UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended Feb 28, 2017

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to             .

 

Commission File Number 0-22735

 

NXChain Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		45-3977747
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

17702 Mitchell North, Irvine, California 92614

(Address of principal executive offices and zip code)

 

(408) 673-2464

(Registrants telephone number, including area code)

 

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 ☒ 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 the definitions of “large accelerated filer, “accelerated filer,” “non-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   ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☒ NO ☐

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 24,374,000 shares of common stock as of January 24, 2017.

 

 

 

NX Chain Inc.

 

FORM 10-Q

 

INDEX

 

		Page No.
PART I.	Financial Information	1
Item 1.	Financial Statements:	1
	Balance Sheets – February 28, 2017 (unaudited) and May 31, 2016 (audited)	1
	Statements of Operations – Three months ended February 28, 2017 and February 29, 2016 (unaudited)	2
	Statements of Operations – Nine months ended February 28, 2017 and February 29, 2016 (unaudited)	3
	Statements of Cash Flows – Nine months ended February 28, 2017 and February 29, 2016 (unaudited)	4
	Notes to Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
PART II.	Other Information:	16
Item 6.	Exhibits	16
Signatures		17

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NX Chain Inc.

 

BALANCE SHEETS

 

		Feb 28, 2017				May 31, 2016
		(unaudited)				(audited)
Assets
Current assets:
Cash		$	(24	)		$	62,075
Loan receivable			10,500				10,500
Total current assets			10,476				72,575
Intangible assets, net			14,243				0.00
Total assets		$	24,719			$	72,575
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses		$	88,765			$	54,453
Notes payable related party			151,000				120,000
Convertible note payable related party			25,000				25,000
Convertible note payable			75,000				75,000
Total liabilities			339,765				274,453
Shareholders’ Deficit:
Common stock, $.001 par value; 100,000,000 shares authorized; 24,374,000 and 10,041,469 shares issued and outstanding, respectively			24,374				10,041
Common stock subscribed, 91,482 shares			--				1
Common stock subscription receivable			--				(2,830	)
Additional paid-in capital			13,119,805				12,953,895
Accumulated deficit			(13,459,225	)			(13,162,985	)
Total shareholders’ deficit			(315,046	)			(201,878	)
Total liabilities and shareholders’ deficit		$	24,719			$	72,575

 

See accompanying notes.

 

 

NX Chain Inc.

 

STATEMENTS OF OPERATIONS

(unaudited)

 

		Three months ended,
		February 28, 2017				February 29, 2016
Selling, general and administrative expenses		$	(83,860	)		$	(38,769	)
Other income (expense):
Interest expense			(42,673	)			(2,333	)
Net loss		$	(126,533	)			(41,102	)
Basic and diluted net loss per share:
Net loss per basic and diluted share		$	(0.01	)			(0.02	)
Weighted average shares outstanding:
Basic and diluted			24,374,000				2,041,422

 

See accompanying notes.

 

 

NX Chain Inc.

 

STATEMENTS OF OPERATIONS

(unaudited)

 

		Nine months ended,
		February 28, 2017				February 29, 2016
Selling, general and administrative expenses		$	(203,915	)		$	(166,976	)
Other income (expense):
Extinguishment of debt			—				87,146
Settlement expense			—				(218,751	)
Interest expense			(92,325	)			(9,311	)
Net loss		$	(296,240	)		$	(307,892	)
Basic and diluted net loss per share:
Net loss per basic and diluted share		$	(0.01	)		$	(0.26	)
Weighted average shares outstanding:
Basic and diluted			24,374,000				1,177,933

 

See accompanying notes.

 

 

NX Chain Inc.

 

STATEMENTS OF CASH FLOWS

(unaudited)

 

		Nine months ended,
		February 28, 2017				February 29, 2016
Net cash from operating activities
Net loss		$	(296,240	)		$	(307,892	)
Adjustments to reconcile net loss to net cash used in operating activities:
Extinguishment of debt			—				(87,146	)
Shares issued for settlement expense			—				218,751
Intrinsic value of beneficial conversion feature			33,333				—
Changes in operating assets and liabilities:
Due from related party			—				11,835
Accounts payable and accrued expenses			79,808				24,452
Net cash used in operating activities			(183,099	)			(140,000	)
Net cash from financing activities
Repayment to related parties			(20,000	)			(60,000	)
Proceeds from issuance of common stock subscriptions			90,000				—
Proceeds from issuance of common stock			—				200,000
Proceeds from notes payable – related party			51,000				—
Net cash provided by financing activities			121,000				140,000
Change in cash and cash equivalents			—				—
Cash and cash equivalents at beginning of period			62,075				—
Cash paid for interest			—				2,333
Cash and cash equivalents at end of period		$	(24	)		$	—
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Accounts payable and accrued expenses converted to stock			—			$	48,421
Accounts payable and accrued expenses converted to convertible note			—			$	75,000
Loan payable converted to note payable			—			$	25,000
Loan payable converted to stock			—			$	32,500
Note payable converted to stock			—			$	85,000
Common stock issued for intangible asset purchase			14,243				—

 

See accompanying notes.

 

 

NX Chain Inc.

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

Note 1 - Description of Business and Summary of Significant Accounting Policies

 

Organization

 

NX Chain Inc. (formerly AgriVest Americas, Inc. and Robocom Systems International Inc.) (the “Company”) was incorporated under the laws of the State of New York in June 1982 and reincorporated in the State of Delaware on December 5, 2011. Since October 2005, the Company had been defined as a “shell” company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, whose sole purpose was to locate and consummate a merger with or an acquisition of a private entity, (see “Plan of Operations” below).

 

On October 11, 2005, we sold substantially all of our assets to Avantce RSI, LLC, a Delaware limited liability company, for $2,970,000 in cash, plus a $200,000 promissory note payable over two years. On July 28, 2006, we paid a dividend to our shareholders totaling approximately $2,760,000, which represented approximately 87% of the total assets at that time. On September 15, 2009, we paid a dividend to our shareholders totaling approximately $217,844, which represented approximately 82% of the total assets at that time.

 

On December 5, 2011, we entered into an Agreement and Plan of Merger dated as of December 5, 2011 in order to effect a reincorporation in the State of Delaware and to, among other things, change our corporate name from “Robocom Systems International Inc.” to “AgriVest Americas, Inc.”

 

On November 19, 2015, we entered into a common stock purchase agreement with Havanti AS, a Norwegian limited liability company, pursuant to which Havanti purchased an aggregate of 1,040,839 shares of common stock for an aggregate purchase price of $200,000.

 

On December 30, 2015, we changed our corporate name from “AgriVest Americas, Inc.” to “NXChain Inc.” and effectuated a stock combination or reverse stock split, whereby every 33.7468 outstanding shares of common stock were converted into one share of common stock.

 

On September 26, 2016, we purchased certain assets of LXCCoin Ltd., a related party, pursuant to an Asset Purchase Agreement dated as of September 26, 2016 with LXCC. In exchange for the assets acquired, we issued to LXCC 14,243,000 shares of our common stock. Following consummation of the asset purchase transaction, LXCC owned approximately 57.97% of our issued and outstanding shares of the common stock, which shares gave LXCC effective control of our company.

 

We plan to use the assets acquired as part of our planned digital-currency payment processing platform that will enable other companies to provide an assortment of online and mobile payment services for products and services that they sell. We plan to both white-label and private-label its payment processing platform for other companies. In addition, we plan to further develop our payment processing platform to support micro-payments, online paywalls, P2P lending and other popular digital-currency services.

 

 

Plan of Operations

 

We are a shell company with no operating business. As a result of the Asset Purchase Agreement and issuance of 14,230,000 shares of Common Stock to LXCCoin Ltd, LXCCoin Ltd has acquired effective control of the Company. The Company plans to use the assets acquired as part of our planned digital-currency payment processing platform that will enable other companies to provide an assortment of online and mobile payment services for products and services that they sell. We plan to both white-label and private-label its payment processing platform for other companies. In addition, we plan to further develop our payment processing platform to support micro-payments, online paywalls, P2P lending and other popular digital-currency services.

 

In order to fund such proposed business plan, we intend to raise funds from investors by issuing our common stock, preferred stock and/or debt securities to fund future operations. Since the Asset Purchase Agreement in September 2016, we were able to raise only limited funds to engage in our proposed business. At the time that we are able to raise capital to effectively implement and execute our business plan we will then seek to become an operating company and no longer operate as a shell company. In February of 2017 we executed a change of management, replacing Mr. Michael Campbell with Mr. Sean Tabatabai. Board of Directors were retired at the same time. New board members will be named in the next 90 days.

 

This discussion of our proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that we may be able to participate in only one potential business venture because we have nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.

 

We may seek additional business opportunities with entities that have recently commenced operations, or that wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.

 

Depreciation, Amortization and Long-Lived Assets:

 

Long-lived assets include:

 

Identifiable intangible assets – We amortize the cost of other intangibles over their useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and written down to fair value as required.

 

At least annually, we review all intangible assets for impairment. When necessary, charges are recorded for impairment of intangible assets for the amount by which the fair value is less than the carrying value of these assets.

 

 

Unaudited Interim Financial Statements

 

The accompanying interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X, and should be read in conjunction with the consolidated financial statements and related notes of the Company filed in its 2016 Annual Report on Form 10-K. The financial statements as of February 28, 2017, and for the three and nine months ended February 28, 2017 and February 29, 2016 presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The balance sheet at May 31, 2016 was derived from audited financial statements but does not include all disclosures required by GAAP.

 

Liquidity and Capital Resources

 

The Company’s accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these financial statements.

 

The Company’s continued existence is dependent upon its ability to effect its business plan and generate sufficient cash flows to support its operations, as well as to provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company anticipates effecting future sales of debt or equity securities to execute its plans to fund its operations. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional debt or equity securities or that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

 

Further, the Company faces considerable risk in its business plan and a potential shortfall of funding due to the Company’s inability to raise capital in the debt and equity securities markets. If no additional capital is raised, the Company will be forced to rely on existing cash in the bank or to scale back operations until such time that it generates revenues or raises additional capital, which raises substantial doubt about the Company’s ability to continue as a going concern.

 

In such a restricted cash flow scenario, the Company would be unable to complete its business plan steps, and would, instead, delay all cash intensive activities. Without necessary cash flow, the Company may have to scale back operations and expansion plans during the next twelve months, or until such time as necessary funds can be raised in the debt or equity securities markets.

 

 

Note 2 - Related Party Transactions

 

Loans Payable Shareholder and Convertible Note Payable Shareholder

 

The Company from time to time borrows money from a Director of the Company and the Company’s CEO. At May 31, 2015, there was $25,000 and $40,073 outstanding in loans to the Director and CEO, respectively. On November 11, 2015, the Company converted all amounts owed to these individuals into a convertible note and into shares of common stock, respectively. At the time of conversion of the loan payable to the Director, there was $25,000 outstanding. This amount was converted to a $25,000 convertible note that bears interest at 8% per annum with a maturity date of August 15, 2016. The note is convertible after August 15, 2016 at a price per share equal to 75% of the closing sale price of the Common Stock, or the last bid price if the closing sale price cannot be determined, on a material stock exchange or in the over-the-counter market on the trading day immediately prior to the conversion date. If the note is not paid in full on or prior to the six-month anniversary of the issue date of the note and at the rate of 18% if the maturity date of the notes was automatically extended for an additional three months as permitted by the note, and now bears interest at a rate per annum equal to the lesser of 28% or the maximum rate permitted by law. As the outstanding principal and interest on the note was not paid in full at the end of such three-month extension period, the note is currently payable on demand and the holder of the note may convert the unpaid principal of and interest on the note into shares of Common Stock as described above. We valued the intrinsic value of the beneficial conversion feature underlying the convertible debt at $8,333 and recorded to interest expense based on the recognized amortization during 2016. As of November 30, 2016, there was $25,000 of principal and accrued interest of $4,062 outstanding on this note.

 

Notes Payable Related Party

 

On March 2, 2016, the Company issued a promissory note to a company, which is affiliated with LXCC, in the aggregate principal amount of $120,000 with interest at 8% per annum and a maturity date of March 31, 2017. At November 30, 2016, $100,000 of principal and $6,400 of accrued interest were outstanding. On August 18, 2016, the Company issued a promissory note to this same party in the aggregate principal amount of $20,000 with interest at 8% per annum and a maturity date of August 18, 2017. On September 14, 2016, the Company issued a promissory note to this same party in the aggregate principal amount of $22,000 with interest at 8% per annum and a maturity date of August 18, 2017. At November 30, 2016, $22,000 of principal and $147 of accrued interest were outstanding. On October 16, 2016, the Company issued a promissory note to this same party in the aggregate principal amount of $9,000 with interest at 8% per annum and a maturity date of August 18, 2017. At November 30, 2016, $9,000 of principal and $60 of accrued interest were outstanding.

 

Expenses

 

The Company uses a consulting firm owned by the CEO for consulting services. During the six months ended November 30, 2016 and 2015, we incurred consulting fees to this related party of $44,500 and $85,000, respectively. There were no payables outstanding to this company as of November 30, 2016 and February 28, 2017.

 

Other

 

On September 26, 2016, entered into an Asset Purchase Agreement dated as of September 26, 2016, (the “Purchase Agreement”) with LXCC, a privately held UK company in the blockchain and digital currency market, that is owned by the stockholders of our majority stockholder, pursuant to which specific assets of LXCC were acquired by the Company. In exchange for the assets acquired, the Company issued to LXCC 14,243,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Following consummation of the asset purchase transaction, LXCC owned approximately 57.97% of the Company’s issued and outstanding shares of the Common Stock, which shares gave LXCC effective control of the Company.

 

 

During the fiscal year ended May 31, 2016, a consulting firm owned by our ex-CEO acquired 283,042 shares of Common Stock for an aggregate purchase price of $2,830. This amount was not received as of February 28, 2017, and is shown as a common stock subscription receivable on the balance sheet.

 

Note 3 - Loan Receivable

 

During the fiscal year ended May 31, 2016, the Company issued a promissory note to Legend Merchant Group, Inc., an unaffiliated New York-based company, in the aggregate principal amount of $10,500. This note bears interest at 8% per annum with a maturity date of September 30, 2016. As of November 30, 2016 and thereafter, this promissory note was still outstanding and in default. The Company is currently renegotiating the terms of the promissory note with the borrower.

 

Note 4 - Notes Payable

 

As of May 31, 2014, the Company had $80,000 in outstanding principal on various notes originated between December 2011 and May 2014. The interest rates on the notes ranged from 10% to 15% and the maturity dates ranged between October 2012 and March 2015. During fiscal 2015, one note holder converted $5,000 in principal and $390 of accrued interest to 107,813 shares of common stock, which resulted in a gain of $4,204.

 

Convertible Note Payable

 

On November 15, 2015, the Company had $144,038 in outstanding payables from a vendor that it converted into a $75,000 convertible note with the remaining $69,038 of debt being forgiven. The convertible note has interest rate of 8% with a maturity date of August 15, 2016. As of this filing, the Company is in arrears on this note as $75,000 is still outstanding. The Notes originally bore interest at the rate of 8% per annum if not paid in full on or prior to the six-month anniversary of the issue date of the Notes and at the rate of 18% if the maturity date of the Notes was automatically extended for an additional three months as permitted by the Notes, and now bears interest at a rate per annum equal to the lesser of 28% or the maximum rate permitted by law. As the outstanding principal and interest on the Notes was not paid in full at the end of such three month extension period, the Notes are payable on demand and the holders of the Notes may convert the unpaid principal of and interest on the Notes into shares of common stock at a price per share equal to 75% of the closing sale price of the common stock, or the last bid price if the closing sale price cannot be determined, on a material stock exchange or in the over-the-counter market on the trading day immediately prior to the conversion date. We valued the intrinsic value of the beneficial conversion feature underlying the convertible debt at $25,000 and recorded to interest expense based on the recognized amortization during 2016. As of November 30, 2016, there was $75,000 of principal and $12,188 of accrued interest outstanding on this note.

 

Note 5 - Common Stock

 

On November 29, 2016, the Company received a subscription for 90,000 shares of common stock for a purchase price of $90,000 from an unaffiliated third party. These shares were issued as of February 28, 2017.

 

 

Note 6 - Intangible Assets

 

Identifiable finite-lived intangible assets

 

		Fair value				Weighted Average Useful Life
						(in years)
Purchased intangible assets:
In process research and development (1)		$	14,243			-
Total purchased intangible assets		$	14,243

 

(1) In-process research and development ("IPR&D") will not be amortized until the underlying products reach technological feasibility. Upon completion, each IPR&D project will be amortized over its useful life.

 

The IPR&D intangible asset represents the value assigned to an acquired research and development project that, as of the acquisition date, had not established technological feasibility. The fair value of IPR&D was based on the par value of the shares issued for the technology, since the asset acquisition was between entities under common control. This intangible asset will be capitalized on the balance sheet and evaluated periodically for impairment until the project is completed, at which time it will be transferred to developed technology and become subject to amortization over its useful life (5 years).

 

Note 7 – Interest Expense

 

In late February, 2017, the Company changed management. The new management is reviewing outstanding contracts and interest owed by Company. The Company has not made a modification in interest owed from the previous quarter ended November 30, 2016 until this review is completed.

 

 

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

 

Certain statements in this Report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions, intense competition for the acquisition of businesses, and domestic and foreign government regulations. The words “believe,” “expect,” “anticipate,” “intend” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

 

Overview

 

On October 11, 2005, we sold substantially all of our assets to Avantce RSI, LLC, a Delaware limited liability company, for $2,970,000 in cash, plus a $200,000 promissory note payable over two years. On July 28, 2006, we paid a dividend to our shareholders totaling approximately $2,760,000, which represented approximately 87% of the total assets at that time. On September 15, 2009, we paid a dividend to our shareholders totaling approximately $217,844, which represented approximately 82% of the total assets at that time.

 

On December 5, 2011, we entered into an Agreement and Plan of Merger dated as of December 5, 2011 in order to effect a reincorporation in the State of Delaware and to, among other things, change our corporate name from “Robocom Systems International Inc.” to “AgriVest Americas, Inc.”

 

On November 19, 2015, we entered into a stock purchase agreement with Havanti AS, a Norwegian limited liability company, pursuant to which Havanti purchased an aggregate of 1,040,839 shares of common stock for an aggregate purchase price of $200,000.

 

On December 30, 2015, we changed our corporate name from “AgriVest Americas, Inc.” to “NXChain Inc.” and effectuated a stock combination or reverse stock split, whereby every 33.7468 outstanding shares of common stock were converted into one share of common stock.

 

On September 26, 2016, we purchased certain assets of LXCCoin Ltd. (“LXCC) pursuant to an Asset Purchase Agreement dated as of September 26, 2016 (the “Purchase Agreement”) with LXCC. In exchange for the assets acquired, we issued to LXCC 14,243,000 shares of our common stock. Following consummation of the asset purchase transaction, LXCC owned approximately 57.97% of our issued and outstanding shares of the common stock, which shares gave LXCC effective control of our company.

 

We plan to use the assets acquired as part of our planned digital-currency payment processing platform that will enable other companies to provide an assortment of online and mobile payment services for products and services that they sell. We plan to both white-label and private-label its payment processing platform for other companies. In addition, we plan to further develop our payment processing platform to support micro-payments, online paywalls, P2P lending and other popular digital-currency services.

 

On November 29, 2016, we entered into a stock purchase agreement with Hans Christian Anderson, a Swiss investor, pursuant to which Anderson purchased an aggregate of 90,000 shares of common stock for an aggregate purchase price of $90,000.

 

 

Critical Accounting Policies

 

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

 

Basic and Diluted Net Income (Loss) Per Share. Basic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

The Company calculates income (loss) per common share in accordance with ASC Topic 260, "Earnings Per Share". Basic and diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding. Common share equivalents consist of warrants and are excluded from the computation of diluted income (loss) per share, since the effect would be anti-dilutive. Common share equivalents, which could potentially dilute basic earnings (loss) per share in the future, and which were excluded from the computation of diluted income (loss) per share.

 

Income Taxes. The Company employs an asset and liability approach in accounting for income taxes payable or refundable at the date of the financial statements as a result of all events that have been recognized in the financial statements and as measured by the provisions of enacted laws.

 

Deferred tax assets or liabilities are recognized for temporary differences that will result in deductible amounts or taxable income in future years and for net operating loss carry forwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

 

Concentration of Credit Risk. The Company maintains its cash principally at one commercial bank. Management does not believe significant credit risk existed at February 28, 2017.

 

 

Results of Operations

 

Comparison of Three-Month Periods Ended February 28, 2017 and February 29, 2017 (unaudited)

 

Revenues. We did not record any revenues related to our operations during the three-month periods ended February 28, 2017 and February 29, 2016.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses consisted of consulting fees, financial personnel and professional fees, as well as other miscellaneous administrative expenses. For the three-months ended February 28, 2017, selling, general and administrative expenses increased by $45,091 to $83,860 as compared to $38,769 during the three-months ended February 29, 2016. This increase was primarily related to an increase in administrative expenses.

 

Other Income (Expense), Net. For the three-months ended February 28, 2017, interest expense increased by $40,314 to $42,673, as compared to $2,333 during the three-months ended February 29, 2016. This increase was primarily related to borrowings under the convertible notes payable from related parties and the notes payable.

 

Income Taxes. No provision for or benefit of income taxes was reflected in the 2017 or 2016 periods, as the benefits of operating loss carryforwards have been reserved.

 

Comparison of Nine Month Periods Ended February 28, 2017 and February 29, 2016 (unaudited)

 

Revenues. We did not record any revenues related to our operations during the nine-month periods ended February 28, 2017 and February 29, 2016.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses consisted of consulting fees, financial personnel and professional fees, as well as other miscellaneous administrative expenses. For the nine-months ended February 28, 2017, selling, general and administrative expenses increased by $36,219 to $203,915 as compared to $166,976 during the nine-months ended February 29, 2016. This increase was primarily related to an increase in administrative expenses.

 

Other Income (Expense), Net. For the nine months ended February 29, 2016, the Company realized gains on extinguishment of debt in the amounts of $87,146, as debt was extinguished for less than the amounts owed. Also for the nine months ended February 29, 2016, the Company incurred expenses on settlements for previously disputed amounts owed in the amount of $218,751. There were no such transactions for the nine months ended February 28, 2017. For the nine-months ended February 28, 2017, interest expense increased by $83,014 to $92,325, as compared to $9,311 during the nine-months ended February 29, 2016. This increase was primarily related to borrowings under the convertible notes payable from related parties and the notes payable.

 

Income Taxes. No provision for or benefit of income taxes was reflected in the 2017 or 2016 periods, as the benefits of operating loss carryforwards have been reserved.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our company’s cash expenditures during the nine months ended February 28, 2017 were limited primarily to amounts required for the payment of consulting and professional fees in connection with our company meeting, complying with securities laws, and in seeking a candidate for merger.

 

During the nine months ended February 28, 2017, we funded our operations with the cash derived from the convertible notes payable from related parties and proceeds from the sale of common stock. As of February 28, 2017, we had negative balance for cash and cash equivalents of $24.00. As of May 31, 2016, the Company had cash and cash equivalents of $62,075.

 

Net cash used in operating activities was $183,099 and $140,000 for the nine months ended February 28, 2017 and February 29, 2016, respectively. During the nine months ended February 28, 2017 and February 29, 2016, the Company was not engaged in any revenue-generating operations. Cash used in operations was lower in the 2017 period primarily as a result of lower amounts paid to related parties.

 

Net cash provided by financing activities was $121,000 and $140,000 for the nine months ended February 28, 2017 and February 29, 2016, respectively. During the nine months ended February 29, 2017, we received loans from a related party of $51,000, repaid $20,000 to the same related party and received $90,000 from the sale of common stock. During the nine months ended February 29, 2016, the Company refunded a cash advance in the amount of $60,000 and received $200,000 from the sale of common stock.

 

The accompanying financial statements have been prepared assuming that our company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these consolidated financial statements. Our continued existence is dependent upon our ability to effect our business plan and generate sufficient cash flows from operations to support its daily operations, as well as to provide sufficient resources to retire existing liabilities and obligations on a timely basis. We anticipate effecting future sales of debt or equity securities to execute our plans to fund our operations. However, there is no assurance that it will be able to obtain additional funding through the sales of additional debt or equity securities or that such funding, if available, will be obtained on terms favorable to or affordable by our company.

 

Further, we face considerable risk in our business plan and a potential shortfall of funding due to our inability to raise capital in the debt and equity securities markets. If no additional capital is raised, our company will be forced to rely on existing cash in the bank and or scale back operations until such time that it generates revenues or raises additional capital, which raises substantial doubt about its ability to continue as a going concern.

 

In such a restricted cash flow scenario, our company would be unable to complete its business plan steps, and would, instead, delay all cash intensive activities. Without necessary cash flow, our company may have to scale back operations and expansion plans during the next twelve months, or until such time as necessary funds can be raised in the debt or equity securities markets.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and is not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of November 30, 2016 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to its management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of February 28, 2017, the disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness described below.

 

In light of the material weakness described below, the Company performed additional analysis to ensure its financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented.

 

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.

 

In performing its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, management identified a material weakness relating to the relatively small number of professionals employed by the Company in bookkeeping and accounting functions, which prevents the Company from appropriately segregating duties within its internal control systems. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

 

The material weakness described above caused management to conclude that, as of February 28, 2017, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level. Management will continue to evaluate the Company’s existing accounting personnel needs and intends to increase the Company’s accounting and financing personnel resources by hiring additional accounting staff. However, the Company will be unable to remedy this material weakness in its disclosure controls until it has the financial resources that will allow it to hire additional qualified employees.

 

Changes in Internal Controls

 

There were no changes in the Company’s internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

ITEM 6. EXHIBITS

 

The exhibits required by this item are listed on the Exhibit Index attached hereto.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

	NX CHAIN INC.
April 10, 2017	By:	/s/ Sean Tabatabai
		Sean Tabatabai, Chief Executive Officer and Chief Financial Officer

 

 

Exhibit Index

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
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.*

 

*

XBRL (eXtensible Business Reporting Language) interactive data files are 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, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

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