UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

 

For the quarterly period ended April 30, 2017

 

or

 

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

 

For the transition period from_________ to ___________

 

Commission File Number 001-36128

  

Magicstem Group Corp.

(Exact name of registrant as specified in its charter)

 

Nevada		46-1504799
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
Room 803, 8th Floor, Lippo Sun Plaza 28Canton Road, Tsim Sha Tsui, Hong Kong
(Address of principal executive offices)		(Zip Code)

 

852 2871 8000

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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. x YES    o 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). x YES    o NO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)		Emerging growth company	¨

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

 

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

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. o YES    o 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.   35,425,000 common shares issued and outstanding as of June 14, 2017.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1	Financial Statements					3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations					4
Item 3.	Quantitative and Qualitative Disclosures about Market Risk					10
Item 4.	Controls and Procedures					10
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings					11
Item 1A.	Risk Factors					11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds					11
Item 3.	Defaults Upon Senior Securities					11
Item 4.	Mining Safety Disclosures					11
Item 5.	Other Information					11
Item 6.	Exhibits					12
SIGNATURES						13

 

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Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1 Financial Statements

 

The condensed unaudited financial statements of our Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars.

 

3

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MAGICSTEM GROUP CORP.

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

			Page
Condensed Consolidated Balance Sheets			F-2
Condensed Consolidated Statements of Operations and Comprehensive Loss			F-3
Condensed Consolidated Statements of Cash Flows			F-4
Notes to Condensed Consolidated Financial Statements			F-5 – F-11

 

F-1

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MAGICSTEM GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF APRIL 30, 2017 AND OCTOBER 31, 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

		April 30, 2017				October 31, 2016
		(Unaudited)				(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	4,675			$	85,552
Prepayments and other receivables			10,400				5,833
Total assets		$	15,075			$	91,385
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accrued liabilities and other payables		$	18,549			$	63,643
Income tax payable			950				950
Amounts due to related parties			101,268				183,393
Total liabilities			120,767				247,986
Commitments and contingencies			-				-
STOCKHOLDERS’ DEFICIT
Common stock, $0.001 par value, 75,000,000 shares authorized, 35,425,000 and 15,870,000 shares issued and outstanding, as of April 30, 2017 and October 31, 2016			35,425				15,870
Additional paid-in capital			78,220				-
Accumulated deficit			(219,337	)			(172,471	)
			(105,692	)			(156,601	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	15,075			$	91,385

 

See accompanying notes to condensed consolidated financial statements.

 

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MAGICSTEM GROUP CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

		Three months ended April 30,								Six months ended April 30,
		2017				2016				2017				2016
Revenues		$	-			$	-			$	-			$	5,547
Cost of revenues			-				-				-				(5,393	)
Gross profit			-				-				-				154
Operating expenses:
Office and general			40				2,513				3,072				5,013
Professional fees			21,215				4,730				43,794				15,180
Total operating expenses			21,255				7,243				46,866				20,193
Loss before income taxes			(21,255	)			(7,243	)			(46,866	)			(20,039	)
Provision for taxes			-				-				-				-
NET LOSS			(21,255	)			(7,243	)		$	(46,866	)		$	(20,039	)
Net loss per share – Basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average common stock outstanding – Basic and diluted			35,425,200				15,870,200				35,425,200				15,870,200

_________

* Less than $0.01 per share

 

See accompanying notes to condensed consolidated financial statements.

 

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MAGICSTEM GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

		Six months ended April 30,
		2017				2016
Cash flow from operating activities:
Net loss		$	(46,866	)		$	(20,039	)
Change in operating assets and liabilities:
Prepayments and other receivables			(4,567	)			(5,000	)
Accounts payable and accrued liabilities			(45,094	)			1,131
Net cash used in operating activities			(96,527	)			(23,908	)
Cash flow from financing activities:
(Repayment to) advances from related parties			(82,125	)			20,955
Proceed from issuance of common stocks			97,775				-
Net cash generated from financing activities			15,650				20,955
Net change in cash and cash equivalents			(80,877	)			(2,953	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			85,552				17,528
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	4,675			$	14,575
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes		$	-			$	-
Cash paid for interest		$	-			$	-

 

See accompanying notes to condensed consolidated financial statements.

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed consolidated or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

In the opinion of management, the consolidated balance sheet as of October 31, 2016 which has been derived from the audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended April 30, 2017 are not necessarily indicative of the results to be expected for the entire fiscal year ending October 31, 2017 or for any future period.

 

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended October 31, 2016.

 

NOTE 2 – ORGANIZATION AND BUSINESS BACKGROUND

 

Magicstem Group Corp. ("Magicstem", the "Company") was incorporated in the State of Nevada under the name Cold Cam, Inc. (“Cold Cam”) on October 25, 2012 ("Inception") and originally intended to develop a camera system to be placed on the inside of refrigerator doors.

 

On April 1, 2015, the Company's board of directors approved an agreement and plan of merger to merge with its wholly-owned subsidiary, Magicstem Group Corp., a Nevada corporation, to effect a name change from Cold Cam, Inc. to Magicstem Group Corp. The Company remains as the surviving company. Magicstem Group Corp. was formed on October 25, 2012.

 

The name change was approved by the Financial Industry Regulatory Authority (FINRA) for filing with an effective date of May 4, 2015 and became effective with the OTC Markets at the opening of trading on May 4, 2015 under the symbol "MGGI".

 

The Company’s fiscal year end is October 31.

 

The Company, through its subsidiary, mainly engages in provision of agency and distribution of stem cell cryo-preserved banking service in Asia Pacific region.

 

Details of the Company’s subsidiary:

 

Company name		Place/date of incorporation		Particulars of issued share capital		Principal activities		Effective interest held
Info Nice Limited		Hong Kong, July 03, 2014		100 issued shares of ordinary shares		Agency and distribution of stem cell			100	%

 

Magicstem and its subsidiary are hereinafter referred to as the “Company”.

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

NOTE－3 GOING CONCERN UNCERTAINTIES

 

The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

For the six months ended April 30, 2017, the Company reported a loss of $46,866 and working capital deficit of $105,692 as of April 30, 2017.

 

In order to continue as a going concern, the Company will expect, among other things, to generate more profitable operations in the future and/or additional capital resources. Management’s plan is to raise adequate resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing.

 

These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

 

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

 

·	Basis of presentation

 

These accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

·	Use of estimates and assumptions

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

·	Basis of consolidation

 

The condensed consolidated financial statements include the financial statements of MGGI and its subsidiary. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

·	Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

·	Income taxes

 

The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

·	Uncertain tax positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the period ended April 30, 30 2017 and 2016.

 

·	Revenue recognition

 

In accordance with ASC Topic 605, “Revenue Recognition”, the Company recognizes revenue when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured.

 

The Company acts as an agent in the sales of stem cell cryo-preserved banking service. Commission fee income is recognized upon the completion of the delivery by the service provider to the final customers.

 

·	Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

 

The reporting currency of the Company is the United States Dollars ("US$") and the accompanying condensed consolidated financial statements have been expressed in US$. Hong Kong Dollars (“HK$”) is functional currency as being the primary currency of the economic environment in which the Company operates.

 

Convenience translation of amounts from the local currency of the Company into US$ has been made at the pegged exchange rate at 0.129 for the respective year.

 

·	Net loss per share

 

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

 

There were no potentially outstanding dilutive shares for the period ended April 30, 2017 and 2016.

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

 

·	Segment reporting

 

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in the financial statements. For the period ended April 30, 2017 and 2016, the Company operates one reportable business segment in Hong Kong.

 

·	Related parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined consolidated financial statements is not required in those condensed consolidated statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which condensed consolidated income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated financial statements; c) the dollar amounts of transactions for each of the periods for which condensed consolidated income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

·	Commitments and contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

·	Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

	Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
	Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
	Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.

 

·	Recent accounting pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

NOTE 5 – AMOUNTS DUE TO RELATED PARTIES

 

As of April 30, 2017 and October 31, 2016, amounts to related parties, which were unsecured, interest-free and repayable on demand. Imputed interest from related parties’ loans is not significant.

 

		April 30, 2017				October 31, 2016
						(Audited)
Balance due to
FONG Sze Hung, a shareholder		$	26,941			$	26,941
NG Chi Man, a director			74,327				156,452
		$	101,268			$	183,393

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

No preferred shares have been authorized or issued since inception (October 25, 2012).

 

Common Stock

 

The Company’s authorized share is 75,000,000 common shares with a par value of $0.001 per share.

 

On November 21, 2016, the Company completed a private placement with three subscribers. The private placement was for an aggregate of 19,555,000 common shares of the Company at a price of $0.005 per share for gross proceeds of $97,775.

 

As of April 30, 2017 and October 31, 2016, the total number of outstanding and issued shares was 35,425,200 and 15,870,200, respectively.

 

NOTE 7 – INCOME TAX

 

For the six months ended April 30, 2017 and 2016, the local (United States) and foreign components of loss before income taxes were comprised of the following:

 

		Six months ended April 30,
		2017				2016
Tax jurisdictions from:
- Local		$	(572	)		$	154
- Foreign			(46,294	)			(20,193	)
Loss before income taxes		$	(46,866	)		$	(20,039	)

  

Provision for income taxes consisted of the following:

 

			Six months ended April 30,
			2017				2016
Current
- Local			$	-			$	-
- Foreign				-				-
Deferred:
- Local				-				-
- Foreign				-				-
Income tax expenses			$	-			$	-

 

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MAGICSTEM GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2017 AND 2016

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company and its subsidiaries are mainly operated in the United States of America and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:

 

United States of America

 

MGGI is registered in the State of Nevada and is subject to the tax laws of the United States of America. For the three and six months ended April 30, 2017 and 2016, the Company incurred no operation in the United States of America.

 

Hong Kong

 

The Company’s major operating subsidiary is subject to Hong Kong Profits Tax, which is charged at the statutory income tax rate of 16.5% on its assessable income.

 

The reconciliation of income tax rate to the effective income tax rate based on loss before income taxes from foreign operation for the six months ended April 30, 2017 and 2016 are as follows:

 

		Six months ended April 30,
		2017				2016
Income (loss) before income taxes		$	(572	)		$	154
Statutory income tax rate			16.5	%			16.5	%
Income tax at Hong Kong statutory income tax rate			(94	)			25
Tax loss not recognized as deferred tax assets			94				(25	)
Income tax expenses		$	-			$	-

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. There was no significant temporary difference as of April 30, 2017 and October 31, 2016, therefore no deferred tax assets or liabilities have been recognized.

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

(a) Operating lease commitments

 

As of April 30, 2017, the Company has no commitments under operating leases.

 

(b) Capital commitment

 

As of April 30, 2017, the Company has no capital commitments in the next twelve months.

 

NOTE 10 – SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10-Q. There were no subsequent events that required recognition or disclosure.

 

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

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's 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 these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our condensed unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to shares of our common stock.

 

As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Magicstem Group Corp., unless otherwise indicated.

 

Company History

 

Our company was incorporated in the State of Nevada on October 25, 2012 under the name Cold Cam, Inc. and originally intended to develop a camera system to be placed on the inside of refrigerator doors.

 

On January 31, 2015, Yonekatsu Kato, formerly our company's sole officer and director, entered into a stock purchase agreement, pursuant to which he sold all of his 10,000,000 shares of our company's common stock (98% of our company's total outstanding common shares) to Magicstem Development Limited, a Seychelles corporation ("Magicstem Development") ultimately owned by Chi Man Ng, in a private transaction, for an aggregate purchase price of $50,000. The funds used for this share purchase were Magicstem Development's funds. Magicstem Development now owns 98% of our company's issued and outstanding shares of common stock. The closing of the share purchase agreement created a change of control of our company. As a result of the change of control, and the change in our management as noted herein, our company now intends to investigate additional opportunities in an effort to enhance shareholder value. Those efforts are initially anticipated to focus on the development of stem cell cryo-preserved banking in Asia, with the expectation that primary customers would come from China.

 

On January 31, 2015, our board of directors accepted the resignation of Yonekatsu Kato as our president, chief executive officer, chief financial officer, treasurer, secretary and director.

 

The resignation of Yonekatsu Kato was not the result of any disagreements with our company regarding our operations, policies, practices or otherwise.

 

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On January 31, 2015, we appointed Chi Man Ng as president, chief executive officer and director; Ka Sing Edmund Yeung as chief financial officer, treasurer, secretary and director; and Guosheng Hu as chief technology officer and director of our company.

 

On April 1, 2015, our company's board of directors approved an agreement and plan of merger to merge with our wholly-owned subsidiary Magicstem Group Corp., a Nevada corporation, to effect a name change from Cold Cam, Inc. to Magicstem Group Corp. Our company remained as the surviving company. Magicstem Group Corp. was formed on October 25, 2012.

 

The name change was approved by the Financial Industry Regulatory Authority (FINRA) for filing with an effective date of May 4, 2015 and became effective with the OTC Markets at the opening of trading on May 4, 2015 under the symbol "MGGI".

 

On July 21, 2015, our company appointed Chun-han (Peter) Lin as a director and Chun-heng (Kevin) Lin as Group Senior Manager of our company. On April 1, 2016 Mr. Chun-heng Lin resigned as group senior manager of our company. On April 1, 2016, we appointed Ms. Kit U Tang as group senior manager of our company.

 

At this time, we have not developed our product or contacted any possible client or developer. Our company has not yet implemented its business model and to date, has generated no revenues.

 

Results of Operations for the Three Months Ended April 30, 2017 Compared to the Three Months Ended April 30, 2016

 

Our operating results for the three month periods ended April 30, 2017 and 2016 are summarized as follows:

 

		Three months ended
		April 30,
		2017				2016
REVENUE		$	-			$	-
OPERATING EXPENSES
Office and general			40				2,513
Professional fees			21,215				4,730
NET LOSS		$	(21,255	)		$	(7,243	)

 

Revenue

 

We recognized no revenues for the three month periods ended April 30, 2017 and April 30, 2016 as we have not yet commenced operations.

 

Operating Expenses

 

During the three months ended April 30, 2017, we incurred operating expenses of $21,255 compared to $7,243 in the three months ended April 30, 2016, an increase of $14,012. The increase in operating expenses is primarily as a result of an increase in professional fees.

 

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Net Losses

 

During the three months ended April 30, 2017, we incurred losses of $21,255 compared to losses of $7,243 incurred during the three months ended April 30, 2016, an increase of $14,012 due to the factors discussed above.

 

Results of Operations for the Six Months Ended April 30, 2017 Compared to the Six Months Ended April 30, 2016

 

Our operating results for the Six month periods ended April 30, 2017 and 2016 are summarized as follows:

 

		Six months ended
		April 30,
		2017				2016
REVENUE		$	-			$	5,547
COST OF REVENUE			-				5,393
OPERATING EXPENSES
Office and general			3,072				5,013
Professional fees			43,794				15,180
NET LOSS		$	(46,866	)		$	(20,039	)

 

Revenue

 

During the six months ended April 30, 2017, no revenue generated compared to $5,547 in the six months ended April 30, 2016, a decrease of $5,547. The decrease in revenue is primarily as a result of a decrease on demand.

 

Operating Expenses

 

During the six months ended April 30, 2017, we incurred operating expenses of $46,866 compared to $20,193 in the six months ended April 30, 2016, an increase of $26,673. The increase in operating expenses is primarily as a result of an increase in professional fees.

 

Net Losses

 

During the six months ended April 30, 2017, we incurred losses of $46,866 compared to losses of $20,039 incurred during the six months ended April 30, 2016, an increase of $26,827 due to the factors discussed above.

 

Liquidity and Capital Resources

 

Working Capital

 

		As at April 30, 2017				As at April 30, 2016
Current Assets		$	15,075			$	25,267
Current Liabilities			120,767				86,903
Working Capital (Deficiency)		$	(105,692	)		$	(61,636	)

 

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Cash Flows

 

		Six Months Ended April 30, 2017				Six Months Ended April 30, 2016
Net cash used in operating activities		$	(96,527	)		$	(23,908	)
Net cash provided by (used in) investing activities			-				-
Net cash provided by financing activities			15,650				20,955
Net increase (decrease) in cash		$	(80,877	)		$	(2,953	)

 

As at April 30, 2017, we had $4,675 in cash, and liabilities of $120,767 compared to $85,552 cash and $247,586 in liabilities as at October 31, 2016. The increase in our working capital deficiency arose due to an increase in repayment to related parties.

 

Cash Flow from Operating Activities

 

During the six months ended April 30, 2017, we used $96,527 in our operating activities compared to $23,908 used in operating activities during the six months ended April 30, 2016. During the six months ended April 30, 2017 we incurred losses of $46,866 and we decreased accounts payable and accrued expenses by $45,094. By comparison, during the six months ended April 30, 2016 we incurred losses of $20,039 and increased accounts payable and accrued expenses by $1,131.

 

Cash Flow from Investing Activities

 

We neither generated funds nor used funds in investing activities during the six month periods ended April 30, 2017 and 2016, respectively.

 

Cash Flow from Financing Activities

 

During the six months ended April 30, 2017, we received proceeds of $97,775 from the issuance of our common stock, compared to receiving a $20,955 loan from a current officer, during the six months ended April 30, 2016. The increase in cash flow from financing activities in 2017 reflected our need to fund the increased cash flow used in operating activities in 2017 as compared to 2016 as described above.

 

Going Concern

 

Our financial statements for the three and six month period ended April 30, 2017 have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

We not generated revenues, have achieved losses since our inception, and rely upon the sale of our common stock and proceeds from shareholder loans to fund our operations. If we are unable to raise equity or secure alternative financing, we may not be able to continue our operations and our business plan may fail.

 

If our operations and cash flow improve, management believes that we can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or an improvement in our liquidity situation. The threat of our ability to continue as a going concern will cease to exist only when our revenues have reached a level able to sustain our business operations.

 

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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Future Financings

 

If our company is unsuccessful in raising the additional proceeds through a private placement offering it will then have to seek additional funds through debt financing, which would be highly difficult for a new development stage company to secure. Therefore, our company is highly dependent upon the success of the anticipated private placement offering and failure thereof would result in our company having to seek capital from other sources such as debt financing, which may be available. However, if such financing were available, because we have no operations to date, we would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If our company cannot raise additional proceeds via a private placement of its common stock or secure debt financing we would be required to cease business operations. As a result, investors in our company's common stock would lose all of their investment.

 

As of the date of this Report, the current funds available to our company will not be sufficient to continue operations. The cost to establish our company and begin operations is estimated to be approximately $100,000 over the next twelve months and the cost of maintaining our reporting status is estimated to be $8,000 over this same period, not taking into account any additional funds that may be required for the acquisition or commencement of a stem cell banking business. Our officers and directors have undertaken to provide our company with operating capital to sustain our business over the next twelve month period as the expenses are incurred in the form of a non-secured loan. However, there is no contract in place or written agreement securing this agreement. Management believes that if our company cannot raise sufficient revenues or maintain its reporting status with the Securities and Exchange Commission ("SEC") we will have to cease all efforts directed towards our company. As such, any investment previously made would be lost in its entirety.

 

Plan of Operation

 

As a result of the change of control, and the change in our management as noted herein, our company now intends to investigate additional opportunities in an effort to enhance shareholder value. Those efforts are initially anticipated to focus on the development of stem cell banking cryopreserved in Asia, with the expectation that primary customers would come from China.

 

In order to pursue this initiative, we anticipate that our cash requirements for the next twelve months shall consist of:

 

Description		Estimated Expenses ($)
General and administrative expenses			40,000
Professional fees			60,000
Total			100,000

 

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Description		Estimated Expenses ($)
Legal and accounting fees			30,000
Management and operating costs			30,000
Salaries and consulting fees			20,000
General and administrative expenses			20,000
Total			100,000

 

Off Balance Sheet Arrangement

 

We do not have any 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 is material to investors.

 

Critical Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements include the accounts of our company and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and the instructions to Form 10-K and Regulation S-X and are presented in US dollars. Our company has adopted an October 31 fiscal year end.

 

Unaudited Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

 

While management of our company believes that the disclosures presented herein are adequate and not misleading, these condensed interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the year ended October 31, 2016 filed on Form 10-K on January 30, 2017.

 

Use of Estimates and Assumptions

 

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 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. Actual results could differ from those estimates.

 

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Recent Accounting Pronouncements

 

Our company reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on our company.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a "smaller reporting company", we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

 

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

 

Changes in Internal Controls over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the period ended April 30, 2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

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PART II–OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

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

 

No sales of unregistered equity securities were completed during the three and six month periods ended April 30, 2017 and April 30, 2016.

 

Item 3. Defaults Upon Senior Securities

 

No senior debt was issued or outstanding during the three month periods ended April 30, 2017 and 2016.

 

Item 4. Mining Safety Disclosures

 

Not applicable to our company

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit No.		Document Description
(3)		(i) Articles of Incorporation; (ii) By-laws
3.1		Articles of Incorporation ( Incorporated by reference to our Registration Statement on Form S-1 filed on January 25, 2013)
3.2		By-Laws ( Incorporated by reference to our Registration Statement on Form S-1 filed on January 25, 2013)
3.3		Articles of Merger filed with the Nevada Secretary of State on April 17, 2015 with an effective date of July 31, 2015. (Incorporated by reference to our Current Report on Form 8-K filed May 5, 2015)
(31)		Rule 13a-14(a) / 15d-14(a) Certifications
31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101*		Interactive Data File
10.1 LAB		XBRL Taxonomy Extension Label Linkbase
10.1 PRE		XBRL Taxonomy Extension Presentation Linkbase
10.1 INS		XBRL Instance Document
10.1 SCH		XBRL Taxonomy Extension Schem
10.1 CAL		XBRL Taxonomy Extension Calculation Linkbase
10.1 DEF		XBRL Taxonomy Extension Definition Linkbase

_______

*Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

		MAGICSTEM GROUP CORP.
		(Registrant)
Date: June 19, 2017	By:	/s/ Chi Man Ng
		Chi Man Ng
		President, Chief Executive Officer, and Director (Principal Executive Officer)
Date: June 19, 2017		/s/ Ka Sing Edmund Yeung
		Ka Sing Edmund Yeung
		Chief Financial Officer, Treasurer, Secretary and Director
		(Principal Financial Officer and Principal Accounting Officer)

 

 

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