NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note
1 – Organization and Basis of Presentation
The
accompanying condensed consolidated unaudited interim financial statements of Luckwel Pharmaceuticals Inc. (the “Company”,
“we” or “our” and formerly known as “Luckycom Pharmaceuticals Inc.” and “Luckycom Inc.”)
have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements
and notes thereto of the Company contained in the Company’s Form 10-K filed with the SEC on July 13, 2018.
In
the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have been reflected herein. The results of operations
for the interim periods are not necessarily indicative of the results to be expected for the full year.
Organization
and Description of Business
The
Company plans to acquire, develop, manufacture and market pharmaceutical medication.
Luckycom
Limited, a wholly-owned subsidiary of the Company, was incorporated in Hong Kong as Goldsans Capital (Hong Kong) Limited (“Goldsans”)
on November 8, 2011. Goldsans name was changed to Wudor Capital Hong Kong Limited on May 22, 2012 and subsequently to Luckycom
Limited on June 28, 2013.
On
December 13, 2017, the Company’s sole officer and director, and a shareholder, Mr. Kingrich Lee executed a Sold Note and
Instrument of Transfer on behalf of Luckwel Pharmaceuticals Inc., pursuant to which the Company would sell to Ms. Lijian Li, Mr.
Kingrich Lee’s sister, 10,000 shares of stock of the Company’s wholly-owned Hong Kong subsidiary, Luckycom Limited
at a purchase price of HKD 1 (approximately $0.13) per share aggregating to HKD 10,000 (approximately $1,281). On the same date,
the transaction was consummated with the payment of stamp duty to the Hong Kong tax department.
On
April 11, 2018, Luckwel Pharmaceuticals Inc. filed a Certificate of Amendment to the Articles of Incorporation to change its name
from Luckycom Pharmaceuticals Inc. to Luckwel Pharmaceuticals Inc. and to increase the number of its authorized shares of common
stock from 100,000,000 to 200,000,000 with an effective date of April 13, 2018. It then amended and restated its by-laws to reflect
the new corporate name.
Recent
Accounting Pronouncements
In
February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments
in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects
resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax
Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments
only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires
that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments
in this Update also require certain disclosures about stranded tax effects. Public business entities should apply the amendments
in ASU 2018-02 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption
of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for
reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods
for which financial statements have not yet been made available for issuance. The Company is currently evaluating the impact of
adopting ASU 2018-02 on its consolidated financial statements.
In March 2018, the FASB issued ASU No. 2018-05, Income Tax (Topic 740) - Amendments to SEC Paragraphs Pursuant
to SEC Staff Accounting Bulletin No. 118. This update adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118,
which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December
22, 2017 - the date on which the Tax Act was signed into law.
The Company does not believe other recently
issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial
position, statements of operations and cash flows.
Note
2 – Going Concern
The
Company has no source of revenues and need additional cash resources to maintain the operations. The Company has a working capital
deficit of $389,650, has incurred losses since inception of $2,289,168, and have not yet received any revenue from sales of products
or services. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability
to continue as a going concern is dependent on its ability to raise additional capital or obtain necessary debt financing. The
Company is presently dependent on its controlling shareholder to provide us funding for its daily operation and expenses, including
professional fee and fees charged by regulators, although he is under no obligation to do so.
The
Company has $34,452 in cash as of June 30, 2018 and believes that the expenses over the next 12 months from the issuance date
of this report will be approximately $300,000. This estimate may change significantly depending on the nature of the future business
activities and the ability to raise capital from shareholders or other sources.
The
Company intends to meet the cash requirements for the next 12 months from the issuance date of the condensed consolidated financial
statements through a combination of debt and equity financing by way of private placements, friends, family and business associates.
The Company currently did not have any arrangements in place to complete any private placement financings and there is no assurance
that the Company will be successful in completing any such financings on terms that will be acceptable to it. The Company anticipates
that Mr. Kingrich Lee, the Chief Executive Office, will spearhead the financing efforts.
If
we do not have sufficient working capital to pay our operating costs for the next 12 months, we will require additional funds
to pay our legal, accounting and other fees associated with our Company and our filing obligations under United States federal
securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. Once these costs
are accounted for, we will focus on the following activities:
1.
|
Establish
a management team to work on the pharmaceutical operations in US and Asia. In particular,
our goal is to submit an abbreviated new drug application (“ANDA”) with the
US Food and Drug Administration for our generic drugs.
|
|
|
2.
|
Implement
manufacturing and sales of the newly-acquired hypertension and cholesterol drugs, namely
WELVASC, WELTOR and WEDUET.
|
Any
failure to raise money will have the effect of delaying the timeframes in the business plan as set forth above, and the Company
may have to push back the dates of such activities.
The
condensed consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able
to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has
incurred losses and further losses are anticipated as a result of the development of business which raises substantial doubt about
the Company’s ability to continue as a going concern within the next twelve months from the issuance date of the condensed
consolidated financial statements. The ability to continue as a going concern is dependent upon the Company generating profitable
operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities
arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve
months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock.
Note
3 – Related Party Transactions
The
Company’s sole officer and director, and a shareholder, Mr. Kingrich Lee, loaned an aggregate of $268,834 and $18,868 to
the Company during the three months ended June 30, 2018 and 2017, respectively.
Mr.
Kingrich Lee is owed an aggregate amount of $350,591 and $81,757 as of June 30, 2018 and March 31, 2018, respectively.
The
amounts are unsecured, non-interest bearing and due on demand.
On May 3, 2018, the Company entered
into an Intellectual Property Sale and Purchase Agreement (the “Agreement”) with Luckwel Asia Limited (the “Seller”,
formerly known as Essential Choice Ventures Ltd), an entity under common control of Mr. Kingrich Lee to purchase from the Seller
the intellectual property rights to five drugs, comprising three generic medicines used to treat hypertension and high cholesterol
and two advanced drug candidates - KL008 for treatment of hypertension and KL009 for treatment of high cholesterol in various
stages of being developed and manufactured (the “Transaction”).Pursuant to the terms of the Agreement, the Company
would pay the Seller on closing (i) US$40,000 and (ii) issue an aggregate 125,000,000 restricted shares of its common stock, par
value $0.01. The Transaction closed on May 3, 2018. The Company recorded the carrying value of the intellectual property as
nil in the Seller’s record, $40,000 as capital distribution to the Seller and recorded the par value of the common stock as additional paid-in capital, which was due to the Transaction
being regarded as an equity transaction because both parties were under common control.
Note
4 – Capital Stock
As
of June 30, 2018, the Company had 143,376,000 shares of common stock issued and outstanding. During the three months ended June
30, 2018, the Company issued in aggregate of 125,000,000 restricted shares of its common stock to Luckwel Asia Limited.
Note
5 – Subsequent Event
The
Company has evaluated subsequent events through the issuance of the condensed consolidated financial statements and no subsequent
event is identified.