U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

 

For the quarterly period ended September 30, 2018

 

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

 

Commission file number: 000-55491 

 

 

ANDES 7 Inc.

(Exact name of registrant as specified in its charter)

 

	Delaware		47-4683655
	(State or Other Jurisdiction of		(I.R.S. Employer
	Incorporation or Organization)		Identification No.)
	424 Clay Street, Lower Level, San Francisco, CA		94111
	(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: 415 463 7827

 

  N/A

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

 

 

 Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☒

Accelerated filer ☐ Smaller reporting company ☒

 

If an emerging growth company, indicate by check mark 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. ☐

 

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

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 9, 2018, the issuer had 120,100,000 shares of its common stock issued and outstanding.

 

TABLE OF CONTENTS

PART I
Item 1.	Unaudited Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	13
PART II
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosures	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
	Signatures	16

 

 

 

 

 

ANDES 7, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

 

  

Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)		4
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)		5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)		6
Notes to the Financial Statements (unaudited)		7

ANDES 7, INC. and Subsidiary

CONSOLIDATED BALANCE SHEETS 
(UNAUDITED) 

		September 30, 2018				December 31, 2017
ASSETS
Current assets:
Cash		$	1,810			$	59,935
Accounts receivable			978				3,592
Inventory			82,438				66,328
Other current assets			3,450				1,936
Total current assets			88,676				131,791
Office deposit			8,051				8,343
Deposit – land contract			273,702				166,143
Construction in progress			20,668				21,420
Property and equipment, net			252,655				259,674
Total assets		$	643,752			$	587,371
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	3,514			$	4,429
Due to a related party			74,979				50,270
Loans from directors			1,196,484				931,449
Loans payable, current portion			11,679				10,927
Total current liabilities			1,286,656				997,075
Long term liabilities:
Loans payable, non-current			15,210				25,113
Total liabilities			1,301,866				1,022,188
Stockholders’ Equity (Deficit):
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; 500,000 and 0 shares issued and outstanding, respectively			50				—
Common stock, $0.0001 par value, 1,000,000,000 shares authorized, 120,100,000 and 10,100,000 shares issued and outstanding, respectively			12,010				1,010
Additional paid in capital			220,826				249,044
Accumulated deficit			(858,250	)			(633,895	)
Accumulated other comprehensive loss			(32,750	)			(50,976	)
Total stockholders’ deficit			(658,114	)			(434,817	)
Total liabilities and stockholders’ deficit		$	643,752			$	587,371

 

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

 

ANDES 7, INC. and Subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)
					For the three months ended September 30,				For the nine months ended September 30,
					2018		2017		2018		2017
Revenue				$	5,425	$	3,827	$	9,020	$	67,112
Cost of revenue					1,020		5,832		6,206		53,758
Gross Margin					4,405		(2,005)		2,814		13,354
Operating expenses:
	General and administrative				55,237		61,954		204,302		191,421
	Rent expense				2,730		2,056		10,270		23,948
	Advertising and promotion				2,042		858		10,435		15,304
	Total operating expenses				60,009		64,868		225,007		230,673
Loss from operations					(55,604)		(66,873)		(222,193)		(217,319)
Other income (expense):
	Interest income				—		—		—		2
	Interest expense				(407)		(72)		(2,162)		(777)
	Total other expense				(407)		(72)		(2,162)		(775)
Loss before income taxes					(56,011)		(66,945)		(224,355)		(218,094)
Provision for income taxes					—		—		—		—
Net Loss				$	(56,011)	$	(66,945)	$	(224,355)	$	(218,094)
Other comprehensive loss:
Foreign currency translation adjustment					(17,322)		(4,724)		18,226		(23,010)
Comprehensive loss				$	(73,222)	$	(71,669)	$	(206,129)	$	(241,104)
Loss per share basic & diluted				$	(0.00)	$	(0.01)	$	(0.01)	$	(0.02)
Weighted average outstanding shares, basic & diluted					117,708,696		10,100,000		46,363,736		10,100,000

 

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

 

ANDES 7, INC . and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		For the Nine Months Ended September 30,
		2018				2017
Cash flows from operating activities:
Net loss		$	(224,355	)		$	(218,094	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			20,776				20,842
Changes in operating assets and liabilities:
Account receivable			2,614				(6,529	)
Inventory			(16,110	)			8,816
Advanced payments			—				(37,488	)
Other assets			(1,222	)			(843	)
Accounts payable and accrued liabilities			33,381				8,970
Deposits			(107,559	)			—
Net cash used in operating activities			(292,475	)			(224,326	)
Cash flows from investing activities:
Construction in progress			752				59,838
Purchase of property and equipment			(13,757	)			(132,449	)
Net cash used in investing activities			(13,005	)			(72,611	)
Cash flows from financing activities:
Net proceeds from director loans			265,035				326,236
Advances from related party			7,180				—
Payments on loans			(9,150	)			(6,054	)
Net cash provided by financing activities			263,065				320,182
Net change in cash			(42,415	)			23,245
Effects of currency translation on cash			(15,710	)			(23,010	)
Cash, beginning of period			59,935				1,772
Cash, end of period		$	1,810			$	2,007
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	—			$	—
Cash paid for taxes		$	—			$	—

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

ANDES 7, INC. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

ANDES 7 Inc. (the “Company”) was incorporated in the State of Delaware on July 27, 2015. ANDES 7 Inc. was formed as a vehicle to pursue a business combination with an operating company that would have perceived benefits of becoming a publicly traded corporation.

 

On February 12, 2016, the Company entered into a Subscription Agreements with three subscribers for the issuance of its restricted common stock – Abina Asean, Co. Ltd., an entity organized under the laws of the Republic of Seychelles (8,000,000 shares), Toh Kean Ban (1,000,000 shares) and Dr. Ir. H.M. Itoc Tochija (1,000,000 shares). Each of the Subscription Agreements were the result of privately negotiated transactions without the use of public dissemination of promotional or sales materials. Each of the buyers represented they were “accredited investors,” and as such could bear the risk of such investment for an indefinite period of time and to afford a complete loss thereof.

 

On July 2, 2018, the Company entered into an Agreement and Plan of Merger between the Company, ANDES 7 Acquisition Corp, (“Merger Sub”) a Delaware corporation and Abina Co. Ltd. (the “Abina”). Abina is a corporation organized under the Kingdom of Thailand and has operated under the name “Abina Co. Ltd.” since August 3, 2015 and has since then operated a diverse business involved in investments in hotels, resorts, and commercial property. The Agreement and Plan of Merger provided for the acquisition by the Company of all the outstanding shares of Abina through a reverse merger of merger sub into Abina, the surviving corporation. The financial statements have been prepared to retroactively present the reverse merger.

 

NOTE 2 - GOING CONCERN

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to raise additional capital through debt and/or equity financing is unknown. The obtainment of additional financing and the successful development of the Company’s contemplated plan of operations are necessary for the Company to continue. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. However; management believes that the Company will generate sufficient cash flows to fund its operations and to meet its obligations on a timely basis for the next twelve months. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2018.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

 

Principles of Consolidation

The accompanying consolidated unaudited financial statements include the accounts of the Company and its wholly-owned subsidiaries, Andes 7 Acquisition Corp and Abina Co, Ltd. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

Translation Adjustment

For the periods ended September 30, 2018 and December 31, 2017, the accounts of the Abina Co, Ltd were maintained, and its financial statements were expressed, in Thai BAHT.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the BAHT as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital.  Transaction gains and losses are reflected in the income statement.

 

Comprehensive Income/(Loss)

The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220).  Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive loss for the period ended September 30, 2018 and 2017 is included in the statement of operations as a foreign currency translation adjustment.

 

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.

 

Revenue recognition

Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.

 

Inventories

Inventories are valued at the lower of cost or market utilizing the first-in first-out (FIFO) method. Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower.

 

Recently issued accounting pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 4 – CONSTRUCTION IN PROGRESS

 

In 2016 Abina entered into an agreement to purchase land in Chiang Rai, Thailand for 200 million baht, approximately $5.6 million. The Company paid a $139,565 deposit (5 million baht) in 2016 and the balance of 195 million baht is due on December 15, 2018 per the terms of a second amended agreement. The Company plans on developing the land as a tourist destination and is currently in the process of building a café on the property.

 

In 2016 the Company incurred $79,744 of construction related costs of which approximately $68,000 was for the building of the café and the remaining balance of almost $12,000 primarily consisted of land and site development costs. As of September 30, 2018, the balance in the construction in progress account has increased to $20,668.

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

The Company’s property and equipment primarily consists of office furniture and equipment and it is being depreciated using the straight-line method over a period of five years.

 

		September 30, 2018				December 31, 2017
Office Equipment		$	59,883			$	55,002
Accounting Software			766				794
Flag Costs			30,224				31,323
Vehicles			85,853				88,975
Buildings and land costs			141,650				130,269
Total property & equipment			318,376				306,363
Less accumulated depreciation			(65,721	)			(46,689	)
Property & equipment, net			252,655				259,674

 

Depreciation expense for the nine months ended September 30, 2018 and 2017 totaled $20,776 and $20,842, respectively.

 

NOTE 6 – LOANS PAYABLE

 

The Company has entered into two financing agreements for its vehicles used in the business. The following is a summary of these loans payable as of September 30, 2018:

Loan		Issue Date		Maturity Date		Interest Rate				Beginning Balance				Payments				Balance 12/31/17				Payments				Balance 9/30/18
Siam Commercial Bank #1		7/14/2016		7/14/2020			5.029	%		$	29,846				(7,442	)			22,404				(6,031	)			16,373
Siam Commercial Bank #2		11/29/2016		11/29/2020			8.98	%			15,801				(2,165	)			13,636				(3,120	)			10,516

 

NOTE 7 – PREFERRED STOCK

 

The Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred stock.

 

On March 25, 2018, the Company with the authorization of the board of directors and the majority shareholder adopted a resolution to create 500,000 shares of Series A preferred stock. The Company then filed an amendment to its certificate of incorporation with the State of Delaware on May 10, 2018 to create a certificate of designation for 500,000 shares of Series A preferred stock with each share convertible into 1,000 shares of common stock and with voting rights of 1,000 votes for each share of Series A preferred stock.

 

On May 10, 2018, Manichan Khor, the wife of Andrew Khor Poh Kiang, the President, CEO and Chairman entered into a stock purchase agreement to purchase 500,000 shares of Series A preferred stock at par value for total proceeds of $50.

 

 

NOTE 8 – COMMON STOCK

 

The Company is authorized to issue 1,000,000,000 shares of $0.0001 par value common stock.

 

As part of the Agreement and Plan of Merger with Abina Co. Ltd. The Company issued 111,000,000 shares of common stock. In addition, Mr. Khor cancelled 1,000,000 shares of his common stock.

NOTE 9 – RELATED PARTY TRANSACTIONS

During the year ended December 31, 2016, directors of Abina had loaned the Company a total of $655,565. The funds were used to pay for general operating expenses. All loans are unsecured, non-interest bearing and due on demand. As of September 30, 2018, the balance due to was $1,196,484.

As September 30, 2018 and December 31, 2017, the Company owed Richard Chiang $990 for the redemption of 9,900,000 shares at par value, which had previously been issued to him in serving in director and officer capacities.

 

Since 2016 a related party has advanced the Company funds to pay for general operating expenses. The funds are unsecured, non-interest bearing and due on demand. As of September 30, 2018, and December 31, 2017, the balance due is $74,979 and $50,270, respectively.

NOTE 10– COMMITMENT

In April 2017 the Company entered into a two-year lease for its office facility in Chiang Rai, Thailand. The monthly rent obligation is approximately $963. Minimum required rental payments for 2018 and 2019 are approximately $11,556 and $2,889, respectively.

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The balance of related after-tax components comprising accumulated other comprehensive income included in stockholders’ equity were as follows at September 30:

 

		September 30, 2018				December 31, 2017
Accumulated other comprehensive loss, beginning of period		$	(50,976	)		$	3,647
Change in cumulative translation adjustment			18,226				(54,623	)
Accumulated other comprehensive loss		$	(32,750	)		$	(50,976	)

 

NOTE 12 – SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

Special Note Regarding Forward-Looking Statements

 

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which 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. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. 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.

 

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

 

The Company was incorporated in the State of Delaware on July 27, 2015 and filed its registration statement on Form 10 to register with the U.S. Securities and Exchange Commission as a public company on August 7, 2015. We were originally organized as a vehicle to investigate and, if such investigation warrants, to acquire a target company or business seeking the perceived advantages of being a publicly held corporation.

 

On July 2, 2018, ANDES 7 Inc. a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger between the Company, ANDES 7 Acquisition Corp, (“Merger Sub”) a Delaware corporation and Abina Co. Ltd. (the “Target”). Abina Co. Ltd (“Abina”) was incorporated in Thailand on August 3, 2015 and has since then operated a diverse business involved in investments in hotels, resorts, and commercial property.

The Company pursuant to the merger is planning a leisure and tourist destination in Thailand with interests in merchandising, souvenirs, retail and real estate projects. The Company is seeking to develop a fully integrated hotel and entertainment center in Chiang Rai, Thailand that will include souvenir shops, a hotel, office buildings, a shopping mall, and a resort entertainment center catering to both local and foreign tourists.

Results of Operations

 

Three Months Ended September 30, 2018 compared to the Three Months Ended September 30, 2017

 

Revenues 

Sales revenue for the three months ended September 30, 2018, was $5,425, compared to $3,827 for the three months ended September 30, 2017, an increase of $1,598 or 41.7%. The increase in revenue was attributed to the sales of our 100^th Year’s Café and souvenir shop in Golden Triangle, Chiang Rai, Thailand.

 

Cost of Goods Sold

Cost of revenue for the three months ended September 30, 2018, was $1,020, compared to $5,832 for the three months ended September 30, 2017. a decrease of $4,812 or 82.5%. The reduction was due to the limited new designs for our t-shirts and souvenirs that were purchased during the quarter.

 

Operating Expenses

General and administrative expense was $55,237 for the three months ended September 30, 2018, compared to $61,954 for the three months ended September 30, 2017, a decrease of $6,717 or 10.8%.

 

Rent expense was $2,730 for the three months ended September 30, 2018, compared to $2,056 for the three months ended September 30, 2017, a decrease of $674 or 32.7%.

 

Advertising and promotion expenses were $2,042 for the three months ended September 30, 2018, compared to $858 for the three months ended September 30, 2017, a decrease of $1,184 or 137.9%. Advertising and promotion expense consists of advertising in magazines and promotional product giveaways of t-shirts and other souvenirs.

 Other Income (Expenses)

 

Interest expense for the three months ended September 30, 2018, was $407, compared to $72 for the three months ended September 30, 2017.

 

Net Loss

 

Net loss for the three months ended September 30, 2018, was $56,011, compared to $66,945 for the three months ended September 30, 2017. Net loss has decreased due to the combination of an increase gross margin and decreased operating costs.

 

Nine Months Ended September 30, 2018 compared to the Nine Months Ended September 30, 2017

 

Revenues 

Sales revenue for the nine months ended September 30, 2018, was $9,020, compared to $67,112 for the nine months ended September 30, 2017, a decrease of $58,092. The decrease was attributed to the clearance of health foods of which $50,000 was being planned to be sold through our souvenir shops but was not approved by the Thai Government.

 

Cost of Goods Sold

Cost of revenue for the nine months ended September 30, 2018, was $6,206, compared to $53,758 for the nine months ended September 30, 2017. a decrease of $47,552. This decrease was due to the existing inventory held and limited new designs for our t-shirts and souvenirs that were purchased during the period.

 

Operating Expenses

General and administrative expense was $204,302 for the nine months ended September 30, 2018, compared to $191,421 for the nine months ended September 30, 2017, an increase of $12,881.

 

Rent expense was $10,270 for the nine months ended September 30, 2018, compared to $23,948 for the nine months ended September 30, 2017, a decrease of $13,678 or 57.1%.Rent expense decreased in the current period due to closing of the Bangkok office in 2017.

 

Advertising and promotion expenses were $10,435 for the nine months ended September 30, 2018, compared to $15,304 for the nine months ended September 30, 2017, a decrease of $4,869 or 31.8%. Advertising and promotion expense consists of advertising in magazines and promotional product giveaways of t-shirts and other souvenirs.

 

Other Income (Expenses)

 

Interest expense for the nine months ended September 30, 2018, was $2,162, compared to $777 for the nine months ended September 30, 2017. This increase was due to an adjustment made on January 1, 2018, on the interest which was anticipated to occur in 2017 but was carried forward into 2018.

 

Net Loss

 

Net loss for the nine months ended September 30, 2018, was $224,355, compared to $218,094 for the nine months ended September 30, 2017.

 

Liquidity 

The accompanying unaudited financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As of September 30, 2018, we had cash of $1,810 and total liabilities of $1,301,866. We used $292,475 of cash flows in operating activities for the nine months ended September 30, 2018. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations.

 

Over the next 12 months we expect to expend approximately $30,000 in cash for legal, accounting and related services. Cash used for other expenditures is expected to be minimal. We hope to be able to attract suitable investors for our business plan, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.

 

We expect to be able to secure capital through advances from our Chief Executive Officer, shareholders and others in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.

The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for acquiring suitable partners or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.

 

Operating Capital and Capital Expenditure Requirements

 

Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

None.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, September 30, 2018. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to a material weakness in our internal control over financial reporting, which is described below.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of September 30, 2018, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2018: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

  

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018 have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

  

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

 

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

 

Item 1A. Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable. 

 

Item 5. Other Information.

 

None. 

 

 Item 6. Exhibits.

	Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
	3.1	Certificate of Incorporation		10		3.1	08/07/15
	3.2	By-Laws		10		3.2	08/07/15
	4.1	Specimen Stock Certificate		10		4.1	08/07/15
	31	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
	32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
	101.INS	XBRL Instance Document	X
	101.SCH	XBRL Taxonomy Extension Schema Document	X
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Definition	X

  

 

 

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	ANDES 7 Inc.
	By:	/s/ Andrew Khor Poh Kiang
		Andrew Khor Poh Kiang President, Chief Executive Officer, Chairman of the Board of Directors

 

	By:	/s/ Lee KokKeing
		Lee Kok Keing Chief Financial Officer

 

Dated: November 13, 2018