UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2017
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from ____________ to ______________
Commission file number: 333-201607
GAIN CITIES LIMITED |
(Exact name of registrant as specified in its charter) |
Nevada | | 47-2548484 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
5575 La Jolla Boulevard
La Jolla, CA, 92037
(Address of principal executive offices)
(360) 878-9625
(Registrant’s telephone number)
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 o No x
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
| | Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extending 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 o No x
The number of shares of the registrant’s common stock outstanding as of February 12, 2018 was 80,003.
GAIN CITIES LIMITED
FORM 10-Q
Quarterly Period Ended August 31, 2017
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
GAIN CITIES LIMITED
BALANCE SHEETS
| | August 31, 2017 | | | November 30, 2016 | |
| | (unaudited) | | | (audited) | |
ASSETS | | | | | | |
| | | | | | |
CURRENT ASSETS: | | | | | | |
Cash | | $ | - | | | $ | 110 | |
Prepaid expenses | | | 2,500 | | | | 10,000 | |
Total Current Assets | | | 2,500 | | | | 10,110 | |
| | | | | | | | |
Deferred offering costs | | | - | | | | - | |
| | | | | | | | |
TOTAL ASSETS | | $ | 2,500 | | | $ | 10,110 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Accounts payable | | $ | 13,654 | | | $ | 15,663 | |
Loan – related party | | | 28,788 | | | | - | |
Loan – nonrelated party | | | 20,000 | | | | - | |
TOTAL LIABILITIES | | | 62,442 | | | | 15,663 | |
| | | | | | | | |
| | | | | | | | |
STOCKHOLDERS’ EQUITY (DEFICIT): | | | | | | | | |
Preferred stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding | | | - | | | | - | |
Common stock, $0.001 par value; 100,000,000 shares authorized; 80,000 shares issued and outstanding at August 31, 2017 and November 30, 2016 | | | 80 | | | | 80 | |
Additional paid in capital | | | 24,843 | | | | 24,843 | |
Accumulated deficit | | | (84,865 | ) | | | (30,476 | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | | | (59,942 | ) | | | (5,553 | ) |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | $ | 2,500 | | | $ | 10,110 | |
See notes to the financial statements.
GAIN CITIES LIMITED
STATEMENTS OF OPERATIONS
| | For the nine months ended August 31, 2017 | | | For the nine months ended August 31, 2016 | |
| | (unaudited) | | | (unaudited) | |
| | | | | | |
Product revenue | | $ | - | | | $ | - | |
| | | | | | | | |
Expenses: | | | | | | | | |
Consulting services and other | | | 11,000 | | | | 74,563 | |
Accounting, audit and public company fees | | | 42,499 | | | | 18,150 | |
Administration expense | | | 890 | | | | 8,040 | |
Loss before provision for income tax | | | 54,389 | | | | 100,753 | |
| | | | | | | | |
Provision for income tax | | | - | | | | - | |
Net loss | | $ | (54,389 | ) | | $ | (100,753 | ) |
| | | | | | | | |
Basic and diluted loss per share | | $ | (0.68 | ) | | $ | (1.26 | ) |
| | | | | | | | |
Weighted average common shares outstanding - basic and diluted | | | 80,000 | | | | 80,000 | |
| | For the three months ended August 31, 2017 | | | For the three months ended August 31, 2016 | |
| | (unaudited) | | | (unaudited) | |
| | | | | | |
Product revenue | | $ | - | | | $ | - | |
| | | | | | | | |
Expenses: | | | | | | | | |
Consulting services and other | | | 4,500 | | | | 18,013 | |
Accounting, audit and public company fees | | | 7,000 | | | | 5,345 | |
Administration expense | | | 500 | | | | 2,312 | |
Loss before provision for income tax | | | 12,000 | | | | 25,670 | |
| | | | | | | | |
Provision for income tax | | | - | | | | - | |
Net loss | | $ | (12,000 | ) | | $ | (25,670 | ) |
| | | | | | | | |
Basic and diluted loss per share | | $ | (0.15 | ) | | $ | (0.32 | ) |
| | | | | | | | |
Weighted average common shares outstanding - basic and diluted | | | 80,000 | | | | 80,000 | |
See notes to the financial statements.
GAIN CITIES LIMITED
STATEMENTS OF CASH FLOWS
| | For the nine months ended August 31, 2017 | | | For the nine months ended August 31, 2016 | |
| | (unaudited) | | | (unaudited) | |
CASH FLOW FROM OPERATING ACTIVITIES: | | | | | | |
Net loss | | $ | (54,389 | ) | | $ | (100,753 | ) |
Adjustments to reconcile net loss to cash (used in) operating activities: | | | | | | | | |
Change in prepaid expense | | | 7,500 | | | | 7,668 | |
Change in accounts payable | | | (2,009 | ) | | | 60,812 | |
Net Cash (Used in) Operating Activities | | | (48,998 | ) | | | (32,273 | ) |
| | | | | | | | |
CASH FLOW FROM INVESTING ACTIVITIES | | | - | | | | - | |
| | | | | | | | |
CASH FLOW FROM FINANCING ACTIVITIES: | | | | | | | | |
Loan proceeds from related party | | | 28,788 | | | | 1,651 | |
Loan repayments to nonrelated party | | | - | | | | (500 | ) |
Loan proceeds from nonrelated parties | | | 20,000 | | | | 31,068 | |
Net Cash Provided by Financing Activities | | | 48,788 | | | | 32,219 | |
CHANGE IN CASH | | | (110 | ) | | | (54 | ) |
CASH AT BEGINNING OF PERIOD | | | 110 | | | | 654 | |
CASH AT END OF PERIOD | | $ | - | | | $ | 600 | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | |
Cash paid for: | | | | | | | | |
Interest | | $ | - | | | $ | - | |
Income taxes | | $ | - | | | $ | - | |
See notes to the financial statements.
GAIN CITIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
AUGUST 31, 2017
NOTE 1 – ORGANIZATION
Gain Cities Limited (formerly known as Remove-By-You, Inc.) (the “Company”) was incorporated under the laws of the state of Nevada on November 25, 2014. The Company issued 30,000 shares of common stock to its founder at inception in exchange for organizational costs. Following its formation, the Company issued 10,000 shares of common stock to its founder, as consideration for the purchase of certain intangible assets for use in a proprietary tattoo removal business. Our founder paid approximately $1,000 for these assets. The acquisition was valued at $1,000.
The Company’s product formulas and tattoo removal service uses a proprietary technology that enables the user to safely remove his or her tattoo with minimal effort and discomfort. The Company’s product formula along with the micro-needle device program we believe safely removes the ink and design and allows the body to heal naturally without scarring.
On October 13, 2016, the Company experienced a change in control (the “Control Change”). With the Control Change certain liabilities of the Company were forgiven and/or paid for on our behalf by our founder. Total liabilities at the time approximated $165,000 which included legal fees owed to our former legal counsel. The board of directors nominated Mr. James Oliver to the board on October 13, 2016.
On October 18, 2016, the Company, reported on a Form 8-K that it had filed an Articles of Merger with the Nevada Secretary of State, whereby it entered into a statutory merger with its wholly-owned subsidiary, the effect being the Company changed its name from “Remove-By-You, Inc.” to “Gain Cities Limited” (the “Name Change”).
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting
The Company’s financial statements are prepared using the accrual method of accounting. The Company elected a November 30th year-end.
The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at August 31, 2017 the results of its operations and cash flows for the nine months ended August 31, 2017. The results of operations for the nine months ended August 31, 2017, are not necessarily indicative of the results to be expected for future quarters or even a full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2016.
b. Cash Equivalents
For purposes of the balance sheet and statement of cash flows, the Company considers all liquid instruments with maturity of six months or less at the time of issuance to be cash equivalents.
c. Stock-based Compensation
The Company follows ASC 718-10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.
d. Use of Estimates and Assumptions
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
e. Earnings (Loss) per Share
The basic earnings (loss) per share is calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares during the period. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.
f. Income Taxes
Income taxes are provided in accordance with ASC 740, Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
No provision was made for Federal or state income taxes.
g. Revenue Recognition
We will recognize revenues in accordance with ASC 605, Revenue Recognition, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. We will recognize revenue when: (i) persuasive evidence of an arrangement exists; (ii) shipment of products has occurred or services have been rendered; (iii) the sales price charged is fixed or determinable; and (iv) collection is reasonably assured. Our shipment terms will generally be FOB shipping point as outlined in our invoices or sales order.
h. Advertising
Advertising is expensed in the period in which it is incurred. No advertising expense has been reported in the periods presented.
i. Intangible Assets
Intangible assets with finite lives are amortized over their estimated useful life. The Company monitors conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization period. The Company tests its intangible assets with finite lives for potential impairment whenever management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset's useful life and the impact of an event or circumstance on either an asset's useful life or carrying value involve significant judgment.
j. Fair Value of Financial Instruments
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| ● | Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities. |
| | | |
| ● | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. |
| | | |
| ● | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. |
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash and accounts payable. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk and are carried at amortized costs which approximates the fair value.
k. Recently Issued Accounting Pronouncements
The Company implemented all new accounting pronouncements that are in effect and that may impact its financial statements. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying financial statements, the Company had negative working capital of $59,942 and an accumulated deficit of $84,865 at August 31, 2017. For the period ending August 31, 2017, the Company had not generated revenues and had no committed sources of capital or financing.
Management anticipates the Company will attain profitable status and improve liquidity through continued business development and additional debt or equity investment in the Company. Management is pursuing sources of financing. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the financial statements. The financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence.
NOTE 4 – SHARE CAPITAL
The Company is authorized to issue 100,000,000 shares of common stock ($0.001 par value) and 1,000,000 shares of preferred stock ($0.001 par value). On February 27, 2017 the shareholders of the Company approved a reverse stock split in the amount of one (1) share for every one hundred (100) shares issued and outstanding. The reverse stock split was approved and filed with the Secretary of State for Nevada, with an effective date of March 14, 2017. We reflected the reverse stock split as if it has been in existence the entire time.
Upon inception the Company issued 30,000 shares of its common stock to its founder for organizational services. These services were valued at $3,000. Following formation, the Company issued 10,000 shares of common stock to its founder as consideration for the purchase of certain intangible assets. Our founder incurred approximately $1,000 in costs and or payments to develop and refine the tattoo removal process utilizing the product formula and micro-needle devices. The acquisition of the intangible assets was valued at $1,000.
On June 24, 2015 the Company completed its offering pursuant to a registration statement filed on Form S-1. The Company issued 40,000 shares of its common stock to 26 investors. The investors paid $1.00 per share for a total investment of $40,000.
In connection with the Control Change (see Note 1 – Organization), our founder settled certain outstanding debts of the Company. This resulted in debt forgiveness recognized as a one-time increase to additional paid in capital of $4,500. As part of the reverse stock split the Company adjusted additional paid in capital by the change in number of shares outstanding multiplied by par value. The Company recognized an increase of $7,920 in additional paid in capital.
At August 31, 2017, there were 80,000 shares of common stock issued and outstanding. There are no shares of preferred stock issued or outstanding.
NOTE 5 – LOAN - RELATED PARTY
For the nine months ending August 31, 2017 the Company received $28,788 in loan proceeds from Mr. James Oliver an officer and director of the Company. The related party loan with Mr. Oliver was entered into in order to pay for certain working capital expenses. This loan is unsecured and carried no interest rate or repayment terms at this time.
NOTE 6 – LOAN - NONRELATED PARTY
The Company with its Control Change our founder negotiated and guaranteed the forgiveness of certain debts. This occurred on or about October 13, 2016. For the nine months ending August 31, 2017 the Company received $20,000 in loan proceeds from nonrelated entity. The nonrelated party loan was entered into in order to pay for certain working capital expenses. This loan is unsecured and carried no interest rate or repayment terms at this time.
NOTE 7 – INCOME TAXES
As of August 31, 2017 and November 30, 2016, the Company had net operating loss carry forward of $84,865 and $30,476, respectively. This amount may be available to reduce future years’ taxable income.
| | As of August 31, 2017 | | | As of November 30, 2016 | |
| | (unaudited) | | | (audited) | |
Deferred tax asset: | | | | | | |
Net operating tax carry-forward | | $ | 29,702 | | | $ | 10,667 | |
Other | | | - | | | | - | |
Gross deferred tax asset | | | 29,702 | | | | 10,667 | |
Valuation allowance | | | (29,702 | ) | | | (10,667 | ) |
| | | | | | | | |
Net deferred tax asset | | $ | - | | | $ | - | |
Realization of deferred tax asset is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forward is expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.
Reconciliation between statutory rate and the effective tax rate for the periods ended August 31, 2017 and November 30, 2016:
Federal statutory rate | | | (35.0 | )% |
State taxes, net of federal benefit | | | (0.00 | )% |
Change in valuation allowance | | | 35.0 | % |
Effective tax rate | | | 0.0 | % |
NOTE 8 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of August 31, 2017 through the date these financial statements were issued. There are no reportable events.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this quarterly report. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this quarterly report should be read as applying to all related forward-looking statements wherever they appear in this quarterly report. From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements.
The following discussion and analysis of our plan of operations should be read in conjunction with our financial statements and related notes appearing in our filings with the Securities and Exchange Commission. This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those presented under the heading of “Risk Factors” and elsewhere in this prospectus.
The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.
The discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (or “GAAP”). The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities at the date of its financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Our Ability to Continue as a Going Concern
Our financial statements as of August 31, 2017 have been prepared under the assumption that we will continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We are a development stage company and have extremely limited financial resources. We have not established a source of equity or debt financing. Our independent registered public accounting firm included an explanatory paragraph in their report emphasizing the uncertainty of our ability to remain a going concern.
Management anticipates the Company will attain profitable status and improve liquidity through continued business development and additional debt or equity investment in the Company. Management is pursuing sources of financing. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the financial statements. The financial statements do not include any adjustments relating to the recoverability of recorded assets amount that might be necessary should the Company be unable to continue in existence.
Financial Condition and Results of Operation
Results of Operations for the Nine Month Period ended August 31, 2017 and August 31, 2016.
Expenses
Expenses for the nine months ended August 31, 2017 were $54,389. We incurred $11,000 for development costs, which includes consultants and travel expenses on behalf of the Company, $42,499 for audit/review services and other expenses associated with our being a publicly reporting registrant with the SEC, and $890 for general and administrative costs. Expenses for the nine months ended August 31, 2016 were $100,753. We incurred $74,563 for product development costs, which includes both consultants and travel expense on behalf of the Company, $18,150 for audit/review services and other expenses associated with being a publicly reporting registrant with the SEC, and $8,040 for general and administrative costs. The Company will continue to incur ever increasing product development costs into the foreseeable future. The Company intends to actively manage its product development, outside consultants and other expenses to coincide with its business plan execution and product development. The Company began operations in November 2014.
Gain (Loss) before provision for income taxes
Loss before provision for incomes taxes for the nine months ended August 31, 2017 was $54,389. We recorded no provision for federal or state income taxes in the nine months. Loss before provision for incomes taxes for the nine months ended August 31, 2016 was $100,753. We recorded no provision for federal or state income taxes. We have not generated any revenues from our intended products or services.
Basic and diluted loss per share
Basic and diluted loss per share for the nine months ended August 31, 2017 was $0.68 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock. Basic and diluted loss per share for the nine months ended August 31, 2016 was $1.26 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock.
Results of Operations for Three Month Period ended August 31, 2017 and August 31, 2016
Expenses
Expenses for the three months ended August 31, 2017 were $12,000. We incurred $4,500 for development costs, which includes both consultants and travel expense on behalf of the Company, $7,000 for audit/review services and other expenses associated with our being a publicly reporting registrant with the SEC, and $500 for general and administrative costs. Expenses for the three months ended August 31, 2016 were $25,670. We incurred $18,013 for product development costs, which includes both consultants and travel expense on behalf of the Company, $5,345 for audit/review services and other expenses associated with being a publicly reporting registrant with the SEC, and $2,312 for general and administrative costs.
Loss before provision for income taxes
Loss before provision for income taxes for three months ended August 31, 2017 was $12,000. We recorded no provision for federal or state income taxes. Loss before provision for income taxes for the three months ended August 31, 2016 was $25,670. We recorded no provision for federal or state income taxes. We have not generated any revenues from our intended products or services.
Basic and diluted loss per share
Basic and diluted loss per share for the three months ended August 31, 2017 was $0.15 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock. Basic and diluted loss per share the three months ended August 31, 2016 was $0.32 per share. Basic and diluted number of shares outstanding was 80,000 shares of our common stock.
Liquidity
We have paid all costs related to our offering. Total offering costs were $23,577. Excess proceeds were used for general working capital purposes. Amounts related to non-offering costs will generally be paid when due and or otherwise accrued on the books and records or until we are able to pay the amounts in full either from revenues or from loans from related or nonrelated third parties. Obligations for expenses, when recorded as liabilities for lengthy periods of time, could preclude us from assistance from other sources, or at a minimum, make further financing difficult for the Company.
Loan Related Party – For the nine months ended August 31, 2017 the Company received $28,788 in loan proceeds from Mr. James Oliver, an officer and director of the Company. The related party loan was entered into in order to pay for certain working capital expenses. The loan is unsecured and carries no interest rate or repayment terms at this time.
Loan Nonrelated Party – For the nine months ended August 31, 2017 the Company received $20,000 in loan proceeds from a nonrelated entity. The nonrelated party loan was entered into in order to pay for certain working capital expenses. The loan is unsecured and carries no interest rate or repayment terms at this time.
As of August 31, 2017, we owed approximately $13,654 in accounts payable to various vendors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future.
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies. The continuation of our business is dependent upon obtaining further financing, a successful program of development, marketing and distribution of product and services, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long - term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Company History
The Company was incorporated under the laws of the State of Nevada on November 25, 2014, at which time it acquired a certain all-natural product based skincare formula to be used with a regimen of procedures using home-care micro-needle devices to remove unwanted tattoos through a do-it-yourself program from Kyle Markward, our former president. Mr. Markward resigned from his positions as an officer and director of the Company in connection with the change in control described below. Mr. Markward’s resignation was not due to any disagreements of any nature with the Company.
The Company issued 3,000,000 (30,000 post reverse stock split effective February 27, 2017, see Note 1 to the Company’s financial statements) shares of its common stock to Mr. Markward at inception in exchange for organizational services incurred upon incorporation. Following our formation, we issued an additional 1,000,000 (10,000 post reverse stock split) shares of our common stock to Mr. Markward, in exchange for a certain all-natural product based formula to be used with a regimen of home-care micro-needle devices to remove unwanted tattoos through a DIY or do-it-yourself program. (See Note 1 to the Company’s financial statements.).
On October 13, 2016, a change in control of the Company occurred by virtue of the Company’s largest shareholder, our founder, selling 4,000,000 (40,000 post reverse stock split) shares of the Company’s common stock to James Oliver, an individual residing in Florida, which represents 50% of the Company’s total issued and outstanding shares of common stock. Such 4,000,000 (40,000 post reverse stock split) shares sold represented all of the shares of the Company’s common stock owned by Mr. Markward.
Effective October 13, 2016, the Board of Directors (the “Board”) of the Company appointed Mr. James Oliver as President, Secretary and as a member of the Company’s Board. On the same day the Board elected Mr. Benjamin Teare as the Company’s Chief Operations Officer.
With the change in control certain liabilities of the Company were forgiven and/or paid for on behalf of the Company by our founder, former president and chief executive officer, Mr. Markward. Total liabilities approximated $165,000 which included legal fees owed to our legal counsel of $2,500. On October 18, 2016, the Company, reported on a Form 8-K that it had filed Articles of Merger with the Nevada Secretary of State, whereby it entered into a statutory merger with its wholly-owned subsidiary, with the effect being that the Company changed its name to from “Remove-By-You, Inc.” to “Gain Cities Limited” (the “Name Change”).
The Company is a development stage company and has no financial resources. We have not established or attempted to establish a source of equity or debt financing. Our independent registered public accounting firm has included an explanatory paragraph in their report emphasizing the uncertainty of our ability to remain a going concern.
Business
In connection with the change in control, the Company has decided to enter into the business of sports betting arbitrage and expects to sell analytics used by customers in placing legal bets on sporting events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing periods specified in the SEC’s rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company’s certifying officer has concluded that the Company’s disclosure controls and procedures are effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
As of August 31, 2017, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the criteria established by COSO management concluded that the Company’s internal control over financial reporting was effective as of August 31, 2017.
This Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting as smaller reporting companies are not required to include such report and EGC’s are exempt from this requirement entirely until they are no longer an EGC. Management’s report is not subject to attestation by the Company’s independent registered public accounting firm.
Limitations on the Effectiveness of Controls
Management has confidence in its internal controls and procedures. The Company’s management believes that a control system, no matter how well designed and operated can provide only reasonable assurance and cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all internal control systems, no evaluation of controls can provide absolute assurance that all control issuers and instances of fraud, if any, within the Company have been detected.
Changes in Internal Controls
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended August 31, 2017 that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None for the period ending August 31, 2017.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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* | Filed with initial filing of the Company’s registration statement on Form S-1, January 20, 2015. |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GAIN CITIES LIMITED | |
| | | |
DATED: February 12, 2018 | By: | /s/ James Oliver | |
| | James Oliver | |
| | Chief Executive Officer (Principal Executive Officer), President, Chief Financial Officer (Principal Accounting Officer), and Director | |
