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.” 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. 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.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
We were incorporated under the laws of the State of Nevada on
April 9, 2014. Our fiscal year end is April 30. Our principal offices are
currently located at 7458 Allison Place, Chilliwack, British Columbia, Canada.
Our telephone number is: (778) 823-3104.
Following incorporation, we commenced the business of a mineral
exploration company. On May 8, 2014, we incorporated our wholly-owned
subsidiary, ORC Exploration LLC, for the purposes of mineral exploration. On May
20, 2014, we acquired an option to acquire a 100% legal and beneficial ownership
interest in the Elizabeth mineral claim, located in the Omineca Mining District
in the central part of the Province of British Columbia. Our initial mining
exploration program, which was scheduled to commence in the second quarter of
the fiscal year ending April 30, 2015, was delayed until the fourth quarter due
to forest fire concerns.
Due to a dearth of available financing options, which has
affected many junior mining companies in recent years, we subsequently ran out
of funds to proceed with our planned exploration program. As a result, our
management decided to seek out other potential business operations and
management skills for the continuation of our business. In connection therewith,
effective June 8, 2015, our chief executive officer (“
CEO
”) and sole
director, Jose Montes, resigned all positions as an officer and director of the
Company, and we appointed Mike Gilliland to serve as our sole officer and
director. Effective March 14, 2016, Mr. Gilliland resigned all positions as an
officer and director of our company, and we appointed Devon Loosdrecht to serve
as our sole officer and director.
We are currently seeking new business opportunities with
established business entities to affect a merger or other form of business
combination with our company. On April 8, 2016, we entered into an arrangement
agreement (the “
Arrangement Agreement
”) with Garmatex Technologies, Inc.
(“
Garmatex
”), a private company incorporated under the laws of the
Province of British Columbia, pursuant to which we have agreed to acquire all of
the outstanding securities of Garmatex in exchange for the issuance of
equivalent securities of our company by way of a statutory arrangement (the
“
Arrangement
”) under the
Business Corporations Act
(British
Columbia). In the event that the Arrangement is successfully completed, we will
commence operating Garmatex’s business, which is the development and supply of
scientifically engineered fabric technologies. As of the date of this report,
this agreement has not closed as subjects to this agreement have not yet been
met.
Completion of the Arrangement is subject to a number of
conditions as in the Arrangement Agreement. There can be no assurance that the
Arrangement will be completed as proposed or at all. In the event that the
Arrangement is not successfully completed, we expect that we will continue to
seek out new business opportunities. We anticipate that any new acquisition or
business opportunity that we may be party to will require additional financing.
There can be no assurance, however, that we will be able to acquire the
financing necessary to enable us to pursue our plan of operation and enter into
such an agreement. If we require additional financing and we are unable to
obtain such funds, our business will fail.
Even if we are able to complete the Arrangement or commence a different new business opportunity and obtain the necessary funding, there is no assurance that we will be able to generate any revenue, or that any revenue that may be generated will be
sufficient to provide a return to our investors.
In implementing a structure for a particular business acquisition or opportunity, we may become a party to a merger, consolidation, reorganization, joint venture or other business combination with another corporation or entity. We may also acquire
stock or assets of an existing business. Upon the consummation of a transaction, it is likely that our present management will no longer be in control of our company. In addition, it is likely that some or all of our current management will resign
and be replaced by one or more new officers or directors.
We anticipate that the selection of a business opportunity in which to participate will be complex and without certainty of success. We believe that there are numerous firms in various industries seeking the perceived benefits of being a publicly
reporting corporation. Business opportunities may be available in many different industries and with businesses at various stages of development, all of which will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Business opportunities that we believe are in the best interests of our company to pursue may be scarce or we may be unable to obtain opportunities that we want. We can provide no assurance that we will
be able to locate compatible business opportunities.
Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we
are uncertain about our continued ability to raise funds privately. Further, we believe that our company may have difficulties raising capital until we locate a prospective business through which we can pursue our plan of operation. If we are unable
to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail.
Results of Operations for the three and six months ended October 31, 2016.
We generated no revenues for the six months ending October 31, 2016 and 2015. We do not expect to generate revenues until we have established a new business plan and operations and successfully implemented such business plan.
Three months ended October 31, 2016 compared to three months ended October 31, 2015
We incurred operating expenses of $42,111 for the three months ended October 31, 2016, compared with operating expenses of $9,786 for the three months ended October 31, 2015. The most significant changes in operating expenses comprised of
foreign exchange of $13,510 (2015 - $nil) and filing fees of $9,630 (2015 - $610). The difference between periods was attributable to the foreign exchange on promissory notes received from Garmatex Technologies in the aggregate
amount of CDN$68,802 (US$51,322), the issuing of common shares through subscription agreements, and increased filing fees due to the merger, name change, forward split, and annual filings with SEDAR.
We incurred other income (expenses) of $5,286 for the three months ended October 31, 2016, as compared to ($502) for the three months ended October 31, 2015. Our other expenses consisted of interest expense of $616 (2015-$502) and
interest income of $5,902 (2015 - $nil). Interest expense for 2016 and 2015 included $616 and $502, respectively, to reflect the interest accrued on promissory notes issued during the periods.
We incurred a net loss of $36,825 for the three months ended October 31, 2016, as compared with a net loss of $10,288 for the prior year three-month period.
Six months ended October 31, 2016 compared to six months ended October 31, 2015
We incurred operating expenses of $76,081 for the six months ended October 31, 2016, compared with operating expenses of $27,107 for the six months ended October 31, 2015. The most significant changes in operating expenses comprised of
consulting fees of $16,253 (2015 - $nil) and foreign exchange of $19,422 (2015 - $3). The difference between periods was mostly attributable to a one-time fee for a mining consultants firm as well as the addition of
monthly consulting fees to the President of the Company which were not present in the prior comparable period. The difference is also attributable to the foreign exchange on promissory notes received from Garmatex Technologies in the aggregate
amount of CDN$589,859 (US$409,662), the issuing of common shares through subscription agreements, and increased filing fees due to the merger, name change, forward split, and annual filings with SEDAR.
We incurred other income (expenses) of $9,478 for the six months ended October 31, 2016, as compared to ($981) for the six months ended October 31, 2015. Our other expenses consisted of interest expense of $1,231 (2015-$981) and
interest income of $10,709 (2015 - $nil). Interest expense for 2016 and 2015 included $1,231 and $981, respectively, to reflect the interest accrued on promissory notes issued during the periods.
We incurred a net loss of $66,603 for the six months ended October 31, 2016, as compared with a net loss of $28,088 for the prior year six-month period.
Liquidity and Capital Resources
As of October 31, 2016, we had total current assets of $500,556, consisting of cash in the amount of $409 and due from related party notes of $500,147. We had current liabilities of $7,678 as of October 31, 2016. Accordingly, we had
working capital of $492,878 as of October 31, 2016.
Operating Activities
Operating activities used $31,863 in cash for the six months ended October 31, 2016 as compared to $11,139 used for the prior six months ended October 31, 2015. The decrease in cash was attributable to the increase in net loss and increase
to interest receivable.
Investing Activities
Investing activities used cash of $182,310 for the six months ended October 31, 2016 as compared to $nil for the six months ended October 31, 2015. The increase in the use of cash was due to the advance of funds to Garmatex Technologies.
Financing Activities
Financing activities provided cash of $214,531 for the six months ended October 31, 2016, as compared to $11,200 for the six months ended October 31, 2015, which comprised of $214,531 in funds received for common stock in the Company and
$11,200 in related and third party borrowings in 2015.
Based upon our current financial condition, we do not expect to have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund future operations through new business sales and debt and/or equity
financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be
successful in raising additional funding. If we are not able to secure additional funding, the implementation of our future business plan will be impaired. There can be no assurance that such additional financing will be available to us on
acceptable terms or at all.
Going Concern
Our financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred cumulative losses of
$175,871 through October 31, 2016, expect to incur further losses in the development of our new business and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These
conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity
securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives.
As discussed in the notes to our unaudited consolidated financial statements, we have no established source of revenue. This has raised substantial doubt for our auditors about our ability to continue as a going concern. Without realization of
additional capital, it would be unlikely for us to continue as a going concern.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to our stockholders.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both
important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain.
Recently Issued Accounting Pronouncements
In November 2015, FASB issued Accounting Standards Update No. 2015-17
Income Taxes: Balance Sheet Classification of Deferred Taxes
(“ASU 2015-17”). ASU 2015-17 eliminates the requirement to bifurcate deferred taxes between current
and non-current on the balance sheet and requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for public entities in fiscal years beginning after December 15, 2016, and for
interim periods within those fiscal years. The amendments for ASU-2015-17 can be applied retrospectively or prospectively and early adoption is permitted. The adoption of this standard is not expected to have a material impact for any period
presented.
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position, or cash flow.