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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
Form 10-Q
 
 
þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended August 31, 2013
 
 
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:  333-182761
 
GANKIT CORPORATION

(Exact name of small business issuer as specified in its charter)
 
Nevada
 
38-3870905
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
5201 Memorial Drive, Suite 1115
   
Houston, TX
 
77007
(Address of principal
executive offices)
 
(Zip Code)

Registrant's telephone number, including area code:  (713) 510-3559
 
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     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 þ     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
Smaller reporting company    
þ

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

There were 30,000,000 shares of the registrant’s common stock issued and outstanding as of October 14, 2013.
 
 
 

 

 
IMPORTANT INFORMATION REGARDING THIS FORM 10-Q

Unless otherwise indicated, references to “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to GankIt Corporation.

Readers should consider the following information as they review this Quarterly Report:

Forward-Looking Statements
 

The statements contained or incorporated by reference in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995), within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements.  Forward-looking statements include any statement that may project, indicate or imply future results, events, performance or achievements.  The forward-looking statements contained herein are based on current expectations that involve a number of risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as “believes,” “expect,” “may,” “should,” “intend,” “plan,” “could,” “estimate” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.

Given the risks and uncertainties relating to forward-looking statements, investors should not place undue reliance on such statements.  Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q and are not guarantees of future performance. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such expectations may prove to have been incorrect.  All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

Except to the extent required by applicable securities laws, we expressly disclaim any obligation or undertakings to release publicly any updates or revisions to any statement or information contained in this Quarterly Report on Form 10-Q, including the forward-looking statements discussed above, to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement or information is based.

 
 
 
 
 
 
 

 
GANKIT CORPORATION
FINANCIAL STATEMENTS ON FORM 10-Q
AS OF AND FOR THE THREE MONTHS ENDED AUGUST 31, 2013
TABLE OF CONTENTS
 
 
Part I.
Financial Information
4
     
Item 1.
Financial Statements
4
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
9
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risks
12
     
Item 4.
Controls and Procedures
12
     
Part II.
Other Information
13
     
Item 1.
Legal Proceedings
13
     
Item 1A.
Risk Factors
13
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
13
     
Item 3.
Defaults Upon Senior Securities
13
     
Item 4.
Mine Safety Disclosures
13
     
Item 5.
Other Information
13
     
Item 6.
Exhibits
14
     
Signatures
 
15
 
 
 
 
 
 

 
PART I. FINANCIAL INFORMATION
 
 
ITEM 1.  FINANCIAL STATEMENTS
 
GANKIT CORPORATION
BALANCE SHEETS
(Unaudited)
   
August 31, 2013
   
May 31, 2013
 
             
ASSETS
           
Cash and cash equivalents
  $ 6,485     $ 23,998  
Restricted cash
    12,219       9,062  
Prepaid expenses and other current assets
    1,233       8,183  
Total current assets
    19,937       41,243  
                 
Intangible assets, net
    14,667       15,667  
Total non-current assets
    14,667       15,667  
                 
TOTAL ASSETS
  $ 34,604     $ 56,910  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
Accounts payable and accrued expenses
  $ 19,826     $ 22,119  
Accounts payable, related party
    28,040       28,040  
Customer deposits
    19,568       4,287  
Shareholder advances
    100,500       100,500  
Note payable
    150,000       50,000  
Total current liabilities
    317,934       204,946  
                 
TOTAL LIABILITIES
    317,934       204,946  
                 
STOCKHOLDERS' DEFICIT
               
Common stock, $0.0001 par value; 100,000,000 shares authorized, 30,000,000 issued and outstanding at August 31, 2013 and May 31, 2013.
    3,000       3,000  
Additional paid in capital
    110,250       110,250  
Deficit accumulated
    (396,580 )     (261,286 )
                 
TOTAL STOCKHOLDERS' DEFICIT
    (283,330 )     (148,036 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 34,604     $ 56,910  

The accompanying notes are an integral part of these financial statements.
 
 
4

 
GANKIT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)

 
             
   
Three Months Ended August 31,
 
   
2013
   
2012
 
REVENUES
           
Revenue
  $ 53,810     $ 13,019  
Total revenues
    53,810       13,019  
                 
COST OF REVENUES
               
Processing fees
    5,847       2,220  
Products
    65,746       24,569  
Total cost of revenues
    71,593       26,789  
                 
Gross loss
    (17,783 )     (13,770 )
                 
OPERATING EXPENSES
               
General and administrative expenses
    113,166       31,187  
Depreciation and amortization
    1,000       1,667  
Total operating expenses
    114,166       32,854  
                 
Loss from operations
    (131,949 )     (46,624 )
                 
OTHER EXPENSE
               
Interest expense
    (3,345 )     (1,876 )
Total other expense
    (3,345 )     (1,876 )
                 
Net loss
  $ (135,294 )   $ (48,500 )
                 
Net loss per share - basic and diluted
  $ (0.00 )   $ (0.00 )
Weighted average number of shares outstanding – basic and diluted
    30,000,000       20,000,000  

The accompanying notes are an integral part of these financial statements.
 
 
5

 
GANKIT CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)

 
   
Three Months Ended August 31,
 
   
2013
   
2012
 
             
             
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (135,294 )   $ (48,500 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    1,000       1,667  
                 
Changes in operating assets and liabilities:
               
Prepaid expenses and other current assets
    6,950       31  
Accounts payable and accrued expenses
    (2,293 )     11,121  
Customer deposits
    15,281       (486 )
Net cash used in operations
    (114,356 )     (36,167 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Restricted cash
    (3,157 )     4,746  
Net cash provided by (used in) investing activities
    (3,157 )     4,746  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from advances from shareholders
    -       25,000  
Proceeds from notes payable
    100,000       -  
Net cash provided by financing activities
    100,000       25,000  
                 
Net change in cash and cash equivalents
    (17,513 )     (6,421 )
Cash and cash equivalents, beginning of period
    23,998       14,274  
Cash and cash equivalents, end of period
  $ 6,485     $ 7,853  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
         
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
  $ -     $ -  

The accompanying notes are an integral part of these financial statements.
 
 
6

 
GANKIT CORPORATION
Notes to Financial Statements
(Unaudited)
 
Note 1.  Basis of Presentation
 
The accompanying unaudited interim financial statements of GankIt Corporation (“GankIt” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K filed with the SEC on August 29, 2013.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein.  The results of operations for our interim period are not necessarily indicative of the results to be expected for the full year.  Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended May 31, 2013, as reported in our annual report on Form 10-K, have been omitted.
 
 
General
 
GankIt was incorporated in Nevada on March 8, 2012.  The Company launched its e-commerce website in May of 2012 and currently has over 25,000 members. GankIt sells a multitude of consumer products including electronics, appliances, clothing, accessories, sporting goods, gift cards and more. The Company procures most of its products from Amazon.com, and drop-ships the items directly from Amazon.com to the customer. The Company's corporate headquarters are located in Houston, Texas and its fiscal year-end is May 31.
 
The Company's website, GankIt.com, provides a forum where participants can either bid-to-win products or "Gank" them at a discount to suggested retail prices. When people visit the website they have the opportunity to purchase bids for $0.55 each that can be used in auctions. Each auction starts at $0.01 and increases by one penny each time a bid is placed. The last person to bid on an item is the winner and has the ability to purchase the product for the final auction price.
 
During an auction, the Company simultaneously offers a "bottomless shelf" of the same product that is being auctioned through its GankIt feature. Each product starts at a suggested retail price which decreases by $0.10 for each bid that is placed during the auction. At any time while an auction is in progress, participants may Gank a product at a discount to the suggested retail price by clicking the Gank button.
 
 
Note 2.  Going Concern
 
The Company realized a loss of $135,294 for the three months ended August 31, 2013 and has an accumulated deficit of $396,580.  As a result, the Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
 
These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
In addition to operational expenses, as the Company executes its business plan, it is incurring expenses related to complying with its public reporting requirements.  In order to finance these expenditures, the Company has raised capital in the form of debt, which will have to be repaid, as discussed in detail below. The Company has depended on loans from private investors and outside investors for most of its operating capital.  The Company will need to raise capital in the next twelve months in order to remain in business.
 
Management anticipates that significant dilution will occur as a result of any future sales of the Company’s common stock and this will reduce the value of its outstanding shares. The Company cannot project the future level of dilution that will be experienced by investors as a result of its future financings, but it will significantly affect the value of its shares.
 
 
7

 
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
Note 3.  Development Stage Company
 
During the three months ended August 31, 2013, the company no longer meet the qualifications as a development stage company as defined by the Accounting Standards Codification No. 915 “Development Stage Entities.” Accordingly, the company is no longer reported as a development stage company.
 
 
Note 4.  Notes Payable
 
On April 11, 2012, GankIt signed a promissory note with Hillsmere S.A. in the amount of $50,000. The note bears interest at a rate of 15%, and becomes due and payable on April 10, 2014 and is collateralized by all of the assets of the Company.  As of August 31, 2013, the principal balance outstanding was $50,000 and accrued interest expense was $10,417.  No interest or principal payments on this note have been made since its inception.
 
On June 21, 2013, Gankit signed a Master Credit Agreement with Levantera, SA, a company formed under the laws of the Marshall Islands, to provide a lending facility of up to $1 million.  The Company has the right to periodically prepare a Borrowing Certificate (a “Certificate”) drawing upon this facility.  At the end of each fiscal quarter, the Lender may prepare an Evidence of Indebtedness, setting forth advances, payments and interest accruals made during that quarter.  Each Certificate and the interest accrued thereon is due one year after the date of the Evidence of Indebtedness.  Interest accrued on un-matured amounts is 12% per year.  Matured, unpaid amounts accrue interest at 18% per year.  As of August 31, 2013, we have borrowed $100,000 on this facility and accrued $1,282 in interest.  No interest or principal payments have been made as of August 31, 2013.
 
 
Note 5.  Concentrations
 
The Company currently purchases approximately 90% of its products from Amazon.com, which presents a risk to the business. In the event that Amazon.com increases its prices or refuses to sell products to the Company, business operations could be adversely affected.
 
 
Note 6.  Related-Party Transactions
 
Clark Rohde, the Company's majority shareholder, was paid $8,400 during the three months ended August 31, 2013.  Work performed was primarily related to product listings, order processing, shipping and fulfillment, and customer service.
 
At August 31, 2013, the Company owed $100,500 in advances to its President and CEO.  The advances are unsecured, non-interest bearing, and have no specific terms for repayment.
 
 
8

 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in connection with the Company’s financial statements and related notes thereto, as included in this report on Form 10-Q, as well as the Company’s annual report on Form 10-K, filed August 29, 2013.
 
Organization and Basis of Presentation
 
GankIt Corporation (“GankIt” or the “Company”) was incorporated in the state of Nevada on March 8, 2012, with a fiscal year end of May 31. We are an e-commerce business focused on selling a diverse set of products through our website that can either be won through a bidding process or purchased at a discount to the suggested retail price. On March 30, 2012, the Company purchased the web site domain and content, trademarks, and all intellectual property related to GankIt.com from John Arnold for $20,000. Mr. Arnold serves as the sole officer and director of GankIt. On May 4, 2012, we launched our website, GankIt.com, and began accepting payments.
 
We have developed and continue to develop a robust e-commerce website that offers a wide selection of retail products such as electronics, appliances, furniture, home furnishings, equipment and tools, toys, gift cards, automobiles and more. However, as our business is in its early stages of development, we intend to initially focus on selling products with an average price point under $500. Over the next six months, we will likely focus on selling consumer electronics such as televisions, music players, video players, computers, tablet computers, cameras, phones, and various accessories which we purchase from other retailers such as Amazon.com. Provided that our business obtains additional financing, we intend to diversify our product mix to add other products.
 
Our business model is different from conventional retail websites in that we offer our users the opportunity to either bid-to-win a product or purchase a product immediately. All of our products can be obtained either by winning a bidding auction or purchasing the product for the "GankIt price” (as described below). When users visit our website, they have the option to sign up for a free membership. If they are interested in bidding to win products, they can purchase bundles of bids for a fixed cost. Our bids presently sell for $0.55 per bid, and the minimum purchase is $22 or 40 bids.  However, if they simply want to purchase a product, users can click on the “GankIt” button, and proceed to checkout without buying bids.
 
When we begin an auction for a product, the bidding starts at one penny, and the GankIt Price starts at the suggested retail price. Each user has the opportunity to place a bid to buy the product for the auction price. The auction price starts at one penny and increases by one penny for each new bid that is placed into the auction. Auction timers typically start counting down from one to seven days. With each new bid that is placed, additional time is added to the auction timer. Single bids add 15 seconds to the auction timer. When less than 15 seconds remain on the auction timer, a single bid placed resets the auction timer to 15 seconds. When multiple auto-bidders are engaged with less than 10 seconds on the auction timer, a "Butler Brawl" resets the auction timer to 30 seconds. When time expires in the auction, the last bidder to place a bid for the product is the winner of the auction and can buy the product for the auction price. At that point, the auction is closed.
 
In addition, while an auction is open, for each new bid that is placed, the suggested retail price of the product decreases by a specified decrement. Our GankIt decrement is presently $0.10. This new discounted price is referred to as the "GankIt price", or the price for which you can buy the product immediately. At any time throughout the course of the auction, any user may purchase the product for the GankIt price by clicking on the “GankIt” button. When this occurs, the auction remains open and the “GankIt price” reverts back to the original suggested retail price. As new bids are placed, the “GankIt price” then begins to decrease once more until either someone else clicks on the GankIt button (at which time the process starts over again) or the auction ends. Once an item is "ganked" by a user (i.e., once a user decides to purchase the item at the then “GankIt price”), the “GankIt price” resets to the original retail price and a new item is offered for sale at the “GankIt price.” An auction may result in many "ganks", while ultimately only one item will be “won” by a user at the end of the auction.
 
 
9

 
During the course of an auction, members compete to "win" an item (i.e., to have the highest bid when the auction closes and be provided the right to purchase the item auctioned for the final bid price). "Winning an item" means the member is able to purchase the item won at the final bid price, usually a steep discount to the retail price. Each auction competition is for one item only so there is only one “winner” of each auction.
 
 
Plan of Operations
 
We believe that we will need to use much of our Levantera Credit Facility (see Note 4 to the financial statements), (the “Credit Facility”), to fully develop our business plan. During the next 24 months, we intend to implement our business development and marketing plan. We believe we must use at least an additional $300,000 (in addition to the already-raised $100,000 capital raise effected through the sale of common stock pursuant to our Registration Statement and the $100,000 already raised pursuant to the Credit Facility.)
 
We believe that the Credit Facility provides is sufficient to continue to develop our marketing plan, purchase products for auction, and hire operational personnel.  However, if we fail to produce positive cash flows before the Credit Facility is fully utilized, we will not have enough capital to hire additional employees or consultants, continue developing our marketing plan, or purchase products for auction.
 
We plan to implement an incremental sales and marketing program that will focus on television and internet advertising. We expect to run television commercials and employ the use of banner ads and pay-per-click ads to drive traffic to our website. In addition, we anticipate purchasing a limited amount of product inventory, which will consist primarily of consumer electronics and other consumer household products such as appliances, kitchenware, and apparel.
 
If our marketing and other operational efforts are successful, we will be able to purchase larger amounts of inventory at lower costs. Additionally, we expect to employ the use of similar sales and marketing devices, only on a larger scale. In addition to increasing our economies of scale related to inventory, sales and marketing efforts, we plan to hire several employees and consultants to manage the anticipated growth of our business.  New employees and consultants would be responsible for product procurement, order fulfillment, implementation and management of sales and marketing efforts, customer support, financial accounting and reporting, and conducting other daily operational tasks.
 
 
Results of Operations
 
Although we have generated revenues from our operations, we cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of an early stage business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies (See "Risk Factors", below). To become profitable and competitive over the long run, we must develop our business and marketing plan and execute it.
 
Three Months Ended August 31, 2013 and 2012
 
Revenues and Gross Margins
 
For the three months ended August 31, 2013, we generated $53,810 of revenues from operations and a gross loss (revenues minus cost of revenues) of $17,783 versus $13,019 and a gross loss of $13,770 for the same period in 2012, respectively. As such, the cost of the products we sold during the both periods in 2013 and 2012 was more than the revenue we generated from the sale of such products.
 
 
10

 
Our gross margin percentages are a directly related to the number of people we have online bidding on our products.  We began our marketing campaign to drive customers to our website during the last week of May 2013.  Since then, our membership has more than doubled.  As you can see from the following table, we have also reduced the gross loss from an average of 148% of sales during the nine months ended February 28, 2013 to 33% for the three months ended August 31, 2013.  We believe that we will continue to improve these numbers and expect the gross margin percentages to be reliably positive by the end of this fiscal year, perhaps sooner.
 
   
Quarter Ended
 
Nine Months Ended 02/28/13
       
   
08/31/12
 
11/30/12
 
02/28/13
   
05/31/13
 
08/31/13
                         
Revenues
$
13,019
$
6,022
$
1,094
 
20,135
$
9,603
$
53,810
Cost of sales
 
26,789
 
19,359
 
3,882
 
50,030
 
12,977
 
71,593
Gross margin
 
(13,770)
 
(13,337)
 
(2,788)
 
(29,895)
 
(3,374)
 
(17,783)
Gross margin percent
 
-106%
 
-221%
 
-255%
 
-148%
 
-35%
 
-33%

 
General and Administrative Expenses
 
For the three months ended August 31, 2013, we incurred total selling, general and administrative costs and expenses of $113,166, versus $31,187 for the same period in 2012.  The increase (or $81,979) is almost entirely due to increases in marketing costs ($29,986), increased labor costs to run our operations ($32,703) and increases in our costs associated with our statutory filing requirements under the Exchange Act ($15,552).
 
Depreciation and Amortization
 
Amortization of our intangible assets decreased from $1,667 for the three months ended August 31, 2012 to $1,000 for the same period in 2013.
 
Interest Expense
 
Interest expense went from $1,876 for the three months ended August 31, 2012 to $3,345 for the same period in 2013.  The increase is due to higher debt levels.
 
 
Liquidity and Capital Resources
 
As of August 31, 2013, the Company had current assets of $19,937, comprised of cash and cash equivalents of $6,485, restricted cash of $12,219, and other current assets of $1,233. In addition, the Company had net long-term assets of $14,667, comprised of intangible assets of $20,000 associated with our websites and intellectual property less the accumulated amortization of those assets of $5,333.
 
Restricted cash of $12,219 as of August 31, 2013, represents cash held by CC Bill as described below. Total liabilities, consisting solely of current liabilities were $317,934, comprised of outstanding notes payable of $150,000 (described below), customer deposits of $19,568, accounts payable and accrued liabilities of $19,826, unpaid salaries and expenses payable to our President and CEO, John Arnold, of $28,040, and advances from Mr. Arnold of $100,500.
 
We had negative working capital of $297,997 and a deficit accumulated of $396,580 as of August 31, 2013.
 
The Company uses CC Bill, a third party payment processor, to accept electronic payments from customers when they purchase products on our website. The Company’s agreement with CC Bill provides that CC Bill charges an 8.95% processing fee on all transactions. They also hold 95% of the Company’s net cash for nine business days, and 5% of the Company’s cash for six months to defray the risk of potential voided transactions or charge backs.
 
We also recently began accepting payments using PayPal, who does not restrict our use of cash, but takes a 5% processing fee.  For the three months ended August 31, 2013, 91% of our transactions went to CCBill and only 9% went to PayPal.
 
 
11

 
Our arrangement with CC Bill serves to diminish our liquidity because we do not immediately receive cash when our customers process transactions. The fees that CC Bill charges also further diminish not only our liquidity, but also provide an additional layer of cost to all of our transactions. Over time, we plan to renegotiate our arrangement with CC Bill to provide us with lower processing fees and fewer delays in receiving our cash. If we are unable to do so, we may seek services from other payment processors. However, there can be no assurance that we will be successful in either renegotiating our terms of service with CC Bill, or establishing service with another third party payment processor.
 
 
Cash Flows from Operating Activities
 
During the three months ended August 31, 2013 and 2012, the Company used cash in operating activities of $114,356 and $36,167, respectively. The use of cash for operating activities is predominantly attributed to our net loss.
 
 
Cash Flows from Investing Activities
 
During the three months ended August 31, 2013, the Company used restricted cash of $3,157 in investing activities.  The Company was provided $4,746 for the same period in 2012.
 
 
Cash Flows from Financing Activities
 
During the three months ended August 31, 2013, we drew down $100,000 from our Credit Facility, which comprised all of our cash provided by financing activities.  During the same period in 2012, our only activity was a $25,000 advance from a shareholder.
 
 
Capital Requirements
 
On June 21, 2013, Gankit signed a Master Credit Agreement with Levantera, SA (the “Credit Facility”), a company formed under the laws of the Marshall Islands, to provide a lending facility of up to $1 million (see Note 4 to the financial statements).
 
We believe that the Credit Facility provides is sufficient to continue to develop our marketing plan, purchase products for auction, and hire operational personnel.  However, if we fail to produce positive cash flows before the Levantera facility is fully utilized, we will not have enough capital to hire additional employees or consultants, continue developing our marketing plan, or purchase products for auction.
 
We plan to implement an incremental sales and marketing program that will focus on television and internet advertising. We expect to run television commercials and employ the use of banner ads and pay-per-click ads to drive traffic to our website. In addition, we anticipate purchasing a limited amount of product inventory, which will consist primarily of consumer electronics and other consumer household products such as appliances, kitchenware, and apparel.
 
Our independent auditor has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.
 
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
As a smaller reporting company, we are not required to provide the information required by this Item.
 
 
ITEM 4. CONTROLS AND PROCEDURES
 
Our principal executive officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer as appropriate, to allow for timely decisions regarding required disclosure as of the end of the period covered by this report.  Based on this evaluation, our principal executive officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to a lack of segregation of duties and an absence of written policies and procedures for accounting and financial reporting.
 
Change in Internal Controls Over Financial Reporting
 
There were no changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2013 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
 
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
 
 
ITEM 1A.  RISK FACTORS
 
There have been no material changes from the risk factors previously disclosed in the Company’s annual report on Form 10-K, filed with the Commission on August 29, 2013, and investors are encouraged to review such risk factors prior to making an investment in the Company.
 
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
There were no unregistered sales of equity securities during the quarter ended August 31, 2013.
 
Use of Proceeds From Sale of Registered Securities
 
Our Registration Statement on Form S-1 (Reg. No. 333-182761) in connection with the sale by us of up to 10 million shares of common stock for $0.01 per share, was declared effective by the SEC on November 28, 2012. We filed a final Rule 424(b)(3) prospectus relating to the offering on January 7, 2013. During the year ended May 31, 2013, the Company received $100,000 in connection with the sale of 10,000,000 shares of common stock.
 
 No payments for our expenses were made directly or indirectly to (1) any of our directors, officers or their associates, nor (2) any person(s) owning 10% or more of any class of our equity securities nor (3) any of our affiliates with the funds raised in the offering, which funds we have not yet officially accepted or used to date.
 
 There has been no material change in the planned use of proceeds from our offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b).
 
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
 
ITEM 4.  MINE SAFETY DISCLOSURES
 
Not applicable.
 
 
ITEM 5.  OTHER INFORMATION
 
Not applicable.
 
 
 
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ITEM 6.  EXHIBITS
 
Exhibit No.
Description of Exhibit
   
31.1*
Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
   
32.1**
Certification of Principal Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
   
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
* Filed herewith.
 
** Furnished herewith.
 
++  XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
 
 
 
 
 
 
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SIGNATURES
 

 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
GankIt Corporation
     
 
By:
/s/  John Arnold
   
John Arnold
   
Chairman of the Board and CEO
   
(Principal Executive Officer and
   
Principal Accounting Officer)
Date:  October 15, 2013
 

 
 
 
 
 
 
 
 
 
 
 
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