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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

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FORM 10-Q

 

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(Mark One)

 

 

(Exact name of registrant as specified in its charter)

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

☒ Yes ☐ No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 ☒ 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 ☐ No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No 

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of issuer’s common stock outstanding, as of February 3, 2017 was 17,626,000.

TABLE OF CONTENTS

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our consolidated financial statements included in this Form 10-Q are as follows:

 

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the Securities and Exchange Commission instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2016 are not necessarily indicative of the results that can be expected for the full year.

 

 

LUCKYCOM, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

See accompanying notes to these unaudited consolidated financial statements.  

 

LUCKYCOM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 (UNAUDITED)

 

 

See accompanying notes to these unaudited consolidated financial statements.

 

 

LUCKYCOM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

See accompanying notes to these unaudited consolidated financial statements.  

 

Luckycom, Inc.

Notes to the Consolidated Unaudited Financial Statements

 

Note 1 – Organization and Basis of Presentation  

 

The accompanying consolidated unaudited interim financial statements of Luckycom, Inc, (the “Company”, “Luckycom”, “we” or “our”) 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 of the Company contained in the Company’s Form 10-K filed with the SEC on May 2, 2016.

 

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 periods presented have been reflected herein. The results of operations for the interim periods 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 February 29, 2016 as reported in the Company’s Form 10-K have been omitted. 

Organization and Description of Business 

Luckycom, Inc. (“we”, “our”, the “Company”) plans to acquire, develop, manufacture and market pharmaceutical medication. In the next few years, we plan to qualify and gain acceptance in international public tenders for anti-malarial drugs through the prequalification programme process governed by the World Health Organization (”WHO”).

 

Luckycom Limited, a wholly-owned subsidiary of Luckycom, Inc, was incorporated in Hong Kong as Goldsans Capital (Hong Kong) Limited (“Goldsans”) on November 08, 2011. Goldsans name was changed to Wudor Capital Hong Kong Limited on May 22, 2012 and subsequently to Luckycom Limited on June 28, 2013.

Fiscal Year

On February 11, 2016, the Board of Directors of Luckycom, Inc. approved a change in the fiscal year end from a fiscal year ending on February 28 or 29 (as the case may be) to March 31, effective beginning with fiscal year 2016. The Company expects to make the fiscal year change on a prospective basis and will not adjust operating results for prior periods.

We began filing our quarterly reports on Form 10-Q based on the new fiscal year-end beginning with the first quarter of fiscal year ending March 31, 2017. We are reporting the third quarter of fiscal year ending March 31, 2017 as a nine-month period ended December 31, 2016.

The change to the Company’s fiscal year will not impact the Company’s fiscal year results for the year ended February 29, 2016. However, the change will impact the prior year comparability of each of the fiscal quarters and annual period in 2016 in future filings.

The Company believes this change will provide numerous benefits, including aligning its reporting periods to be more consistent with peer companies and improving comparability between periods.

 

Recent Accounting Pronouncements 

Luckycom does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

Note 2 – Going Concern 

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company has incurred losses since inception resulting in an accumulated deficit of $1,332,974 as of December 31, 2016, and further losses are anticipated as a result of the development of business which raises substantial doubt about the Company’s ability to continue as a going concern.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock.

Note 3 – Related Party Transactions

 

The Company’s sole officer and director, and a shareholder, Mr. Kingrich Lee, loaned an aggregate of $190,282 and $25,707 to the Company during the nine month ended December 31, 2016 and 2015, respectively.

During the nine months ended December 31, 2016 and 2015, Mr. Kingrich Lee has paid, on behalf of the Company, the amounts of $28,823 and $nil, respectively.

Mr. Lee is owed an aggregate amount of $254,464, as of December 31, 2016.

The amounts are unsecured, non-interest bearing and due on demand.

 

On October 2, 2016, the Company entered into a one-year employment agreement with Mr. Kingrich Lee to serve as its CEO. For his services, the Company agreed to pay him an annual salary of $180,000.

 

Note 4 – Capital Stock

  

As of December 31, 2016, the Company had 17,626,000 shares of common stock issued and outstanding. During nine months ended December 31, 2016, the Company issued 120,000 shares of common stock for $120,000 of cash and the Company received cash for $112,508 after deduction of stock issuance cost. Additionally, during nine month ended December 31, 2016, 6,000 shares of common stock were issued for services with fair value of $6,000.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

Forward-Looking Statements 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the Securities and Exchange Commission (the “SEC”).

 

Overview 

As we have not yet begun operations, we anticipate that we will meet our ongoing cash requirements through equity or debt financing. Over the next few years, we intend to qualify and gain acceptance in international public tenders for anti-malarial drugs through the prequalification programme governed by the World Health Organization (“WHO”) (the “Prequalification Programme”). We initially believed that our expenses over the next 12 months will be approximately $1,000,000. This estimate may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

 

We intend to meet our cash requirements for the next 12 months through a combination of debt and equity financing by way of private placements. As a reporting company we are better equipped to raise capital because of the transparency of our operations and development. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us.

 

If we are not able to raise $1,000,000 to implement our business plan as anticipated, we will need to scale our business development in line with available capital. Our primary priority will be to retain our reporting status with the SEC, which means that we will first ensure that we have sufficient capital to cover our legal and accounting expenses, which are estimated to be $200,000 over the next 12 months. Once these costs are accounted for, we will focus on the following activities:

  

 

Any failure to raise money will have the effect of delaying the timeframes in our business plan as set forth below, and we may have to push back the dates of such activities.

 

Secure Necessary Funds.

We plan to obtain financing from friends, family and business associates. This activity will be ongoing until adequate capital has been secured on terms favorable to us and/or sufficient revenue is generated to meet our ongoing capital requirements. We require $1,000,000 - $5,000,000 of funding in the next 12 months. We have $81,259 in cash as of December 31, 2016, and plan to obtain the remaining funds from a combination of debt and/or equity financing arrangements. We anticipate that Mr. Kingrich Lee, our CEO, will spearhead our financing efforts.

 

MHRA (UK) Manufacturer.

We currently do not have a manufacturing facility. We plan to rely upon a contract manufacturer to produce both drug substances and drug products. We have identified a manufacturing plant with MHRA compliant facilities in India, and the manufacturing plant is not affiliated with Mr. Lee, our Company or the companies that Mr. Lee owns. In the next 12 months, if we are able to obtain funding, we plan to work with the MHRA compliant facility in India to start the process of establishing a relationship and retrofitting their facilities to meet WHO standards. We hope to establish this relationship and begin the retrofitting process by December 2017. We anticipate it will cost $500,000 to negotiate with the manufacturer and establish a plan to retrofit its facilities. The build out to meet WHO standards will entail funds beyond the initial $500,000 estimate. We do not believe we will get to the retrofitting stage in the next 12 months. We will have to raise more than the $1,000,000 we plan to raise in the next 12 months to achieve the retrofitting step. We will know more about the costs of retrofitting once we have retained a consultant. We anticipate that Mr. Lee and a consultant who we anticipate hiring in the future will spearhead our efforts to meet our manufacturing needs.

 

Prepare and Apply for the Prequalification Programme with the WHO.

It takes anywhere from three (3) months to three (3) years to gain access to the WHO program for international tenders. We believe that it will cost approximately $500,000 to qualify for the Prequalification Programme; this relates to the cost of (i) inspection of contract research organizations (“CROs”) and Good Clinical Practice (“GCP”) and Good Laboratory Practice (“GLP”) inspection of CROs, (ii) manufacturing of drug samples, preparation of drug dossiers and bioequivalent studies and (iii) traveling expenses associated with establishing contacts with international distributors. We intend to commence our preparation for the Prequalification Programme by December 2016).. As stated earlier, we will first need to retain a consultant to guide us through this process and all costs stated above are estimates provided by management and subject to change.

 

There are no first time application fee for Prequalification Programme . The prequalification process takes a minimum of three (3) months if the product meets all the required standards. When products do not meet the appropriate standards the process can take longer, and if the applicant fails to prove the quality, safety and efficacy of its medicine, it will not be prequalified. Even though some larger firms are able to complete the process in a matter of months, we believe that it will take us two (2) to three (3) years to complete the prequalification process because we need to enroll MHRA compliant facilities, retrofit such facilities in accordance with WHO standards, engage Active Pharmaceuticals Ingredients (“API”) suppliers with WHO prequalification and gather all the data, testing and sampling needed to apply for prequalification. Other more established firms already have these requirements in place and therefore, it takes them less time to maneuver through the Prequalification Programme.

 

Compensate Management.

 

On October 2, 2016, our wholly-owned subsidiary, Luckycom Ltd entered into an employment agreement with Mr. Kingrich Lee, pursuant to which he will receive $180,000 per year. The employment agreement terminates on September 30, 2017 unless renewed.

Marketing and Distribution Channels.

We do not currently have an infrastructure for the sales, marketing and distribution of pharmaceutical products. We must develop our sales, marketing, and distribution channels or make arrangements with third parties to perform these services. After the prequalification process, we will engage in discussions with third parties to assist us in the distribution and sale of our products. We intend to engage a European international tender distributor to carry out our distribution efforts, which can reduce the sales and marketing expenses we would otherwise incur. We anticipate that Mr. Lee will spearhead our efforts to establish connections with distributors for our products. We do not currently know what the cost will be for these services.

 

If we are not able to raise $1,000,000, we will have to scale back our operations. Our primary priority will be to retain our reporting status with the SEC which means paying our accounting and legal professionals. We also will prioritize paying the salary of our CEO, Mr. Lee, to spearhead efforts to implement our business plan as detailed above.

 

Results of Operations

 

Three Months Ended December 31, 2016 and 2015 and Nine Months Ended December 31, 2016 and 2015

 

Operating Revenue 

We recorded no consolidated revenue and consolidated gross loss for the three-month and nine-month period ended December 31, 2016 and the same corresponding periods in 2015 as we are a shell company without any operations to generate revenue. We do not anticipate receiving further revenue for so long as we have no operations.

 

We had operating expenses of $128,749 and $99,696 for the three months ended December 31, 2016 and 2015 respectively and $351,677 and $300,759 for the nine months ended December 31, 2016 and 2015, respectively.

Our operating expenses for the three months ended December 31, 2016 consisted mainly of professional fees of $56,465, officer compensation of $44,663, travel expenses of $12,086, and rent of $9,396.

Our operating expenses for the three months ended December 31, 2015 consisted mainly of officer compensation of $45,000, professional fees of $33,007, rent of $9,240 and travel expenses of 8,225.

Our operating expenses for the nine months ended December 31, 2016 consisted mainly of professional fees of $152,664 (which includes $5,940 stock-based compensation), officer compensation of $134,659, rent of $25,506 and travel expenses of $25,287.

Our operating expenses for the nine months ended December 31, 2015 consisted mainly of officer compensation of $105,193, stock compensation of $70,000, professional fees of $55,885, and rent of $27,342.

Although we will cease to accrue amortization expenses, we anticipate our operating expenses will increase sharply as we proceed to implement our business plan described above and become operational.

 

We incurred a net loss of $128,737 and $99,458 for the three months ended December 31, 2016 and 2015, respectively, net loss of $351,955 and $300,719 for the nine months ended December 31, 2016 and 2015, respectively. We anticipate that we will continue to incur losses unless we are able to achieve some of our goals above.

Liquidity and Capital Resources

 

As of December 31, 2016, we had total current assets of $81,384 consisting of $81,259 in cash and cash equivalents and $125 in prepaid expenses and other current assets. As of December 31, 2016, we had current liabilities in the amount of $264,900 consisting of:

 

The table below sets forth selected cash flow data for the periods presented:

 

Our negative operating cash flows were mainly a result of operating expenses (See also Result of Operations)

 

On October 2, 2016, our wholly owned subsidiary, Luckycom, Ltd., entered into an employment agreement with Mr. Lee. The agreement is for one year and provides annual compensation of $180,000, and other benefits. This agreement will materially impact our cash needs in the future, as any investment money we obtain will be used to pay Mr. Lee’s salary and other benefits, and will have the effect of diverting funds that may be used to pursue our business plan.

On August 31, 2016, we entered into subscription agreements with an aggregate of two (2) investors for the purchase and sale of an aggregate of 120,000 shares of common stock of the Company, par value $0.01 (the "Shares"), at a price of US$1.00 per Share for total gross proceeds of US$120,000 (the "Offering"). The proceeds from the Offering will be used for general corporate purposes, including infrastructure, product development, marketing and sales and working capital.

In addition, on August 31, 2016, we entered into a placement agent agreement with Jianwen Li ("Placement Agent") to serve as our placement agent in the Offering.  Pursuant to the said agreement, we agreed to pay the Placement Agent a transaction fee of $0.05 per Share purchased by an investor in the form of restricted Shares valued at $1.00 per Share upon the closing of the Offering.

Despite having $81,259 in cash as of December 31, 2016, we have insufficient cash to operate our business at the current level for the next 12 months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sale of stock or the advancement of loans of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off-Balance Sheet Arrangements 

 

We have no off-balance sheet arrangements.

 

Critical Accounting Policies 

 

Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accrued expenses and loans payable to an officer. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Income Taxes 

 

Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Use of Estimates 

 

The preparation of financial statements in conformity with United States generally accepted accounting principles 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. We regularly evaluate estimates and assumptions related to deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe 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 us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Revenue Recognition

 

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718.  To date, the Company has not adopted a stock option plan and has not granted any stock options.

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2016.

 

Comprehensive Income

 

The Company has which established standards for reporting and display of comprehensive income, its components and accumulated balances.  When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity.  Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

 

Foreign Currency Translation

 

The Company is based in The Woodlands, Texas although it is incorporated in Nevada. The Company has subsidiary in Hong Kong. The functional currency of the Company is the Hong Kong Dollar and is translated to U.S. dollars using the exchange rate effective for the date reported for assets and liabilities and the average exchange rate for the period reported for revenues and expenses.

Recent Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

 

Going Concern

 

We have a working capital of $(183,516), have incurred losses since inception of $1,332,974, and have not yet received revenues from sales of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent upon generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; provided however, there can be no assurance we will be successful in these efforts.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures 

Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2016, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that as of December 31, 2016, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified below.

Our principal executive officer and principal financial officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following two material weaknesses that have caused management to conclude that, as of December 31, 2016, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

•

We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. We only have one officer and director. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

•

Effective controls over the control environment have not been maintained. Specifically, we do not have a formally adopted written code of business conduct and ethics that governs our employees, officers and directors. Additionally, management has not developed and effectively communicated to its employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.

 

We intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.

 

Changes in Internal Control over Financial Reporting

 

During the fiscal quarter ended December 31, 2016, there have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

Item 6. Exhibits

 

* Filed herewith

**Furnished herewith

(1)	Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 filed with the Commission on February 3, 2017.

(2)	Incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 filed with the Commission on February 3, 2017.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.