Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing in this report and are hereby referenced. 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 report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers; and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates; and, the continued employment of our key personnel and other risks associated with competition.
Plan of Operation
The Company is currently pursuing business opportunities in Hong Kong. The Company is contemplating purchasing two existing companies, one in financing and the other in the retail tea business. As of March 31, 2019, there has been no major progress regarding these acquisitions.
On November 15, 2018, the Company created Ando Automobile Technology Limited, a Hong Kong company. The Company intends this fully-owned subsidiary to operate as an automobile trading company, trading in foreign-made automobiles to be shipped to Chinese buyers directly. As of March 31, 2019, this subsidiary has no operations.
Results of Operations for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018
Revenues
. The Company’s revenues were $0 for the three-month period ended March 31, 2019 and $0 for the three-month period ended March 31, 2018.
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Selling, General and Administrative Expenses
. Selling, general and administrative expenses for the three-month period ended March 31, 2019 were $5,517 as compared to $3,495 for the three-month period ended March 31, 2018. General and administrative expenses increased due to additional wire transfer fees and OTCAB quarterly fees.
Professional Fees
. Professional Fees for the three-month period ended March 31, 2019 were $4,200 as compared to $3,550 for the three-month period ended March 31, 2018. The increase was due primarily to additional accounting and audit fees.
Results of Operations for the Six Months Ended March 31, 2019 Compared to the Six Months Ended March 31, 2018
Revenues
. The Company’s revenues were $0 for the six-month period ended March 31, 2019 and $0 for the six-month period ended March 31, 2018.
Selling, General and Administrative Expenses
. Selling, general and administrative expenses for the six-month period ended March 31, 2019 were $10,990 as compared to $7,070 for the six-month period ended March 31, 2018. General and administrative expenses increased due to additional wire transfer fees and OTCAB quarterly fees.
Professional Fees
. Professional Fees for the six-month period ended March 31, 2019 were $25,500 as compared to $9,585 for the six-month period ended March 31, 2018. The increase was due to the increase in wire fees and consulting fees related to future bond issuances.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following:
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As of
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As of
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March 31, 2019
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September 30, 2018
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Cash
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$
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62,136
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$
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--
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Prepaid Expenses
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3,400
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9,000
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Related Party Loans
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89,451
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48,958
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Working Deficit
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(76,482)
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(39,993)
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Total Current liabilities
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$
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142,018
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$
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48,993
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The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period from inception on August 22, 2015 through March 31, 2019, the Company has had minimal operations, and has accumulated a deficit of $147,322. In view of this, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue operations and to achieve a level of profitability large enough to cover the Company’s expenses. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities, with some additional funding from other traditional financing sources, until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has evaluated these factors and has determined that they raise substantial doubt about the Company’s ability to continue as a going concern.
The officers and directors have agreed to advance funds to the Company to meet its obligations.
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Impact of Inflation
We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.
Net Cash Used in Operating Activities
We experienced net cash used in operating activities for the six-month period ended March 31, 2019 of $28,357 due to cash used to fund a net loss of $36,489. We experienced net cash used in operating activities of $13,720 for the six-month period ended March 31, 2018 due to cash used to fund a net loss of $16,655.
Net Cash Used in Investing Activities
The net cash used in investing activities during the six-month periods ended March 31, 2019 and 2018 was $0.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the six-month period ended March 31, 2019 was $90,493, and $13,720 during the six-month period ended March 31, 2018, due to the Company entering into a promissory note and to a related party making payments on the Company’s behalf.
Availability of Additional Funds
Based on our working capital deficit as of March 31, 2019 and zero revenues, we expect to need additional equity and/or debt financing to continue our operations during the next 12 months. We expect that our current cash on hand will not fund our operations through September 2019.
Critical Accounting Policies and Estimates
Our unaudited interim financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of unaudited interim financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited interim financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Our significant estimates and assumptions include amortization, the fair value of our stock, and the valuation allowance relating to the Company’s deferred tax assets.
Material Commitments
On March 18, 2017, Ando Capital Investment Limited engaged Acorn Assets & Equity Limited to identify and precipitate the purchase of a public company through a Consulting Agreement. On August 29, 2017, a supplement to the Consulting Agreement was signed to clarify certain terms of the agreement. The supplementary document states that the transfer agent fees incurred in the purchase, such as cancelation or issuance of share certificates, new CUSIP application, and printing of new share certificate templates, will be paid by Acorn Assets & Equity Limited until the completion of the initial Consulting Agreement.
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At March 31, 2019 and September 30, 2018, Acorn Assets & Equity Limited has paid transfer agent fees in the amounts of $3,830 and $1,215, respectively, on behalf of Ando Holdings Ltd.
On November 7, 2018, the Company entered into a Consulting Agreement with Greenpro Financial Consulting Ltd. (Greenpro) to advise on the required procedures for the issuance of bond. Greenpro’s responsibilities include the drafting and preparation of the Bond Subscription Agreement and Bond Form 8-K, along with the legal fees relevant to the Bond 8-K
The Company agreed to pay Greenpro a fee of $10,000, $7,000 to be paid within seven (7) days of execution of the agreement, and $3,000 to be paid within seven (7) days of the submission of the Form 8-K related to the issuance of bond. At March 31, 2019 and September 30, 2018, the Company has paid Greenpro $7,000 and $0, respectively.
Off Balance Sheet Arrangements
As of March 31, 2019, we had no off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Disclosure under this section is not required for a smaller reporting company.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (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 that such information is accumulated and communicated to our management, including our President and Treasurer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our third fiscal quarter covered by this report. Based on the foregoing, our President and Treasurer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level at March 31, 2019. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have the financial resources to do so:
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We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to an audit committee resulting in a fully functioning audit committee, which will undertake the oversight in the establishment and monitoring of required internal controls and procedures, such as reviewing and approving estimates and assumptions made by management when funds are available to us.
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Management believes that the appointment of outside directors to a fully functioning audit committee, would remedy the lack of a functioning audit committee.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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