportunities with a focus in technology, mining and applied materials. Management is also currently assessing and evaluating new strategic partnership opportunities for TPT to develop its customer base.
Plan of Operation
TPT has developed a breakthrough technology and processing system for extraction of latent precious metals from certain types of complex ores. A significant percentage of mineral ores including those that contain the platinum group, gold and silver encapsulate their metals making extraction far more difficult. A prime example of the difficulty presented by these complex ores occurs with the cyanidization of gold where copper, lead, and other minerals absorb most of the cyanide making it unavailable for the extraction process. By applying TPT’s proprietary technology using Radio Frequency Plasma ("RF Plasma") torch at ultrahigh temperature of between 8,000 to 12,000 degrees Celsius, ore structure disintegrates and encapsulated gold, iron etc. are freed up and condensed for collection.
The primary reason to apply RF plasma to mineral ore processing is to gain higher recoveries than what can be otherwise achieved from conventional hydrometallurgy or pyrometallurgy. TPT has performed laboratory investigations and pilot plant demonstrations of their proprietary RF Plasma technology on both platinum group metal recoveries and gold extraction. The results as shown in independent lab assay tests have been convincingly positive. The goal is to pave the way for mining companies and mine operators to tap into hidden or undervalued assets in complex ore mines that may or may not have been excavated.
Management continues to explore new investment opportunities with a focus in technology, mining and applied materials. Management is also currently assessing and evaluating new strategic partnership opportunities for TPT to develop its customer base.
Results of Operations
For the Three Months Ended December 31, 2014 and 2013
Revenues
The Company had no revenue for the Three months ended December 31, 2014 and 2013.
Operating Expenses
For the three months ended December 31, 2014 total operating expenses were $16,786 compared to $38,033 for the three months ended December 31, 2013 resulting in a decrease of $21,247. The decrease in operating expenses primarily relates to decreases in consulting fees, and rent.
We incurred $2,079 of interest expense, of which $1,299 was the accretion of the beneficial conversion features on convertible promissory notes. For the three months ended December 31, 2014. We incurred no interest expense for the three months ended December 31, 2013. Our net loss to our shareholders for the three months ended September 30, 2014 and 2013 was $18,865 and $38,033, respectively.
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Liquidity and Capital Resources
Overview
As of December 31, 2014, the Company cash of $2,954 and a deficit in working capital of $382,946. Historically, our operating expenses have been funded and paid by CIL and by the issuance of notes payable.
We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $150,000 in expenses during the next twelve months of operations. We estimate that this will be comprised of the following expenses: $50,000 for business planning and development, and $100,000 for general overhead expenses such as legal and accounting fees, office overhead and general expenses.
Liquidity and Capital Resources during the Three Months Ended December 31, 2014 compared to the Three Months ended December 31, 2013
We used cash for operating activities of $2,085 and $17,999 for the three months ended December 31, 2014, and 2013, respectively. The elements of cash flow used in operations for the three months ended December 31, 2014 included a net loss of $18,865 offset by interest accrued on notes payable of $780, accretion of beneficial conversion features of $1,299 and increases in accounts payable of $14,701. The elements of cash flow used in operations for the three months ended December 31, 2013 included a net loss of $38,033 increased by a deposit of $861 and offset by an increase in accounts payable of $20,895.
We used no cash in investing activities during the three months ended December 31, 2014 and 2013.
Cash generated in our financing activities was $5,039 for the three months ended December 31, 2014, compared to cash generated of $17,999 during the comparable period in 2013. The financing activities for the three months ended December 31, 2014 consisted of $5,039 of proceeds from a note payable while the cash provided by financing activities for the three months ended December 31, 2013 are attributed to amounts due to our principal shareholder for expenses paid on our behalf by the shareholder.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. On January 1, 2015, the Company issued a convertible promissory note to South Riverside Group, Inc. in the amount of $22,000. The note is due January 5, 2016, bears interest at 15% per annum, and is convertible into common shares of the Company at a 20% discount to the average VWAP of the last 30 days trading prior to the date of conversion. We currently have no other arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended September 30, 2013 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended September 30, 2014, included in our Annual Report on Form 10-K as filed on January 13, 2015, for a discussion of our critical accounting policies and estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of
Regulation S-K.
Item 4. Controls and Procedures.
| (a) | Evaluation of Disclosure Controls and Procedures |
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of December 31, 2014. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
| (b) | Changes in Internal Control over Financial Reporting |
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company or our common stock in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities during the quarter ended December 31, 2014.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| Exhibit 31.1 | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). |
| Exhibit 31.2 | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). |
| Exhibit 32.1 | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Exhibit 32.2 | Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Date: February 6, 2015 | By: | /s/ Takanori Ozaki |
| Takanori Ozaki | ||
Chief Executive Officer Chief Financial Officer (Principal Executive and Financial Officer)
|
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