UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 2016
¨	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: 333-182956

INTERUPS INC.

(Exact name of registrant as specified in its charter)

Nevada	48-1308920
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

645 Fifth Avenue, Suite 400, New York, NY	10022
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (212) 371-7799

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 filings requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ 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 in 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	¨	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 ¨ No þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the most practicable date: 6,900,000 shares of common stock, $.001 par value, as of November 14, 2016.

 

 

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	1
Balance Sheets (unaudited)	1
Statements of Operations (unaudited)	2
Statements of Cash Flows (unaudited)	3
Notes to the Financial Statement (unaudited)	4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13
ITEM 4. CONTROLS AND PROCEDURES	13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	15
ITEM 1A. RISK FACTORS	15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	15
ITEM 4. MINE SAFETY DISCLOSURES	15
ITEM 5. OTHER INFORMATION	15
ITEM 6. EXHIBITS	15
SIGNATURES	16

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FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

GENERAL

Throughout this Form 10-Q Quarterly Report, the terms “We,” “Registrant” and “Company” all refer to Interups Inc.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERUPS INC.

BALANCE SHEETS

		August 31, 2016 $				May 31, 2016 $
		(Unaudited)
ASSETS
Current assets
Cash			12,211				7,197
Prepaid expenses			28,824				70,798
Total assets			41,035				77,995
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities			663,898				269,727
Loans payable			703,100				411,500
Due to related parties			1,118108				598,866
Total current liabilities			2,485,106				1,280,093
STOCKHOLDERS’ DEFICIT
Common Stock Authorized: 75,000,000 common shares with a par value of $0.001 per share Issued and outstanding: 6,900,000 common shares			6,900				6,900
Common Stock Issuable			75				–
Additional paid-in capital			40,437				40,437
Accumulated deficit			(2,491,483	)			(1,249,435	)
Total Stockholders’ Deficit			(2,444,071	)			(1,202,098	)
Total Liabilities and Stockholders’ Deficit			41,035				77,995

(The accompanying notes are an integral part of these unaudited financial statements)

1

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INTERUPS INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

		Three months ended August 31, 2016 $				Three months ended August 31, 2015 $
Operating Expenses
Consulting fees			338,739				–
Consulting fees - related parties			672,144				–
General and administrative			94,354				13,150
Professional fees			125,120				–
Total Operating Expenses			1,230,357				13,150
Net Loss Before Other Expense			(1,230,357	)			(13,150	)
Other Expense
Interest Expense			(11,691	)			–
Net Loss			(1,242,048	)			(13,150	)
Net Loss per Share – Basic and Diluted			(0.18	)			(0.00	)
Weighted Average Shares Outstanding – Basic and Diluted			6,900,000				6,900,000

(The accompanying notes are an integral part of these unaudited financial statements)

2

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INTERUPS INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

		Three months ended August 31, 2016 $				Three months ended August 31, 2015 $
Operating Activities
Net loss for the period			(1,242,048	)			(13,150	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Common stock issuable for services incurred			75				–
Changes in Operating Assets and Liabilities:
Prepaid expenses			41,974				–
Accounts payable and accrued liabilities			394,171				12,350
Due to related parties			392,642				800
Net Cash Used In Operating Activities			(413,186	)			–
Financing Activities
Proceeds from related parties			126,600				–
Proceeds from loans payable			291,600				–
Net Cash Provided By Financing Activities			418,200				–
Increase in Cash			5,014				–
Cash – Beginning of Period			7,197				–
Cash – End of Period			12,211				–
Supplemental Disclosures
Interest paid			–				–
Income tax paid			–				–

(The accompanying notes are an integral part of these unaudited financial statements)

3

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

1.

Organization and Nature of Operations

Interups Inc. (the “Company”) was incorporated in the State of Nevada on April 11, 2012. Until the change of control which took place as reported in a Form 8-K Report, filed with the Securities and Exchange Commission on November 24, 2014, the Company was in the business of developing an internet based group buying site.  As reported in that Form 8-K, the then-principal shareholder, Romanas Bagdonas, sold all of his 4,000,000 shares of the Company, representing 57.97% of our issued and outstanding shares, to Laxmi Prasad, who is now the principal shareholder.  As part of that transaction, Mr. Bagdonas resigned as the sole officer and director, and designated Likhitha Palaypu, Laxmi Prasad’s daughter, as the sole officer and director.  Also, the Company sold all of its then-existing assets and business back to Mr. Bagdonas for $1.  The Company is now in the business of identifying and investing into, and acquiring potential business opportunities or transactions, and conducting and offering turnkey services in India. On April 27, 2016, the Company announced its change in status and ceased to be a “shell,” as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934.

Going Concern

These unaudited interim financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at August 31, 2016, the Company has a working capital deficit of $2,444,071 and an accumulated deficit of $2,491,483. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  

2.

Summary of Significant Accounting Policies

a)

Basis of Presentation

The unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is May 31.

b)

Interim Financial Statements

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three months ended August 31, 2016 are not necessarily indicative of the results that may be expected for the year ended May 31, 2017. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended May 31, 2016 included in our Form 10-K filed with the SEC.

4

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

2.

Summary of Significant Accounting Policies (continued)

c)

Use of Estimates

The preparation of financial statements in conformity with US GAAP 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 of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

d)

Cash and cash equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of August 31 and May 31, 2016, there were no cash equivalents.

e)

Revenue Recognition

The Company recognizes and accounts for revenue in accordance with ASC 605 as a principal on the services provided. Pursuant to ASC 605, Revenue Recognition, revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the amount is fixed and determinable, and collection is reasonably assured.

f)

Basic and Diluted Net Loss per Share

The Company computes net income (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 computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

g)

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

5

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

2.

Summary of Significant Accounting Policies (continued)

(g)

Financial Instruments (continued)

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(h)

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

(i)

Comprehensive Loss

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at August 31 and May 31, 2016, the Company has no items representing comprehensive income or loss.

(j)

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and 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.

3.

Accounts Payable and Accrued Liabilities

		August 31, 2016 $				May 31, 2016 $
Trade payables			635,029				263,385
Accrued liabilities			11,500				–
Interest payable			17,369				6,342
			663,898				269,727

6

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

4.

Related Party Transactions

(a)

As at August 31, 2016, the Company owed $117,834 (May 31, 2016 - $61,000) to the Chief Executive Officer ("CEO") of the Company for unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the three months ended August 31, 2016, the Company incurred consulting fees of $90,834 (2015 - $nil) to the CEO of the Company.

(b)

As at August 31, 2016, the Company owed $671,673 (May 31, 2016 - $372,937) to a company controlled by the Chief Financial Officer ("CFO") of the Company for day-to-day expenditures, unpaid consulting fees incurred, and loan proceeds received.  Of this amount, $126,600 (May 31, 2016 - $nil) is unsecured, bears interest at 10% per annum, and is due on May 31, 2017. The remaining amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $225,000 (2015 - $nil) and interest expense of $664 (May 31, 2016 - $nil) to this company.

(c)

As at August 31, 2016, the Company owed $99,808 (May 31, 2016 - $42,308) to the Vice-Chairman of the Company for unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $57,500 (2016 - $nil) to the Vice-Chairman of the Company.

(d)

As at August 31, 2016, the Company owed $111,248 (May 31, 2016 - $64,553) to a director of the Company for day-to-day expenditures and unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $60,000 (2015 - $nil) to this director of the Company.

(e)

As at August 31, 2016, the Company owed $30,651 (May 31, 2016 - $19,103) to a former director of the Company for unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $11,548 (2015 - $nil) to the former director. As at August 31, 2016, the amount was reallocated to accounts payable and accrued liabilities as the former director is no longer a related party.

(f)

As at August 31, 2016, the Company owed $107,545 (May 31, 2016 - $38,965) to a director of the Company and a company controlled by a director of the Company for day-to-day expenditures and unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $67,262 (2015 - $nil) and travel expenses $18,455 (2015 - $nil) to this director of the Company and a company controlled by this director of the Company. Refer to Note 6.

(g)

As at August 31, 2016, the Company owed $10,000 (May 31, 2016 - $nil) to a director of the Company for unpaid consulting fees incurred.  The amounts owing are unsecured, non-interest bearing, and due on demand.  During the period ended August 31, 2016, the Company incurred consulting fees of $160,000 (2015 - $nil) to this director of the Company.

5.

Loans Payable

(a)

On February 29, 2016, the Company entered into a loan agreement with a significant shareholder of the Company for $288,000.  The amount owing is unsecured, bears interest at 5% per annum, and is due on or before October 1, 2016. On August 30, 2016, the term of the loan was extended to May 31, 2017. As at August 31, 2016, accrued interest payable of $9,176 (May 31, 2016 - $5,507) was included in accounts payable and accrued liabilities.  

7

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

5.

Loans Payable (continued)

(b)

On May 31, 2016, the Company entered into a loan agreement with a significant shareholder of the Company for $66,000.  The amount owing is unsecured, bears interest at 10% per annum, and is due on or before September 10, 2016. On August 30, 2016, the term of the loan was extended to May 31, 2017. As at August 31, 2016, accrued interest payable of $2,399 (May 31, 2016 - $718) was included in accounts payable and accrued liabilities.

(c)

On June 13, 2016, the Company entered into a loan agreement with an unrelated party for $125,000. The amount owing is unsecured, bears interest at 10% per annum, and is due on or before September 10, 2016.  On August 30, 2016, the term of the loan was extended to December 31, 2016. As at August 31, 2016, accrued interest payable of $2,764 (May 31, 2016 - $117) was included in accounts payable and accrued liabilities.

(d)

On June 15, 2016, the Company entered into a loan agreement with a significant shareholder for $224,100. The amount owing is unsecured, bears interest at 10% per annum, and is due on or before May 31, 2017. As at August 31, 2016, accrued interest payable of $3,030 (May 31, 2016 - $nil) was included in accounts payable and accrued liabilities

6.

Common Stock Issuable

As at August 31, 2016, the Company had $75 (May 31, 2016 – $nil) in common stock issuable to a director of the Company for consulting fees incurred. Refer to Note 7(e).

7.

Commitments

(a)

On March 1, 2016, the Company entered into a services agreement with a non-related party in Mumbai, India for a term of two years. Pursuant to the agreement, the consultant is to provide data and research on specific Indian companies, provide complete support to the Company and its designated representatives when in Mumbai, and to carry out limited preliminary financial due diligence of certain targeted entities. In consideration, the Company agreed to pay a minimum of $60,000 per month, payable in advance by the 1st day of each month, along with a finder's fee for any transaction closed between the Company and clients sourced by the consultant.

(b)

On March 11, 2016, the Company entered into a services agreement with the Vice-Chairman of the Company for director and vice-chairman services. In consideration, the Company agreed to compensation of $90,000 per annum until the Company ceases to be a “shell,” which occurred on April 27, 2016, increasing to $180,000 per annum from when the Company’s total revenues reach $36,000,000 (not including certain “Excluded Transactions”), then to $270,000 per annum when revenues in any twelve-month period are at least $72,000,000, and further increases if and when the Company’s revenues reach higher milestones. The Company also agreed to pay bonuses based on the Company's financial performance.  In lieu of stock options, on September 28, 2016, the Vice-Chairman of the Company agreed to accept 5,560 restricted shares of common stock of the Company from the CFO of the Company, which shares are in addition to the 80,000 restricted shares, which the Vice-Chairman of the Company had previously received from the CFO of the Company.

(c)

On March 23, 2016, the Company entered into a service agreement with the CEO of the Company for director and interim CEO services. In consideration, the Company agreed to compensation of $240,000 per annum prior to the date the Company earns cumulative gross revenues of $36,000,000, increasing to $360,000 per annum when the Company's revenues in any twelve-month period are at least $72,000,000, and further increases if and when the Company's revenues reach higher milestones. The Company agreed to pay bonuses based on the Company's financial performance. The Company also agreed to pay director payments, after the CEO of the Company ceases to be an officer of the Company, of not less than $50,000 per annum without the then CEO of the Company's consent, payable quarterly. In lieu of stock options, on September 28, 2016, the CEO of the Company agreed to accept 5,560 restricted shares of common stock of the Company from the CFO of the Company, which shares are in addition to the 100,000 restricted shares, which the CEO of the Company had previously received from the CFO of the Company.

8

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

7.

Commitments (continued)

 (d)

On April 15, 2016, the Company entered into a services agreement with a director of the Company, who was formerly the CEO of the Company, for director and client coordination services. In consideration, the Company agreed to compensation of $90,000 per annum until the Company ceases to be a "shell", which occurred on April 27, 2016, increasing to $180,000 per annum from when the Company's total revenues reach $36,000,000 (not including certain "Excluded Transactions"), then to $300,000 per annum when revenues in any twelve-month period are at least $72,000,000, and further increases if and when the Company's revenues reach higher milestones. The Company also agreed to pay bonuses based on the Company's financial performance. In lieu of stock options, on September 28, 2016, the director of the Company agreed to accept 5,560 restricted shares of common stock of the Company from the CFO of the Company, which shares are in addition to the 192,000 restricted shares, which this director had received from the CFO of the Company, who is her father.

(e)

On April 22, 2016, the Company entered into a services agreement with a director of the Company who was the former CFO of the Company for director services, for which the director is to receive an annual director fee established from time to time by the Board, but not less than $50,000 without his consent. The fee is to be paid in five equal installments during the term, pro rata for any partial periods. In lieu of stock options, on September 28, 2016, the director of the Company agreed to accept 5,560 restricted shares of common stock of the Company from the CFO of the Company, which shares are in addition to the 80,000 shares, which this director had received from the CFO of the Company. On April 16, 2016, the Company entered into an agreement with this director pursuant to which the Company agreed to issue 20,000 restricted shares of common stock for CFO services to be incurred over a term of one year. As at August 31, 2016, the Company recorded $75 in shares issuable for the issuance of 7,500 restricted shares of common stock, which reflects the pro-rata portion of the services provided prior to the director's resignation as CFO of the Company.

(f)

On August 15, 2016, the Company entered into a services agreement with a director of the Company for director and officer services. In consideration, the Company agreed to compensation of $240,000 per annum, which will increase based on certain performance milestones being achieved. The Company also agreed to pay director payments of not less than $50,000 per annum without the director of the Company's consent, payable quarterly.

8.  Subsequent Events

a. Events that have had additional evidence with respect to conditions that existed at the date of the balance sheet and are likely or reasonably likely to affect or impact the estimates inherent in the process of preparing future financial statements.

Certain Asset Purchases or Substantial Equity Investments disclosed in 8-K filings.  The extended agreement dates for acquiring or substantially investing into Lavasa Corporation, Birla Shloka and Windflower have all expired and as at the date of this filing. Registrant is yet to approach and obtain any extension, nor has the Registrant received an agreement termination notice from any of these firms. While there are no obligations or liabilities or material risks associated with the acquisition not taking place in any of these transactions, it is a material subsequent event (with evidence existing as of Aug 31, 2016) that would not impact the current financial condition of the Company but which would future projections based on which the Company is attempting to raise additional capital.

b. Events that provide evidence with respect to conditions that did not exist at the date of the balance sheet being reported on but arose subsequent to that date:  

a)

On 10/31/16, Registrant extended the term of one promissory note dated 6/13/16 for $125,000 to 12/31/2016.

b)

Effective November 1, 2016, Registrant initiated efforts to raise capital from outside of the United States, from certain non-US persons under Regulation S of the US Securities Act of 1933.

9

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INTERUPS INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

c)

In October 2016, Registrant held negotiations with a prominent Mutual Fund sponsored by one of India’s premier national banks, to act as Investment Manager for investments which the Registrant intends to bring into India from the United States by organizing a Private Equity firm and associating with an identified US registered Investment Company as the referral/introducing agent for structuring and placing India-focused investment products through registered and licensed broker dealers to certain investors desiring to invest into the Indian markets in certain classes of assets. Although the Registrant is spending considerable money towards this initiative, there is no guarantee that it will succeed in this effort, and its failure to succeed would be a material loss to the Company, so much so that it might even jeopardize its survival and existence.

d)

In October 2016, Registrant also held discussions with one of India’s largest financial services providers to partner and engage as introducing / referring agents to certain US based online firms, enabling qualified Indian Residents who want to open US Broker Accounts and trade in the US Markets. The Registrant also discussed with this prospective partner a plan to help and identify certain qualified clients who desire to receive the services of the Registrant in the Registrant’s effort to switch business management and control to the US, and strategically attract global capital markets in their growth ambition.  Although the Registrant is spending considerable money towards this initiative, there is no guarantee that it will succeed in this effort and its failure to succeed would be a material loss to the Company, so much so that it might even jeopardize its survival and existence.

There are material risks associated with some of these acquisitions/transactions not taking place, as described above, which have impacted the current financial condition of the Company, and which could affect future projections, based on which the Company is attempting to raise additional capital.

10

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors, which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Working Capital

		August 31,				May 31,
		2016				2016
		$				$
Current Assets			41,035				77,995
Current Liabilities			2,485,106				1,280,093
Working Capital (Deficit)			(2,444,071	)			(1,202,098	)

Cash Flows

		Three months ended
		August 31, 2016				August 31, 2015
		$				$
Cash Flows used in Operating Activities			(413,186	)			—
Cash Flows provided by Investing Activities			—				—
Cash Flows provided by Financing Activities			418,200				—
Net increase in Cash During Period			12,211				—

 

Operating Revenues

During the three months ended August 31, 2016 and August 31, 2015, the Company did not earn any revenues.

Operating Expenses and Net Loss

Three Months Ended August 31, 2016 and August 31, 2015

Operating expenses for the three months ended August 31, 2016 were $1,230,357 compared to $13,150 during the three months ended August 31, 2015. The large increase is due to a significant increase in operating activity, including consulting expense of $1,010,883 and increase in general and administrative expense of $94,354 for rent and travel expenses. Furthermore, the Company incurred an increase of $125,120 of professional fees related to an increase in time required for the Company’s legal counsel and accountants.

During the three months ended August 31, 2016, the Company incurred a net loss of $1,242,048 compared to $13,150 for the three months ended August 31, 2015. The Company incurred a loss per share of $0.18 during the three months ended August 31, 2016 compared to a net loss of $0.00 per share during the three months ended August 31, 2015. In addition to the operating expenses noted above, the Company also incurred interest expense of $11,691 in the current period.

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Liquidity and Capital Resources

At August 31, 2016, the Company had cash of $12,211 and total assets of $41,035 compared to cash of $7,197 and total assets of $77,995 as at May 31, 2016. The decrease in cash and total assets was due to a decrease in prepaid expenses of $41,974, offset by an increase in cash of $5,014.

At August 31, 2016, the Company had total liabilities of $2,485,106 compared to liabilities of $1,280,093 as at May 31, 2016. The increase in liabilities was due to an increase in amounts due to related parties of $519,242, increase in accounts payable and accrued liabilities of 394,171, and increase in loans payable of $291,600.

During the three months ended August 31, 2016 and August 31, 2015, the Company did not have any equity transactions.

Cash Flow from Operating Activities

During the three months ended August 31, 2016, the Company used cash of $413,186 for operating activity compared to $nil for the three months ended August 31, 2015. The increase in cash used for operating activities is due to the fact that the Company received funding during the period and incurred significantly more operating activity.

Cash Flow from Investing Activities

During the three months ended August 31, 2016 and August 31, 2015, the Company did not have any investing activities.

Cash Flow from Financing Activities

During the three months ended August 31, 2016, the Company received $418,200 in cash from financing activities relating to proceeds received from loans payable issued of $291,600 and proceeds from related parties of $126,600. During the three months ended August 31, 2015, the Company did not have any financing activities.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

Off-Balance Sheet Arrangements

We have no significant 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 are material to stockholders.

Future Financings

We will continue to rely on equity sales of our common shares, and loans from related and/or unrelated parties, in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

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We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and our 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The term "disclosure controls and procedures" (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within required time periods. "Disclosure controls and procedures" include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer noted the deficiencies in internal controls identified in this Item 4. Accordingly, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were not effective.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision of the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of August 31, 2016 using the criteria established in " Internal Control - Integrated Framework " issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of August 31, 2016, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

	1.	We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is management's view that such a committee, including a financial expert member, is an utmost important entity level control over the Company's financial statements. Currently, we have two members on the Audit Committee, but neither is considered to be independent of management to provide the necessary oversight over management's activities.  However, the Company is in discussions with an independent search firm to elect independent members to its Board and Audit Committee.

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	2.	We did not maintain appropriate cash controls – We did not maintain appropriate cash controls – As of August 31, 2016, we are yet to establish sufficient internal controls over financial reporting for treasury management, including segregation of cash handling at various operational levels, and requiring dual signatures on the Company’s bank accounts over and above certain dollar amounts per transaction. The effects of poor cash controls were somewhat mitigated by the fact that the Company had limited transactions in its bank accounts during that period, and that the accounting function, including review, preparation and reporting of financial statements per PCAOB norms, was endorsed to third party independent professional accountants.

	3.	We did not implement appropriate information technology controls – As at August 31, 2016, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company's data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.  However, we signed up with an online data storage facility and Google Mail, to electronically store and back up certain critical documents.

 

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company's internal controls.

 

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2016 based on criteria established in Internal Control — Integrated Framework issued by COSO.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of August 31, 2016, that occurred during our current fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management' s report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

No report required.

ITEM 6. EXHIBITS

Exhibit
Number		Name
31.1*		Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2*		Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1**		Certification pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS*		XBRL Instance
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculations
101.DEF*		XBRL Taxonomy Extension Definitions
101.LAB*		XBRL Taxonomy Extension Labels
101.PRE*		XBRL Taxonomy Extension Presentation

* 

Filed herewith.

**

Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Interups Inc.
Dated:  November 14, 2016		By:	/s/ Louise Jones
			Louise Jones Chief Executive Officer

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