UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☐ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
or
| ☐ | 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 333-197056
| Spirit International, Inc. |
(Exact name of registrant as specified in its charter) |
| Nevada | | 38-3926700 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| 2620 Regatta Drive, Suite 102, Las Vegas, NV | 89128 |
(Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code | (702) 359-0881 |
| |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file 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 Website, 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, 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 ☐ | Accelerated filer ☐ |
| | |
| Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☐ No
As of September 30, 2017, the Registrant has 5,110,000 shares of common stock outstanding.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| SPIRIT INTERNATIONAL INC |
INTERIM FINANCIAL STATEMENTS (unaudited) |
| for the six months ended June 30, 2017 |
| | |
SPIRIT INTERNATIONAL, INC
BALANCE SHEETS
(in U.S. Dollars)
| ASSETS | | September 30, 2017 | | | December 31, 2016 | |
| | | (Unaudited) | | | (Audited) | |
| | | $ | | | $ | |
| Current Assets: | | | | | | | | |
| Cash and cash equivalents | | | 8,958 | | | | 10,459 | |
| Accounts receivable | | | — | | | | 2,500 | |
| | | | | | | | | |
| TOTAL ASSETS | | | 8,958 | | | | 12,959 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDER’S DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | | 8,633 | | | | 8,000 | |
| Loan from related party | | | 42,502 | | | | 42,037 | |
| | | | | | | | | |
| Total Liabilities | | | 51,135 | | | | 50,037 | |
| | | | | | | | | |
| Stockholder’s Deficit | | | | | | | | |
| Common stock, $0.0001 par value, 75,000,000 shares authorized; 5,110,000 and 8,110,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016 | | | 500 | | | | 811 | |
| Paid in capital | | | 22,089 | | | | 21,789 | |
| Accumulated deficit | | | (64,777 | ) | | | (59,678 | ) |
| | | | | | | | | |
| Total Stockholder’s Deficit | | | (42,177 | ) | | | (37,078 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT | | | 8,958 | | | | 12,959 | |
The accompanying notes are an integral part of these financial statements.
SPIRIT INTERNATIONAL, INC
STATEMENTS OF OPERATIONS
(in U.S. Dollars)
(Unaudited)
| | | Three Months period Ended September 30, | | | Nine Months period Ended September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | | | | | | | | | | | |
| Revenue | | | 12,000 | | | | 2,000 | | | | 15,600 | | | | 9,000 | |
| Cost of sales | | | — | | | | — | | | | — | | | | — | |
| Gross profit | | | 12,000 | | | | 2,000 | | | | 15,600 | | | | 9,000 | |
| | | | | | | | | | | | | | | | | |
| General and administrative:- | | | | | | | | | | | | | | | | |
| Professional fees | | | | | | | | | | | | | | | | |
| Auditors’ fees | | | 2,500 | | | | 2,000 | | | | 5,500 | | | | 12,000 | |
| Legal fees | | | 1,500 | | | | — | | | | 7,000 | | | | 2,000 | |
| Set up fees | | | 2,500 | | | | — | | | | 2,500 | | | | | |
| Tax preparation | | | 900 | | | | — | | | | 900 | | | | | |
| Filling fees | | | 2,073 | | | | 689 | | | | 4,409 | | | | 3,022 | |
| Other costs | | | 90 | | | | 90 | | | | 390 | | | | 415 | |
| Total operating expenses | | | (9,563 | ) | | | (2,779 | ) | | | (20,699 | ) | | | (17,437 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss | | | 2,437 | | | | (779 | ) | | | (5,099 | ) | | | (8,437 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss per common share - basic and diluted: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net loss per share attributable to common stockholders | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Weighted-average number of common shares outstanding | | | 5,110,000 | | | | 5,000,000 | | | | 6,879,231 | | | | 5,000,000 | |
The accompanying notes are an integral part of these financial statements.
SPIRIT INTERNATIONAL, INC
STATEMENT OF CASH FLOWS
(in U.S. Dollars)
(Unaudited)
| | | Nine months Ended September 30, 2017 | | | Nine months Ended September 30, 2016 | |
| | | $ | | | $ | |
| | | | | | | | | |
| Cash Flows from Operating Activities | | | | | | | | |
| | | | | | | | | |
| Net loss | | | (5,099 | ) | | | (8,437 | ) |
| | | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 2,500 | | | | (2,000 | ) |
| Advances to suppliers | | | — | | | | (500 | ) |
| Accounts payable and accrued liabilities | | | 633 | | | | (2,000 | ) |
| Net cash used by operating activities | | | (1,966 | ) | | | (12,937 | ) |
| | | | | | | | | |
| Cash Flows from Investing Activities | | | — | | | | — | |
| | | | | | | | | |
| Cash Flows from Financing Activities | | | | | | | | |
| Short term borrowings - related party | | | 465 | | | | 16,540 | |
| Net cash used by operating activities | | | 465 | | | | 16,540 | |
| | | | | | | | | |
| Increase/(Decrease) in cash and cash equivalents | | | (1,501 | ) | | | 3,603 | |
| | | | | | | | | |
| Cash and cash equivalents at beginning of the period | | | 10,459 | | | | 1,441 | |
| | | | | | | | | |
| Cash and cash equivalents at end of the period | | | 8,958 | | | | 5,044 | |
The accompanying notes are an integral part of these financial statements.
SPIRIT INTERNATIONAL, INC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Spirit International, Inc. (the “Company”) is a Nevada Corporation incorporated on March 10, 2014. The Company plans to market a unique brand of Australian whiskey for export to Western Europe and the Middle East.
Basis of Presentation
The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
These financial statements are presented in US dollars.
Fiscal Year End
The Corporation has adopted a fiscal year end of December 31.
Unaudited Interim Financial Statements
The interim financial statements of the Company as of September 30, 2017, and for the periods then ended are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2017, and the results of its operations and its cash flows for the three and nine month period ended September 30, 2017. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2017. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2016, filed with the SEC, for additional information, including significant accounting policies.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies are set out below, these policies have been consistently applied to the period presented, unless otherwise stated:
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates.
Going concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As at September 30, 2017 the Company has an accumulated deficit from operations of $64,777 and has not earned revenues sufficient to cover operating costs and has a working capital deficit of $42,177. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2017.
The Company will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of funding is secured. The Company will offer non-cash consideration as a means of financing its operations. If the Company is unable to obtain revenue-producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash and cash equivalents
Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.
Property, plant and equipment
The Company does not own any property, plant and equipment.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
Revenue Recognition
The Company recognizes revenue when all of the following have occurred: persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable and collectability of the selling price is reasonably assured.
The Company recognizes revenues when title has passed to the customer, which is generally when products are shipped. Sale consist of sale of wine product.
Cost of Sales
Cost of sales consists of the cost of merchandise sold to customers.
Income taxes
Income taxes are accounted for in accordance with ASC Topic 740, “Income Taxes.” Under the asset and liability method, deferred tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Earnings per share
The Company computes net loss per share in accordance with ASC 260, “Earnings Per Share” ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares. As at September 30, 2017 the Company had no potentially dilutive shares.
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
- Level 1: Quoted prices in active markets for identical instruments;
- Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments);
- Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments).
NOTE 3 – LOAN FROM RELATED PARTY
| | | September 30, | | | December 31, | |
| | | 2017 | | | 2016 | |
| | | | (unaudited) | | | | (Audited) | |
| | | | $ | | | | $ | |
| | | | | | | | | |
| Loan from related party | | | 42,502 | | | | 42,037 | |
The above loan is unsecured, bears no interest and has no set terms of repayment. This loan is repayable on demand.
NOTE 4 – STOCKHOLDER’S DEFICIT
Common Stock
On October 11, 2014, the Company issued 5,000,000 shares of common stock to the director of the Company at a price of $0.0001 per share, for $500 cash.
During November 2016, the Company issued 222,000 shares of common stock to various stockholders at price of $0.01 per share, for $22,100 cash.
At November 16, 2016 the company made a share split and gave 5 shares for every share, and issued 20,888,000 shares total 26,110,000.
At December 1, 2016 the director cancelled by 18,000,000 shares of his.
At June 11, 2017 the director cancelled by 3,000,000 shares of his.
NOTE 5 – INCOME TAXES
The benefit for income taxes for the periods ended September 30, 2017 and December 31, 2016 differ from the amount which would be expected as a result of applying the statutory tax rates to the losses before income taxes due primarily to changes in the valuation allowance to fully reserve net deferred tax assets.
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income.
The components of these differences are as follows:
| | | September 30, | | | September 30, | |
| | | 2017 | | | 2016 | |
| | | | (Unaudited) | | | | (Unaudited) | |
| | | | $ | | | | $ | |
| Net tax loss carry-forwards | | | (5,099 | ) | | | (8,437 | ) |
| Statutory rate | | | 15 | % | | | 15 | % |
| Expected tax recovery | | | (765 | ) | | | (1,266 | ) |
| Change in valuation allowance | | | 765 | | | | 1,266 | |
| Income tax provision | | | — | | | | — | |
| | | | | | | | | |
| | | | September 30, | | | | December 31, | |
| | | | 2017 | | | | 2016 | |
| | | | (Unaudited) | | | | (Audited) | |
| | | | $ | | | | $ | |
| Components of deferred tax assets: | | | | | | | | |
| Non capital tax loss carry forwards | | | 9,717 | | | | 8,952 | |
| Less: valuation allowance | | | (9,717 | ) | | | (8,952 | ) |
| Net deferred tax asset | | | — | | | | — | |
The Company has provided a valuation allowance against the full amount of the deferred tax asset due to management’s uncertainty about its realization. As of September 30, 2017 the Company had approximately $34,993 in tax loss carryforwards that can be utilized future periods to reduce taxable income, and expire by the year 2037.
NOTE 6 – RELATED PARTY TRANSACTIONS
Details of transactions between the Company and related parties are disclosed below:
The following entities have been identified as related parties:
Zur Dadon - Director and greater than 10% stockholder
| | | September 30, | | | December 31, | |
| | | 2017 | | | 2016 | |
| | | | (unaudited) | | | | (Audited) | |
| The following transactions were carried out with related parties: | | | $ | | | | $ | |
| | | | | | | | | |
| Balance sheets: | | | | | | | | |
| Loan from related party - director | | | 42,502 | | | | 42,037 | |
| | | | | | | | | |
| From time to time, the director and stockholder of the Company provides advances to the Company for its working capital purposes. These advances bear no interest and are due on demand. |
NOTE 7 – SUBSEQUENT EVENTS
On October 16, 2017, Spirit International, Inc., a Nevada corporation (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with Kimho Consultants Company Limited, a Hong Kong limited liability company (the “Purchaser”) and Mr. Zur Dadon (the “Seller”), pursuant to which the Purchaser acquired 4,000,000 shares of common stock of the Company (the “Shares”) from Seller for an aggregate purchase price of $430,000 (“Stock Purchase”). The transaction contemplated in the SPA closed on October 17, 2017 (the “Closing”). For more details, please refer to Form 8-K filed on October 20, 2017.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended April 30, 2016.
Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “Spirit International” or the “Company” refer to Spirit International , Inc.
Our Ability to Continue as a Going Concern
Our independent registered public accounting firm has issued its report dated March 30, 2017, in connection with the audit of our annual financial statements as of March 30, 2017, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the unaudited financial statements for the period ended September 30, 2017 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
Overview
Spirit International, Inc. (the “Company”) is a Nevada Corporation incorporated on March 10, 2014. The Company plans to market a unique brand of Australian whiskey for export to Western Europe and the Middle East.
Recent Development in our Business
Share Purchase by Kimho Consultants Company Limited (“Kimho”) and Change of Control
On October 16, 2017, the Company entered into a Stock Purchase Agreement (the “SPA”) with Kimho Consultants Company Limited, a Hong Kong limited liability company (the “Purchaser”) and Mr. Zur Dadon (the “Seller”), pursuant to which the Purchaser acquired 4,000,000 shares of common stock of the Company (the “Shares”) from Seller for an aggregate purchase price of $430,000 (“Stock Purchase”). The transaction contemplated in the SPA closed on October 17, 2017 (the “Closing”). The Stock Purchase is a private transaction exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended (the “Act”).
As the result of the Closing, the Purchaser became the beneficial owner of approximately 78.3% of the Company’s issued and outstanding common stock. The Shares constitute “restricted securities” within the meaning of Rule 144 of the Act and may not be sold, pledged, or otherwise disposed of by the Purchaser without restriction under the Act and applicable state securities laws. The transaction has resulted in a change in control of the Company.
The SPA was originally disclosed in our Current Report on Form 8-K filed October 20, 2017, which is incorporated herein by this reference.
Share Exchange with I JIU JIU and its Stockholders
On November 10, 2017 (the “Closing Date”), the Company, I JIU JIU Limited (“I JIU JIU”) and the shareholders of I JIU JIU entered into the Share Exchange Agreement, which closed on the same date. Pursuant to the terms of the Share Exchange Agreement, we issued 8,000,000 new shares of our common stock,par value $0.0001 per share (the “Common Stock”) for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of ours.
Pursuant to the Share Exchange, we acquired the business of the I JIU JIU, which is to engage in the business of providing loans to small and medium sized enterprises (“SMEs”) and individuals in the People’s Republic of China (“PRC” or “China”) through online platform. As a result, we have ceased to be a shell company.
At the closing of the Share Exchange, 50,000 shares of I JIU JIU’s capital stock issued and outstanding immediately prior to the closing of the Share Exchange were exchanged for 8,000,000 shares of our common stock.
As a result, an aggregate of 8,000,000 shares of our common stock were issued to the stockholders of I JIU JIU.
The Share Exchange Agreement was originally disclosed in our Current Report on Form 8-K filed November 13, 2017, which is incorporated herein by this reference.
Share Cancellation by Kimho
In connection with the Share Exchange Agreement, the Company’s majority shareholder, Kimho entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).
The Share Cancellation Agreement was originally disclosed in our Current Report on Form 8-K filed November 13, 2017, which is incorporated herein by this reference.
Results of Operations
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2017
Revenue
Our revenue from operations for the three months ended September 30, 2017 was $12,000 compared to $2,000, an increase of $10,000, from the three months ended September 30, 2016. This increase is primarily due to an increase in sales.
Cost of Goods Sold
Our cost of goods sold for the three months ended September 30, 2017 was $0 compared to $0 for the three months ended September 30, 2016.
Gross Profit
Our gross profit for the three months ended September 30, 2017 was $12,000 compared to $2,000 for the three months ended September 30, 2016. This increase in the gross profits is primarily attributed to expanded operations and sales during the fiscal year ended December 2017 to date.
Operating Expenses
Our operating expenses increased by $6,784 to $9,563 for the three months ended September 30, 2017, from $2,779 for the three months ended September 30, 2016. The increase was primarily due to the increases in general and administrative costs related to professional fees.
Net Income
Our net loss decreased by $3,216 to a net gain of $2,437 for the three months ended September 30, 2017 compared to a net loss of $779 for the three months ending September 30, 2016. The increase in net income compared to the prior period is primarily a result of the increase in gross profits.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2017
Revenue
Our revenue from operations for the nine months ended September 30, 2017 was $15,600 compared to $9,000, an increase of $10,000, from the nine months ended September 30, 2016. This increase is primarily due to an increase in sales.
Cost of Goods Sold
Our cost of goods sold for the nine months ended September 30, 2017 was $0 compared to $0 for the nine months ended September 30, 2016.
Gross Profit
Our gross profit for the nine months ended September 30, 2017 was $15,600 compared to $9,000 for the nine months ended September 30, 2016. This increase in the gross profits is primarily attributed to expanded operations and sales during the fiscal year ended December 2017 to date.
Operating Expenses
Our operating expenses increased by $6,262 to $20,699 for the nine months ended September 30, 2017, from $17,437 for the nine months ended September 30, 2016. The increase was primarily due to the increases in general and administrative costs related to professional fees and setup fees.
Net Income
Our net loss decreased by $3,338 to a net loss of $5,099 for the nine months ended September 30, 2017 compared to a net loss of $8,437 for the nine months ending September 30, 2016. The increase in net income compared to the prior period is primarily a result of the increase in gross profits.
Liquidity and Capital Resources
Introduction
During the nine months ended September 30, 2017 we began to reduce our net loss, however, we still used net cash of $(1,966), compared to $(12,937) for the period ended September 30, 2016. Our cash on hand as of September 30, 2017 was $8,952.
Cash Requirements
We had cash available of $8,952 as of September. Based on our revenues, cash on hand and current monthly burn rate, we believe that our operations are not sufficient to fund operations through December 31, 2017. For the three months ended September 30, 2017, the Compay did see a net gain of $2,437, but this gain was not sufficient to cover cashflow for operations.
Sources and Uses of Cash
Operations
We had net cash provided in operating activities of $(1,966) for the nine months ended September 30, 2017, as compared to cash used of $12,937 for the nine months ended September 30, 2017.
Net cash provided in operations consisted primarily of the net loss of $5,099. Changes in assets and liabilities consisted of increases in accounts receivable $2,500, and an increase in accounts payable of $633.
Investments
We had no net cash used in investing activities for the nine months ended September 30, 2017.
Financing
We had net cash provided in financing activities of $465 for the nine months ended September 30, 2017, as compared to net cash provided in financing activities of $16,540 for the nine months ended September 30, 2016.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we consider material.
Going Concern
Our financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the business is relatively new and has a short history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the three months and nine months ended September 30, 2017 and 2016 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has incurred losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) 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 SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.
We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.
Changes in internal controls over financial reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a 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 limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | Spirit International, Inc. |
| | |
| Date: November 15, 2017 | By: /s/ Zur Dadon |
| | Zur Dadon |
| | Chief Executive Officer |
