NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
1 – Organization and Description of Business
Luckwel
Pharmaceuticals Inc. (“Luckwel” or 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
April 11, 2018, Luckwel filed a Certificate of Amendment to the Articles of Incorporation to change its name from Luckycom Pharmaceuticals
Inc. to Luckwel and to increase the number of its authorized shares of common stock to 200,000,000 with an effective date of April
13, 2018. The Company then amended and restated its by-laws to reflect the new corporate name.
The
Company’s corporate office is located in Waltham, Massachusetts and is incorporated in the State of Nevada.
As
used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless otherwise indicated, all references herein
to “Luckwel,” the “Company,” “we” or “us” refer to Luckwel Pharmaceuticals Inc.
Note
2 - Summary of Significant Accounting Policies
Preparation
of Interim Financial Statements
The
accompanying condensed financial statements have been prepared by the Company 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 June 30, 2019 are not necessarily indicative of the results that can be expected for the
full year. The condensed financial statements contained herein 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 year ended March 31, 2019 filed with the SEC
on July 2, 2019.
These
condensed financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge
its liabilities in the normal course of business. This assumption is presently uncertain and contingent upon the Company’s
ability to raise additional working capital. The financial statements do not include any adjustments relating to recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
Basis
of Presentation
The
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United
States of America (“U.S. GAAP”) and are presented in US dollars (“USD”).
Cash
Cash
includes all cash in bank with no restrictions. The Company had $72,394 and $25,754 of cash as of June 30, 2019 and March 31,
2019, respectively.
LUCKWEL
PHARMACEUTICALS INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2 – Summary of Significant Accounting Policies (Continued)
Fair
Value of Financial Instruments
Accounting
Standards Codification (“ASC”) Topic 820,
Fair Value Measurement,
defines fair value as the price that would
be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three
levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the
fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date. Level 2 utilizes quoted market prices in markets that are not active,
broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Level 3 inputs are unobservable
inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement
date.
The
Company’s financial instruments consist of cash, accrued liabilities and due to officer. The carrying amount of these financial
instruments approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates
unless otherwise disclosed in these financial statements. There were no financial instruments classified as Level 3 in the fair
value hierarchy during the three months ended June 30, 2019 and June 30, 2018, respectively.
Income
Taxes
During
the three months ended June 30, 2019 and 2018, there was no provision for income taxes as the Company incurred losses during both
periods. Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income
tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount
of deferred tax assets that, based on available evidence, are not expected to be realized.
Uncertain
tax positions
The
Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that
it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized
upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision
for income taxes. Tax years from 2013 forward remain open to examination by the U.S. federal tax authority due to the carryover
of net operating losses or tax credits. According to Hong Kong Inland Revenue Department, the statute of limitation is six years
if any company chargeable with tax has not been assessed at less than the proper amount. The statute of limitation is extended
to 10 years if the underpayment of taxes is due to fraud or willful evasion. There were no uncertain tax positions as of June
30, 2019 and March 31, 2019.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Basic
and Diluted Net Loss Per Share
Basic
loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average
number of common shares during the period. Diluted loss per share is calculated by dividing the Company’s net loss available
to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average
number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There
were no potentially dilutive debt or equity outstanding as of June 30, 2019 and March 31, 2019, respectively.
Recent
Accounting Pronouncements
The
Company does not believe any recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on the financial position, statements of operations and cash flows.
LUCKWEL
PHARMACEUTICALS INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
3 – Going Concern
The
Company does not have any sources of revenues and needs additional cash resources to maintain its operations. At June 30, 2019,
we have $72,394 in cash and a net working capital deficit of $932,337, have incurred losses since inception of $2,831,855,
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 Chief Executive Officer, Mr. Kingrich Lee to either 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, or to spearhead financing efforts with third parties.
We
currently do not have any arrangements in place to complete any financings and there is no assurance that we will be successful
in completing any such financings on terms that will be acceptable.
Our
priority, should we receive such additional funds is 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 its other accounts payable generated in
the ordinary course of our business.
The
financial statements have been prepared on a going concern basis which assumes we will be able to realize its assets and discharge
our liabilities in the normal course of business for the foreseeable future. We have incurred losses and further losses are anticipated
as a result of the development of business which raises substantial doubt about our ability to continue as a going concern within
the next twelve months from the issuance date of the financial statements. The ability to continue as a going concern is dependent
upon our generating profitable operations in the future and/or obtaining financing necessary to meet our obligations and repay
our 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 our common stock.
LUCKWEL
PHARMACEUTICALS INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
4 – Related Party Transactions
The
Company’s sole officer and director, and also a shareholder, Mr. Kingrich Lee, loaned an aggregate of $154,670 in cash to
the Company during the three months ended June 30, 2019.
Accordingly,
Mr. Kingrich Lee is owed an aggregate amount of $905,920 and $751,250 as of June 30, 2019 and March 31, 2019, respectively, from
the Company.
The
amounts are unsecured, non-interest bearing and are 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) $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.
On
November 1, 2017, the Company entered into an employment agreement with Mr. Kingrich Lee. The agreement is for one year, renewable
for successive one-year terms if not terminated, and provides an annual compensation of $180,000, and other benefits, including
housing and education allowances. On November 1, 2018, the Company renewed the employment agreement with Mr. Kingrich Lee for
another one-year term.
Note
5 – Capital Stock
As
of June 30, 2019 and 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 an aggregate of 125,000,000 restricted shares of its common stock to Luckwel Asia Limited.
Note
6 – Subsequent Events
The
Company has evaluated subsequent events subsequent to the balance sheet date through the date of this filing and determined that
there were no such events requiring recognition or disclosure in the financial statements.