Item
1. Financial Statements (Unaudited)
Our
condensed consolidated financial statements included in this Form 10-Q are as follows:
These
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and the Securities and Exchange Commission instructions to Form
10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating
results for the interim period ended December 31, 2018 are not necessarily indicative of the results that can be expected for
the full year.
LUCKWEL
PHARMACEUTICALS INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Stated
in US Dollars)
|
|
December 31, 2018
|
|
|
March 31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
42,917
|
|
|
$
|
18,503
|
|
Prepaid expense and other current assets
|
|
|
569
|
|
|
|
-
|
|
Total Assets
|
|
$
|
43,486
|
|
|
$
|
18,503
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Other payable and accrued liabilities
|
|
$
|
87,386
|
|
|
$
|
66,043
|
|
Due to officer
|
|
|
767,659
|
|
|
|
81,757
|
|
Total Liabilities
|
|
|
855,045
|
|
|
|
147,800
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 200,000,000 and 100,000,000 shares authorized; 143,376,000 and 18,376,000 shares issued and outstanding as of December 31, 2018 and March 31, 2018, respectively.
|
|
|
1,433,760
|
|
|
|
183,760
|
|
Additional paid-in capital
|
|
|
465,748
|
|
|
|
1,715,748
|
|
Accumulated other comprehensive income
|
|
|
10
|
|
|
|
10
|
|
Accumulated deficit
|
|
|
(2,711,077
|
)
|
|
|
(2,028,815
|
)
|
Total stockholders’ deficit
|
|
|
(811,559
|
)
|
|
|
(129,297
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
43,486
|
|
|
$
|
18,503
|
|
See
accompanying notes to condensed consolidated financial statements.
LUCKWEL
PHARMACEUTICALS INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated
in US Dollars)
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
General and administrative expenses
|
|
$
|
(262,811
|
)
|
|
$
|
(122,806
|
)
|
|
$
|
(642,267
|
)
|
|
$
|
(388,820
|
)
|
Other income
|
|
|
1
|
|
|
|
95
|
|
|
|
5
|
|
|
|
287
|
|
Loss on disposal of a subsidiary
|
|
|
-
|
|
|
|
(4,123
|
)
|
|
|
-
|
|
|
|
(4,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(262,810
|
)
|
|
$
|
(126,834
|
)
|
|
$
|
(642,262
|
)
|
|
$
|
(392,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted
|
|
$
|
(0.002
|
)
|
|
$
|
(0.007
|
)
|
|
$
|
(0.005
|
)
|
|
$
|
(0.021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – basic and diluted
|
|
|
143,376,000
|
|
|
|
18,376,000
|
|
|
|
128,376,000
|
|
|
|
18,280,545
|
|
See
accompanying notes to condensed consolidated financial statements
.
LUCKWEL
PHARMACEUTICALS INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated
in US Dollars)
|
|
For the nine months ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(642,262
|
)
|
|
$
|
(392,656
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Disposal loss from a subsidiary
|
|
|
-
|
|
|
|
4,123
|
|
Prepaid expense and other current assets
|
|
|
(569
|
)
|
|
|
(1,224
|
)
|
Other assets
|
|
|
-
|
|
|
|
4,944
|
|
Due to officer
|
|
|
281,019
|
|
|
|
62,105
|
|
Other payable and accrued liabilities
|
|
|
21,343
|
|
|
|
187
|
|
Net cash flow used in operating activities
|
|
|
(340,469
|
)
|
|
|
(322,521
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
-
|
|
|
|
-
|
|
Proceeds from disposal of a subsidiary, net of cash balance at disposed entity
|
|
|
-
|
|
|
|
5
|
|
Net cash flow provided by investing activities
|
|
|
-
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
422,946
|
|
Capital distribution
|
|
|
(40,000
|
)
|
|
|
-
|
|
Proceeds from officer loans
|
|
|
404,883
|
|
|
|
-
|
|
Net cash flow provided by financing activities
|
|
|
364,883
|
|
|
|
422,946
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
24,414
|
|
|
|
100,430
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
18,503
|
|
|
|
29,413
|
|
|
|
|
|
|
|
|
|
|
Cash, End of Period
|
|
$
|
42,917
|
|
|
$
|
129,843
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash financing activities
|
|
|
|
|
|
|
|
|
Shares issued to officer for debt repayment
|
|
$
|
-
|
|
|
$
|
327,504
|
|
Expense payment by the primary shareholder
|
|
|
281,019
|
|
|
|
62,105
|
|
See
accompanying notes to condensed consolidated financial statements.
LUCKWEL
PHARMACEUTICALS INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Stated
in US Dollars)
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated other
Comprehensive
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance as of March 31, 2017
|
|
|
17,626,000
|
|
|
$
|
176,260
|
|
|
$
|
973,248
|
|
|
$
|
10
|
|
|
|
(1,491,727
|
)
|
|
|
(342,209
|
)
|
Common stock issued for cash
|
|
|
422,946
|
|
|
|
4,229
|
|
|
|
418,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
422,946
|
|
Common stock issued to officer for debt repayment
|
|
|
327,054
|
|
|
|
3,271
|
|
|
|
323,783
|
|
|
|
-
|
|
|
|
-
|
|
|
|
327,054
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(157,296
|
)
|
|
|
(157,296
|
)
|
Balance as of June 30, 2017
|
|
|
18,376,000
|
|
|
$
|
183,760
|
|
|
$
|
1,715,748
|
|
|
$
|
10
|
|
|
|
(1,649,023
|
)
|
|
|
250,495
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(108,526
|
)
|
|
|
(108,526
|
)
|
Balance as of September 30, 2017
|
|
|
18,376,000
|
|
|
$
|
183,760
|
|
|
$
|
1,715,748
|
|
|
$
|
10
|
|
|
|
(1,757,549
|
)
|
|
|
141,969
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(126,834
|
)
|
|
|
(126,834
|
)
|
Balance as of December 31, 2017
|
|
|
18,376,000
|
|
|
$
|
183,760
|
|
|
$
|
1,715,748
|
|
|
$
|
10
|
|
|
|
(1,884,383
|
)
|
|
|
15,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018
|
|
|
18,376,000
|
|
|
|
183,760
|
|
|
|
1,715,748
|
|
|
|
10
|
|
|
|
(2,028,815
|
)
|
|
|
(129,297
|
)
|
Common stock issued for service
|
|
|
125,000,000
|
|
|
|
1,250,000
|
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Capital distribution
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,000
|
)
|
|
|
(40,000
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(220,353
|
)
|
|
|
(220,353
|
)
|
Balance as of June 30, 2018
|
|
|
143,376,000
|
|
|
|
1,433,760
|
|
|
|
465,748
|
|
|
|
10
|
|
|
|
(2,289,168
|
)
|
|
|
(389,650
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(159,099
|
)
|
|
|
(159,099
|
)
|
Balance as of September 30, 2018
|
|
|
143,376,000
|
|
|
|
1,433,760
|
|
|
|
465,748
|
|
|
|
10
|
|
|
|
(2,448,267
|
)
|
|
|
(548,749
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(262,810
|
)
|
|
|
(262,810
|
)
|
Balance as of December 31, 2018
|
|
|
143,376,000
|
|
|
$
|
1,433,760
|
|
|
$
|
465,748
|
|
|
$
|
10
|
|
|
$
|
(2,711,077
|
)
|
|
$
|
(811,559
|
)
|
See
accompanying notes to condensed consolidated financial statements
LUCKWEL
PHARMACEUTICALS INC.
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 16, 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 determines there is no material impact
of adopting ASU 2018-02 on its condensed consolidated financial statements.
In
March 2018, the FASB issued ASU 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 determines there is no material impact of adopting ASU 2018-05 on its condensed
consolidated financial statements.
In
June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): “Improvements to Nonemployee
Share-Based Payment Accounting.” The amendment simplifies several aspects of the accounting for nonemployee share-based
payment transactions resulting from expanding the scope of ASC Topic 718, Compensation—Stock Compensation to include share-based
payment transactions for acquiring goods and services from nonemployees. The guidance is effective for annual periods, and interim
periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted, including any interim period,
for reporting periods for which financial statements have not been issued, but no earlier than an entity’s adoption date
of ASC Topic 606. The Company is currently evaluating the impact of adopting ASU 2018-07 on its condensed consolidated financial
statements.
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 $42,917 in cash and a
working capital deficit of $811,559, has incurred losses since inception of $2,711,077, 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 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
the Company does not have sufficient working capital to pay its operating costs for the next 12 months, it will require additional
funds to pay its legal, accounting and other fees associated with our Company and its filing obligations under United States federal
securities laws, as well as to pay its other accounts payable generated in the ordinary course of our business. Once these costs
are accounted for, it will focus on the following activities:
1.
|
Establish
a management team to work on establishing pharmaceutical operations in Chicago, focusing on generic non-steroidal anti-inflammatory
medicines, hypertension and cholesterol drugs.
|
2.
|
Apply
for US ANDA/NDA for the above mentioned drugs
|
3.
|
Intellectual
property registration work.
|
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 $139,929 in cash and made
$132,536 payment on behalf of the Company during the three months ended December 31, 2018. During the comparable period of 2017,
Mr. Kingrich Lee made payments amounting to $24,365 on behalf of the Company. Mr. Kingrich Lee loaned an aggregate of $404,883
in cash and made payments aggregating $281,019 on behalf of the Company during the nine months ended December 31, 2018. During
the comparable period of 2017, he made aggregate payments of $62,105 on behalf of the Company.
Accordingly,
Mr. Kingrich Lee is owed an aggregate amount of $767,659 and $81,757 as of December 31, 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 December 31, 2018, the Company had 143,376,000 shares of common stock issued and outstanding. During the nine months ended
December 31, 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.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the
words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. We intend such
forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. Further information concerning our business, including additional factors that could materially affect
our financial results, is included herein and in our other filings with the SEC.
Overview
As
reflected in the accompanying financial statements, we have no source of revenue and need additional cash resources to maintain
our operations. We have $42,917 in cash and a working capital deficit of $811,559, have incurred losses since inception
of $2,711,077, and have not yet received any revenue from sales of products or services. These factors raise substantial doubt
about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise
additional capital or obtain necessary debt financing. We are presently dependent on our controlling shareholder to provide us
funding for our daily operation and expenses, including professional fee and fees charged by regulators, although he is under
no obligation to do so.
We
intend to meet our cash requirements for the next 12 months from the issuance date of this report through a combination of debt
and equity financing by way of private placements, friends, family and business associates. We currently do not have any arrangements
in place to complete any private placement financings and there is no assurance that we will be successful in completing any such
financings on terms that will be acceptable to us. We anticipate that Mr. Kingrich Lee, our Chief Executive Office, will spearhead
our 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 establishing pharmaceutical operations in Chicago, focusing on generic non-steroidal
anti-inflammatory medicines, hypertension and cholesterol drugs.
|
|
2.
|
Apply for US
ANDA/NDA for the above mentioned drugs.
|
|
3.
|
Intellectual
property registration work.
|
Any
failure to raise money will have the effect of delaying the timeframes in our business plan as set forth above, and we may have
to push back the dates of such activities.
Results
of Operations
The
Three Months and Nine Months Ended December 31, 2018 and 2017
Operating
Revenue
We
recorded no consolidated revenue and consolidated net loss for the three-month and nine-month periods ended December 31,
2018 and the same for the corresponding periods in 2017 as we are a shell company without any operations to generate revenue.
We do not anticipate receiving further revenue for so long as we have no operations.
Operating
Expenses
We
had operating expenses of $262,811 and $122,806 for the three months ended December 31, 2018 and 2017, respectively, and
$642,267 and $388,820 for the nine months ended December 31, 2018 and 2017, respectively.
Our
operating expenses for the three months ended December 31, 2018 consisted mainly of professional fees of $108,320, officer compensation
of $60,488, travel and entertainment expenses of $47,805, rent of $959, and office operation expenses of $45,240. Operating
expenses increased significantly due to increased travel and business development activities. Besides, we also hired consultants
about business management which led to the increase of operating expenses.
Our
operating expenses for the three months ended December 31, 2017 consisted mainly of professional fees of $48,906, officer compensation
of $59,624, travel and entertainment expenses of $8,213, rent of $3,481, and other operation expenses of $2,582.
Our
operating expenses for the nine months ended December 31, 2018 consisted mainly of professional fees of $209,735,
officer compensation of $206,201, travel and entertainment expenses of $80,502, rent of $2,426, office operations
expenses of $142,900, and other operation expenses of $503. Operating expenses increased due to increased travel and
businesses development activities. In addition, we have been providing education and housing allowances to Mr. Kingrich Lee,
our Chief Executive Officer according to his employment contract since November 2017, which also increased our
operating expense.
Our
operating expenses for the nine months ended December 31, 2017 consisted mainly of professional fees of $175,177, officer compensation
of $155,623, travel expenses of $22,896, rent of $21,677, and other operation expenses of $13,447.
We
anticipate our operating expenses will increase sharply as we proceed to implement our business plan described above and become
operational.
Net
Loss
We
incurred a net loss of $262,810 and $126,834 for the three months ended December 31, 2018 and 2017, respectively, and a net loss
of $642,262 and $392,656 for the nine months ended December 31, 2018 and 2017, respectively.
Liquidity
and Capital Resources
As
of December 31, 2018, we had total current assets of $43,486 consisting of $42,917 in cash and $569 in prepaid expenses and other
current assets. As of December 31, 2018, we had current liabilities in the amount of $855,045, consisting of other payable and
accrued liabilities of $87,386, and $767,659 due to an officer.
The
table below sets forth selected cash flow data for the periods presented:
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash used in operating activities
|
|
$
|
(340,469
|
)
|
|
$
|
(322,521
|
)
|
Net cash flow provided by investing activities
|
|
|
-
|
|
|
|
5
|
|
Net cash provided by financing activities
|
|
|
364,883
|
|
|
|
422,946
|
|
Net increase in cash
|
|
$
|
24,414
|
|
|
$
|
100,430
|
|
Our
negative operating cash flows were mainly a result of operating expenses (See also Result of Operations).
Our
positive financing cash flows were a result of proceeds from officer loans.
On
May 3, 2018, we 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 newly issued
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 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.
Despite
having $42,917 in cash as of December 31, 2018, we have insufficient cash to operate our business at the current level for the
next 12 months from the issuance date of this report and insufficient cash to achieve our business goals. The success of our business
plan beyond the next 12 months from the issuance date of this report is contingent upon us obtaining additional financing. We
intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures,
working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sale of stock or the
advancement of loans of funds at this time. There can be no assurance that such additional financing will be available to us on
acceptable terms, or at all.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements.
Item
4. Controls and Procedures
Disclosure
Controls and Procedures
We
conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) as of December 31, 2018, to ensure that information required to be disclosed
by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated
to our management, including our Chief Executive and Chief Financial Officer, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive and Chief Financial Officer
has concluded that as of December 31, 2018, our disclosure controls and procedures were not effective at the reasonable assurance
level due to the material weaknesses identified below.
Our
principal executive and principal financial officer does not expect that our disclosure controls or internal controls will prevent
all error and all fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable,
not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of a simple error or mistake. There can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Remediation
Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
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 December 31, 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 December
31, 2018, our internal controls over financial reporting were not effective. The material weaknesses identified related to (i)
a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements;
(ii) a lack of sufficient documented financial closing policies and procedures; and (iii) a lack of independent directors and
an audit committee.
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 March 31, 2019: (i) appoint additional
qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written
policies and procedures for accounting and financial reporting, and (iii) strengthen our financial team by employing more qualified
accountant(s) conversant with US GAAP to enhance the quality of our financial reporting function. The remediation efforts set
out in (i), (ii) and (iii) 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
During
the quarter ended December 31, 2018, there have been no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.