ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E the Securities Exchange Act of 1934, as amended and
such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. "Forward-looking statements" describe future expectations,
plans, results, or strategies and are generally preceded by words
such as "may," "future," "plan" or "planned," "will" or "should,"
"expected," "anticipates," "draft," "eventually" or "projected."
You are cautioned that such statements are subject to a multitude
of risks and uncertainties that could cause future circumstances,
events, or results to differ materially from those projected in the
forward-looking statements, including the risks that actual results
may differ materially from those projected in the forward-looking
statements as a result of various factors, and other risks
identified in a companies' annual report on Form 10-K and other
filings made by such company with the United States Securities and
Exchange Commission. You should consider these factors in
evaluating the forward-looking statements included herein, and not
place undue reliance on such statements.
The following discussion should be read in
conjunction with
the financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2017, as filed with the Securities and Exchange
Commission (“SEC”) on April 10, 2018 (the “Annual
Report”).
Please note that t
he accompanying financial statements have
been prepared assuming that the Company will continue as a going
concern. As shown in the financial statements, the Company had a
material working capital deficiency and an accumulated deficit at
September 30, 2018, and a record of continuing losses. These
factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not
include adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the
Company be unable to continue in operation.
Company Overview
The
Company was incorporated in the State of Nevada on December 1,
1997. Its operations to date have been limited to obtaining the
license to various environmental and other technologies, conducting
preliminary marketing efforts and seeking financing.
The Company's principal offices are at 224 Fifth Avenue, Suite
D144, New York, NY 10022 Telephone: 604-790-8799. The Tokyo branch
is located at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan.
Telephone: 03-5808-3663.
General
Management’s discussion and analysis of results of operations
and financial condition is intended to assist the reader in the
understanding and assessment of significant changes and trends
related to the results of operations and financial position of the
Company together with its subsidiary. This discussion and analysis
should be read in conjunction with the consolidated financial
statements and accompanying financial notes, and with the Critical
Accounting Policies noted below.
Plan of Operations
The Company is a development stage corporation. It has not
commenced its planned operations of manufacturing and
marketing. Its operations to date have been limited to
conducting various tests on its technologies and seeking financing.
The Company will continue to develop and market two technologies,
which the Company believes have great market
potential.
The first technology is an automated personal waste collection and
cleaning machine Haruka (formerly "Heartlet"), developed by Nanomax
Corporation in Japan. The Haruka is a machine used in retirement
homes, hospitals, and even in private residences. The Haruka allows
the patient maximum comfort. The Haruka lowers the burden on the
caretaker with an automated cleaning system. This machine is the
only machine in its class to have a 90% government rebate, which
the company believes makes the technology extremely competitive
even in the current global economic crisis. The company obtained
sales and manufacturing rights to the Haruka brand and is currently
seeking manufacturing partners.
The second technology is Thoughts Routine Mechanism
(“RUNE”) developed by the Company. We plan to develop
this operating software to be used on electronic devices, such as
smart phones, PC’s and gaming machines. We have secured
technology and human resources that extend this technology to other
applications outside the gaming sector. The Company has developed
an alliance with Valhalla Game Studios (“VGS”) to
jointly conduct game development and application development on
“fate diagnosis based statistical theory, and “fate
diagnosis” game service on mobile phones, smart phones, and
tablets. We believe the collaboration between the Company and VGS
may contribute to the future growth of the Company. Currently, Mr.
Maki offers a wide range of advice as a special advisor, and this
business continues to be evaluated and developed. In addition,
cartoons, movies and games play a large role and influence world
views and we believe that this technology be a very effective tool
in this area.
The Company will also be concentrating its efforts on capital
raising efforts to enter into the NASDAQ Global Market. The Company
satisfies all entry requirements, except for investment capital.
The Company's target is to raise $30,000,000 in the near future. As
stated above, the Company cannot predict whether or not it will be
successful in its capital raising efforts and, thus, be able to
satisfy its cash requirements for the next 12 months. If the
Company is unsuccessful in raising additional capital, it may not
be able to complete its plan of expanding operations as discussed
above. The company is expecting to gain the capital from issuing
and selling the shares of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
There were no revenues for the three and nine months ended
September 30, 2018 and 2017.
General and administrative expenses decreased $693 (5.0%) to
$13,129 for the three months ended September 30, 2018 as compared
to $13,822 for the three months ended September 30, 2017. This
decrease is attributed to lower travel, automobile and insurance
expenses offset partially by increases in professional fees and
utility expenses. General and administrative expenses decreased
$2,427 (4.6%) to $50,238 for the nine months ended September 30,
2018 as compared to $52,665 for the nine months ended September 30,
2017. This decrease is attributed to a decrease in professional
fees and travel expenses offset partially by higher utility and
automobile expenses.
As a result of the above, the Company incurred a losses from
operations of $13,129 and $50,238 for the three and nine months
ended September 30, 2018 as compared to a losses from operations of
$13,822 and $52,665 for the three and nine months ended September
30, 2017.
For the three and nine months ended September 30, 2018, interest
expense increased $275 and $893 to $3,521 and $10,228,
respectively, as compared to $3,246 and $9,335 for the three and
nine months ended September 30, 2017, respectively, as a result of
the additional advances from stockholders
As a result of the above, the Company incurred a net losses of
$16,650 and $60,466 for the three and nine months ended September
30, 2018 as compared to net losses of $17,068 and $62,000 for the
three and nine months ended September 30, 2017.
LIQUIDITY AND CAPITAL RESOURCES
The Company's minimum cash requirements for the next twelve months
are estimated to be $80,000, including rent, audit fees, office
expenses, interest and professional fees. The Company does not have
sufficient cash on hand to support its overhead for the next twelve
months and there are no material commitments for capital at this
time other than as described above. The Company will need to issue
and sell shares to gain capital for operations or arrange for
additional stockholder or related party loans. There is
no current commitment for either of these fund
sources.
Our working capital deficit increased $60,466 to $541,729 at
September 30, 2018 as compared to $481,263 at December 31, 2017
primarily due to an increase in advances from stockholders and
officers, accrued expenses and due to affiliates.
On September 30, 2018, the Company had a cash balance of $4,989.
The Company’s principal sources and uses of funds were as
follows:
Cash used in operating activities.
For the nine months ended September 30, 2018, the
Company used $41,237 in cash for operations as compared to using
$45,165 in cash for operations for the nine months ended September
30, 2017, primarily as a result of the increase in accrued expenses
offset partially by the lower operating loss.
Cash provided by financing activities.
Net cash provided by financing activities for the
nine months ended September 30, 2018 was $41,212 as compared to
$45,321 for the nine months ended September 30, 2017 primarily as a
result of lower proceeds from loans from stockholders and
officers.
OFF-BALANCE SHEET ARRANAGEMENTS
The Company has no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
The
Company prepares its financial statements in accordance with
accounting principles generally accepted in the United States of
America. Preparing financial statements in accordance with
generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the financial statements and the
reported amounts of revenue and expenses during the reported
period.
Our critical accounting policies are described in the Notes to the
Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2017, as filed with the SEC on April
10, 2018 (the “Annual Report”). There have been no
changes in our critical accounting policies. Our significant
accounting policies are described in our notes to the 2017
consolidated financial statements included in our Annual
Report.
RECENTLY ISSUED ACCOUNTING STANDARDS
No recently issued accounting pronouncements had or are expected to
have a material impact on the Company’s consolidated
financial statements.
ITEM 4. MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND
PROCEDURES
We
maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) are recorded, processed, summarized and
reported within the time periods specified in the rules and forms
of the SEC, and that such information is accumulated and
communicated to our Chief Executive Officer (“CEO”) and
Chief Financial Officer (“CFO”), to allow timely
decisions regarding required disclosure. 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 a 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. Management designed the
disclosure controls and procedures to provide reasonable assurance
of achieving the desired control objectives.
We
carried out an evaluation, under the supervision and with the
participation of our management, including our CEO and CFO, of the
effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by
this Quarterly Report. Based upon that evaluation, the CEO and
CFO concluded that the Company’s disclosure controls and
procedures were ineffective for the reasons discussed below. In
addition, management identified the following material weaknesses
in its assessment of the effectiveness of disclosure controls and
procedures as of September 30, 2018:
The
Company did not effectively segregate certain accounting duties due
to the small size of its accounting staff. A material weakness is a
deficiency, or a combination of control deficiencies, in internal
control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim
consolidated financial statements will not be prevented or detected
on a timely basis. Notwithstanding the determination that our
internal control over financial reporting was not effective, as of
December 31, 2017, and that there was a material weakness as
identified in this Quarterly Report, we believe that our financial
statements contained in this Quarterly Report fairly present our
financial position, results of operations and cash flows for the
years covered hereby in all material respects.
We plan
on increasing the size of our accounting staff at the appropriate
time for our business and its size to ameliorate our concern that
we do not effectively segregate certain accounting duties, which we
believe would resolve the material weakness in disclosure controls
and procedures, but there can be no assurances as to the timing of
any such action or that we will be able to do so.
(b) Changes in Internal Control over Financial
Reporting
There
were no changes in our internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.