Item
1. Financial Statements
Interim
Condensed Financial Statements and Notes to Interim Financial Statements
General
The
accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the instructions
to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles.
Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements
included in the Company’s original S-1 filing and the annual audit for the year ended January 31, 2019. In the opinion of
management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature. Operating results for the nine months ended October 31,
2019 are not necessarily indicative of the results that can be expected for the year ending January 31, 2020.
OBITX,
Inc.
and SUBSIDIARIES
Consolidated
Balance Sheets
|
(unaudited)
|
|
(audited)
|
|
October 31,
|
|
January 31,
|
ASSETS
|
2019
|
|
2019
|
Current Assets
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
Accounts receivable, net
|
|
—
|
|
|
|
4,500
|
|
Assets held for Sale
|
|
—
|
|
|
|
408,166
|
|
Prepaid expenses
|
|
—
|
|
|
|
149
|
|
Total current assets
|
|
—
|
|
|
|
412,815
|
|
Property, plant and equipment, net
|
|
2,081,845
|
|
|
|
2,445,322
|
|
Intangible assets, net
|
|
3,638
|
|
|
|
5,576
|
|
Total assets
|
$
|
2,085,483
|
|
|
$
|
2,863,713
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
|
|
|
|
January 31,
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
2019
|
|
|
|
2019
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
157,211
|
|
|
$
|
143,702
|
|
Due to Related Party
|
|
218,263
|
|
|
|
707,680
|
|
Total current liabilities
|
|
375,474
|
|
|
|
851,382
|
|
Accounts Payable , Noncurrent Portion
|
|
114,724
|
|
|
|
—
|
|
Due to Related Party, Noncurrent Portion
|
|
89,400
|
|
|
|
—
|
|
Total noncurrent liabilities
|
|
204,124
|
|
|
|
—
|
|
Total Liabilities
|
|
579,598
|
|
|
|
851,382
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0 shares issued and
outstanding, as of October 31, 2019 and 100,000 shares issued and outstanding, as of January 31, 2019.
|
|
—
|
|
|
|
10
|
|
Common stock, $0.0001 par value, voting; 200,000,000 shares authorized; 10,460,000 shares
issued and outstanding, as of October 31, 2019 and 5,460,000 as of January 31, 2019.
|
|
1,046
|
|
|
|
546
|
|
Additional paid in capital
|
|
3,442,335
|
|
|
|
3,442,825
|
|
Accumulated deficit
|
|
(1,937,496
|
)
|
|
|
(1,431,050
|
)
|
Total stockholders' equity
|
|
1,505,885
|
|
|
|
2,012,331
|
|
Total liabilities and stockholders' equity
|
$
|
2,085,483
|
|
|
$
|
2,863,713
|
|
See
accompanying notes to unaudited consolidated financial statements.
OBITX,
Inc.
and SUBSIDIARIES
Consolidated
Statements of Operations
(unaudited)
|
For the three months ended
October 31,
|
|
For the nine months ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales
|
$
|
—
|
|
|
$
|
46,320
|
|
|
$
|
—
|
|
|
$
|
84,610
|
|
Computer Lease
|
|
—
|
|
|
|
3,382
|
|
|
|
—
|
|
|
|
11,418
|
|
Cost of Services
|
|
—
|
|
|
|
29,057
|
|
|
|
—
|
|
|
|
65,479
|
|
Depreciation Expense
|
|
121,159
|
|
|
|
121,159
|
|
|
|
363,477
|
|
|
|
363,475
|
|
Software Maintenance
|
|
—
|
|
|
|
26,920
|
|
|
|
—
|
|
|
|
79,792
|
|
Total Cost of Sales
|
|
121,159
|
|
|
|
180,518
|
|
|
|
363,477
|
|
|
|
520,164
|
|
Gross Loss
|
|
(121,159
|
)
|
|
|
(134,198
|
)
|
|
|
(363,477
|
)
|
|
|
(435,554
|
)
|
Selling, general, and administrative
|
|
711
|
|
|
|
11,156
|
|
|
|
5,272
|
|
|
|
20,051
|
|
Professional fees
|
|
—
|
|
|
|
2,925
|
|
|
|
5,256
|
|
|
|
24,033
|
|
Marketing & advertising
|
|
—
|
|
|
|
804
|
|
|
|
—
|
|
|
|
9,795
|
|
Payroll
|
|
—
|
|
|
|
8,978
|
|
|
|
—
|
|
|
|
30,761
|
|
Consultant fees
|
|
42,000
|
|
|
|
57,477
|
|
|
|
126,000
|
|
|
|
168,977
|
|
Bad Debt Expense
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
|
|
—
|
|
Amortization & Depreciation Expense
|
|
646
|
|
|
|
646
|
|
|
|
1,938
|
|
|
|
1,531
|
|
Total operating expenses
|
|
43,357
|
|
|
|
81,986
|
|
|
|
142,966
|
|
|
|
255,148
|
|
Net Loss from operations
|
|
(164,516
|
)
|
|
|
(216,184
|
)
|
|
|
(506,443
|
)
|
|
|
(690,702
|
)
|
Other income (expense)
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) before Extraordinary items
|
$
|
(164,517
|
)
|
|
$
|
(216,184
|
)
|
|
$
|
(506,446
|
)
|
|
$
|
(690,702
|
)
|
Basic and diluted (Loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(Loss) per share - basic and diluted
|
|
(0.0157
|
)
|
|
|
(0.0389
|
)
|
|
|
(0.0575
|
)
|
|
|
(0.1242
|
)
|
Weighted average shares outstanding - basic and diluted
|
|
10,460,000
|
|
|
|
5,560,000
|
|
|
|
8,811,648
|
|
|
|
5,560,000
|
|
See
accompanying notes to unaudited consolidated financial statements.
OBITX,
Inc.
and
SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
|
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid-in
|
|
Accumulated
|
|
Total
Stockholders’
Equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
(Deficit)
|
Balance - January 31, 2018
|
|
100,000
|
|
|
$
|
10
|
|
|
|
5,460,000
|
|
|
$
|
546
|
|
|
$
|
3,442,825
|
|
|
$
|
688,735
|
|
|
$
|
4,132,116
|
|
Net Loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(2,119,785
|
)
|
|
$
|
(2,119,785
|
)
|
Balance - January 31, 2019
|
|
100,000
|
|
|
$
|
10
|
|
|
|
5,460,000
|
|
|
$
|
546
|
|
|
$
|
3,442,825
|
|
|
$
|
(1,431,050
|
)
|
|
$
|
2,012,331
|
|
Stock converted from preferred to common
|
|
(100,000
|
)
|
|
$
|
(10
|
)
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
$
|
(490
|
)
|
|
|
—
|
|
|
|
—
|
|
Net income (loss)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(506,446
|
)
|
|
$
|
(506,446
|
)
|
Balance - October 31, 2019
|
|
—
|
|
|
|
—
|
|
|
|
10,460,000
|
|
|
$
|
1,046
|
|
|
$
|
3,442,335
|
|
|
$
|
(1,937,496
|
)
|
|
$
|
1,505,885
|
|
The
accompanying notes are an integral part of these unaudited financial statements.
OBITX,
Inc.
and
SUBSIDIARIES
Statements
of Cash Flows
For
the nine months ended October 31,
(unaudited)
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net (Loss)
|
$
|
(506,446
|
)
|
|
$
|
(690,702
|
)
|
Adjustments to reconcile net loss to net
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
365,412
|
|
|
|
365,006
|
|
Decrease (Increase) in:
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
4,500
|
|
|
|
215,456
|
|
Prepaid expenses and other current assets
|
|
149
|
|
|
|
(224
|
)
|
Accounts payable, accrued expenses and taxes payable
|
|
128,233
|
|
|
|
54,324
|
|
Net cash used in operating activities
|
$
|
(8,152
|
)
|
|
$
|
(56,140
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Increase (Decrease) in:
|
|
|
|
|
|
|
|
Assets held for Sale
|
|
—
|
|
|
|
(108,196
|
)
|
Acquisition of property, plant and equipment
|
|
—
|
|
|
|
(5,822
|
)
|
Acquisition of intangible assets
|
|
—
|
|
|
|
(8,301
|
)
|
Net cash received in investing activities
|
$
|
—
|
|
|
$
|
(122,319
|
)
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
Borrowing from related party
|
|
8,152
|
|
|
|
162,148
|
|
Net Cash Provided By Financing Activities
|
$
|
8,152
|
|
|
$
|
162,148
|
|
Net Change in Cash
|
|
—
|
|
|
|
(16,311
|
)
|
Cash at Beginning of Year
|
|
—
|
|
|
|
16,350
|
|
Cash at End of Period
|
$
|
—
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
Conversion of preferred stock to common stock
|
|
500
|
|
|
|
|
|
Reduction on debt for available for sale assets
|
|
408,166
|
|
|
|
—
|
|
See
accompanying notes to unaudited consolidated financial statements.
OBITX,
Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1. Organization and Basis of Presentation
The
accompanying unaudited financial statements of OBITX, Inc., (the “Company”, “we”, “our”),
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”).
Basis
of Presentation
The
accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany accounts and
transactions have been eliminated.
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Haute Jobs, LLC, (“HAUTE”),
Campaign Pigeon, LLC, (“CAMP”), and altCUBE, Inc., (“altCUBE”).
Description
of Business
The
Company was incorporated in the State of Delaware on March 30, 2017 originally under the name GigeTech, Inc. On October 31, 2017
the Company changed its name to OBITX, Inc., and updated its Articles of Incorporation through unanimous consent of its shareholder,
MCIG. The Company is headquartered in Jacksonville, Florida.
The
Company’s primary NAICS CODE is 519130, Internet publishing and broadcasting and web search portals. We publish and generate
textual, audio, and/or video content on the Internet, and operate web sites that use a search engine to generate and maintain
extensive databases of internet addresses and content.
The
Company earns revenue through social media advertising, fees, and services. Under its plan, the Company developed its white label
software solution for MCIG under the 420 Cloud brand in support of the cannabis industry. The company has expanded its services
and solutions in software development and internet advertising and promotion into the social media industries of entertainment,
business administration, blockchain technologies, and social media.1
Subsidiaries
of the Company
The
company currently operates, in addition to OBITX, Inc., two wholly owned subsidiaries, and has one company in which it has discontinued
operations, which are consolidated:
Haute
Jobs, LLC
We
incorporated on May 10, 2018 in the state of Wyoming. Haute Jobs, LLC was created to provide services in the arena of job marketing
and matching services, to perform an as an employment center.
Campaign
Pigeon, LLC
We
incorporated on May 10, 2018 in the state of Wyoming. Campaign Pigeon, LLC was created to provide services in the arena of online
marketing and generating advertising.
altCUBE,
Inc
We
incorporated on June 4, 2018 in the state of Wyoming. altCUBE, Inc was created to provide services in the arena of promoting individual
advertising solutions and enabling access to the financial crypto global market, providing modern, efficient, clean and intuitive
user interface. This company has discontinued operations and is only being included for prior year financial comparison.
Note
2. Summary of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company, the wholly owned subsidiaries of HAUTE, CAMP, and altCUBE.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The most significant estimates include: revenue recognition; sales returns and other allowances; allowance for doubtful accounts;
valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.
On
a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances,
historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted
accordingly. Actual results could differ from those estimates.
Revenue
Recognition Policies
We
intend to earn revenue from the subscription, non-software related hosted services, term-based and perpetual licensing of software
products, associated software maintenance and support plans, consulting services, training, and technical support.
On
February 1, 2018, we adopted Topic 606, using the modified retrospective transition method applied to those contracts which were
not completed as of February 1, 2018. Results for reporting periods beginning after February 1, 2018 are presented under Topic
606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting.
The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment
to beginning retained earnings upon adoption.
Under
Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount
that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We
determine revenue recognition through the following steps:
•
identification of the contract, or contracts, with a customer;
•
identification of the performance obligations in the contract;
•
determination of the transaction price;
•
allocation of the transaction price to the performance obligations in the contract; and
•
recognition of revenue when, or as, we satisfy a performance obligation.
Research
and Development
Research
and Development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge
and understanding, is recognized in profit or loss as an expense as incurred.
Expenditure
on development activities, whereby research findings are applied to a plan or design for the production of new or substantially
improved products and processes, is capitalized only if the product or process is technically and commercially feasible, if development
costs can be measured reliably, if future economic benefits are probable, if the Company intends to use or sell the asset and
the Company intends and has sufficient resources to complete development. The Company has recognized $0 as a capital asset for
the periods ended October 31, 2019 and January 31, 2019
Concentration
of Credit Risk and Significant Customers
Financial
instruments which potentially subject the Company to a concentration of credit risk consist principally of temporary cash investments
and accounts receivable. The Company places its temporary cash investments with financial institutions insured by the FDIC.
Concentrations
of credit risk with respect to trade receivables and commodities are limited due to the diverse group of customers to whom the
Company provides services to. The Company establishes an allowance for doubtful accounts when events and circumstances regarding
the collectability of its receivables or the selling of its commodities warrant based upon factors such as the credit risk of
specific customers, historical trends, other information and past bad debt history. The outstanding balances are stated net of
an allowance for doubtful accounts.
Our
cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The
Company may occasionally maintain amounts on deposit with a financial institution that are in excess of the federally insured
limit of $250,000. The risk is managed by maintaining all deposits in high-quality financial institutions. The Company
had $0 in excess of federally insured limits on October 31, 2019, and January 31, 2019.
Cost
of Goods Sold
The
Company recognizes the direct cost of purchasing product for sale, including freight-in and packaging, as cost of goods sold in
the accompanying statement of operations.
Cost
of Revenue
Cost
of revenue includes: manufacturing and distribution costs for products sold and programs licensed; operating costs related to
product support service centers and product distribution centers; costs incurred to include software on PCs sold by OEMs, to drive
traffic to our websites and products, and to acquire online advertising space; costs incurred to support and maintain Internet-based
products and services, including data center costs and royalties; warranty costs; inventory valuation adjustments; costs associated
with the delivery of consulting services; and the amortization of capitalized software development costs. Capitalized software
development costs are amortized over the estimated lives of the products.
Cash
and Cash Equivalents
The
Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of the
date of purchase. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity
funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes, the company
concentrates its cash holdings in an account at Bank of America. The Company had no cash equivalents as of October 31, 2019, or
January 31, 2019.
Property,
Plant, and Equipment
Property,
plant, and equipment (“PPE”) are stated at cost less accumulated depreciation and amortization. Expenditures
for maintenance and repairs are charged to expense as incurred. Additions, improvements and major replacements that extend
the life of the asset are capitalized.
Depreciation
and amortization are recorded using the straight-line method over the estimated useful lives of depreciable assets, which are
generally three to five periods.
The
Company classifies its software under the Financial Accounting Standards Advisory Board (FASAB) Statement of Federal
Financial Accounting Standards (SFFAS) No. 10, Accounting for Internal Use Software, and the Governmental Accounting
Standards Board (GASB) Statement No. 42, Accounting of Costs of Computer Software Developed or Obtained for Internal
Use. When software is used in providing goods and services it is classified as PPE. The Company considers its proprietary
software as a major part of the Company’s operations that are intended to provide profits.
Accounts
Receivable
The
Company’s accounts receivable are trade accounts receivable. The Company recognized $1,254,500 as an uncollectable
reserve for the nine month period ending October 31, 2019 and the company had outstanding accounts receivable of $4,500 for the
year ending January 31, 2019.
For
the nine month period ended October 31, 2019 and October 31, 2018 there were $0 and $84,610 in sales. During the period ending
April 30, 2019 it was decided to write off the remaining $4,500 accounts receivable as it was also greater than 1 year outstanding.
During the last quarter for the year ended January 31, 2019 the accounts receivable of $1,250,000 for Render Payment was written
off as bad debt to take a conservative approach on the balance sheet as the amount of time of non-payment was quite substantial
and greater than 1 year. For the nine-month period ending October 31, 2019 there are no accounts receivable being recognized on
the balance sheet.
Advertising
Costs and Expense
The
advertising costs are expensed as incurred. Advertising costs were $0 for the nine month period ending October 31, 2019 and $9,795
for the nine month period ending October 31, 2018.
Foreign
Currency Translation
The
Company’s functional currency and its reporting currency is the United States Dollar.
Income
Taxes
In
accordance with SAB Topic 1: Financial Statements, Subsidiary’s or Division’s Separate Financial Statements and
Segments, income taxes are consolidated with MCIG, the controlling entity of the Company. There are currently no tax
implications should the Company not consolidate with MCIG. With only losses showing for the periods shown there would be no taxes
payable for any periods presented. If there were tax expenses they would be based on the IRS published corporate tax rate of 21%
for 2018 and 2019.
Basic
and Diluted Net Earnings (Loss) Per Share
The
Company follows ASC Topic 260 – Earnings Per Share, and FASB 2015-06, Earnings Per Share to account for earnings
per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Diluted earnings per share calculations are determined
by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Commitments
and Contingencies
The
Company reports and accounts for its commitments and contingencies in accordance with ASC 440 – Commitments and ASC
450 – Contingencies. We recognize a loss on a contingency when it is probable a loss will incur and that the amount
of the loss can be reasonably estimated. The Company recognized $0 as a loss on contingencies in the nine month periods
ending October 31, 2019 and October 31, 2018.
Note
3. Going Concern
The
Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization
of assets and liquidation of liabilities in the normal course of business. Because the business is new and has a limited history,
no certainty of continuation can be stated. The accompanying financial statements for the period ended October 31, 2019, has been
prepared to assume that we will continue as a going concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.
The
Company has negative cash flow and there are no assurances the Company will generate a profit or obtain positive cash flow.
The Company has sustained its solvency through the support of the shareholder, MCIG as well as a significant decrease in operating
costs, which raise substantial doubt about its ability to continue as a going concern.
Management
is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the
next twelve months. Management has devoted a significant amount of time to the raising of capital from additional debt and equity
financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through
debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate
the revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.
Note
4. Property, Plant and Equipment, and Intangible Assets
In
a major transaction, the Company acquired the 420 Cloud software environment which includes, 420 Cloud mobile, 420 Cloud browser,
420 Cloud API, WhoDab, BangPunch, 420 single sign-on mobile wallet, 420 job search, Weedistry, Ehesive, 420 cue, 420 wise guy,
and Palm weed. While some of the software applications are currently in use, others are still under development. The
Company launched its 420 cloud software service on April 20, 2017. On June 3, 2019 OBITX sold all assets held for sale to MCIG
for the price of $408,166. The payment was made by OBITX decreasing the amount owed to MCIG by $408,166.
The
following is a detail of equipment:
Property, Plant, and Equipment
|
|
|
Nine months ended
|
|
Year ended
|
|
|
October 31,
|
|
January 31,
|
|
|
2019
|
|
2019
|
Software
|
|
$
|
3,129,411
|
|
|
$
|
3,129,411
|
|
Intangibles
|
|
|
7,753
|
|
|
|
7,753
|
|
Machinery & Equipment
|
|
|
—
|
|
|
|
—
|
|
Total acquisition cost
|
|
|
3,137,164
|
|
|
|
3,137,164
|
|
Accumulated depreciation
|
|
|
1,051,678
|
|
|
|
686,265
|
|
Total property, plant, and equipment
|
|
$
|
2,085,483
|
|
|
$
|
2,450,898
|
|
Depreciation
expense on property, plant and equipment was $363,477 for the nine month period ended October 31, 2019 and $363,475 for the nine
month period ending October 31, 2018.
Note
5. Related Party Transactions
On
June 14, 2018 the Company entered a Line of Credit with APO Holdings, LLC for up to $100,000 at any one time. The Line of
Credit may be cancelled at any time by either party providing 30 days written notice of cancellation. It was given at a
0.6% interest rate and may be paid at any time with no definitive payoff date. As of October 31, 2019 the current outstanding
on the line of credit is $77,400 principal and $4.85 interest.
On
June 30, 2018 OBITX provided services to their subsidiary altCUBE in the amount of $25,167. This amount was made up of General
Administrative expenses of $1,250, Website Design of $16,009, Marketing Expense $7,168, and Website Maintenance of $740. In January
2019 altCUBE was written off as discontinued operations.
On
May 1, 2019 MCIG converted all 100,000 Series A Preferred shares at par value of $0.0001 to 5,000,000 common shares at par value
of $0.0001.
MCIG
entered into a Line of Credit Agreement with the Company on November 1, 2016 with a maximum limit of $500,000. MCIG increased
the limit to $1,000,000 on January 1, 2018. The agreement expired on April 30, 2019. The Line of Credit bore 0% interest with
a right to convert at 15% discount to market rate, The Company defaulted and has failed to payoff the Line of Credit. On June
3, 2019 MCIG purchased all cryptocurrency-based automated teller machines from OBITX for the price of $408,166. The payment was
made by OBITX decreasing the amount owed to MCIG by $408,166. MCIG extended the Line of Credit Agreement until December 31, 2019.
As of October 31,2019 OBITX owes MCIG $218,257.
Note
6. Commitments and Contingencies
The
Company entered into a commitment for its corporate offices on January 4, 2019. The commitment is for a period of twelve
(12) months at the rate of $69 per month. The Company may utilize additional space on an as needed basis at an hourly or
daily rate.
Note
7. Stockholders’ Equity
Common
Stock
As
of October 31, 2019 and January 31, 2019, the Company had 200,000,000 common shares authorized, with 10,546,000 common shares
on October 31, 2019 and 5,460,000 common shares on January 31, 2019 at a par value of $0.0001 issued and outstanding. On
May 1, 2019 MCIG elected to convert its 100,000 shares of Series A Preferred Stock into 5,000,000 common shares of stock in accordance
with the Series A Preferred terms and conditions.
Preferred
Stock
As
of October 31, 2019 and January 31, 2019, the company had 1,000,000 Series A Preferred shares authorized, with 0 Series A Preferred
Shares on October 31, 2019 and 100,000 Series A Preferred shares on January 31, 2019 at a par value of $0.0001 issued and outstanding.
Note
8. Basic Income per Share before Non-Controlling Interest
Basic
Income Per Share - The computation of basic and diluted loss per common share is based on the weighted average number
of shares outstanding during each period.
Basic
Income Per share
|
For
the nine months Ended October 31,
|
|
|
2019
|
|
2018
|
Net
income
|
|
(506,446)
|
|
(690,702)
|
Basic
income per share
|
|
(0.0575)
|
|
(0.1242)
|
Basic
weighted average number of shares outstanding
|
|
8,811,648
|
|
5,560,000
|
The
computation of basic loss per common share is based on the weighted average number of shares outstanding during the period.
Note
9. Warrants
On
November 1, 2017 the Company issued 7 warrants to officers, directors, and investors for the purchase of up to 3,000,000 shares
of common stock at $1.00 per share. The warrants expire on November 1, 2022 at 5:00 PM Eastern Standard Time. The warrants contain
participation rights to any registration statement filed by the Company. The Holder shall not be entitled to exercise their Warrant
when the number of shares exercised by the Warrant Holder would cause the Holder to exceed 4.99% of the total outstanding common
stock.
A
summary of warrant activity for nine months ended October 31, 2019 is as follows:
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Conversion
|
|
|
|
Shares
|
|
Price
|
|
|
|
|
|
|
|
Warrants
outstanding at January 31, 2019
|
|
|
3,000,000
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
$
|
-
|
|
Granted
|
|
|
3,000,000
|
|
$
|
1.00
|
|
Warrants outstanding
at October 31, 2019
|
|
|
3,000,000
|
|
$
|
1.00
|
|
Note
10. Subsequent Events
There
are no reportable subsequent events.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto
included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes
thereto in our S-1 and annual audit for the year ended January 31, 2019. .
Certain
statements in this section contain “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements contained in this report and not clearly historical in nature are forward-looking,
and the words “may,” “will,” “should,” “could,” “would,” “expects,”
“plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,”
“intends,” “potential,” and similar expressions (as well as other words or expressions referencing future
events, conditions or circumstances) generally are intended to identify forward-looking statements. Any statements
in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those discussed
from time to time in the Company's Securities and Exchange Commission filings. The Company undertakes no obligation to update
or revise any forward-looking statement for events or circumstances after the date on which such statement is made except as required
by law.
HISTORY
AND BACKGROUND
We
were incorporated in the State of Delaware on March 30, 2017, originally under the name GigeTech, Inc. On October 31, 2017,
the Company changed its name to OBITX, Inc., and updated its Articles of Incorporation through unanimous consent of its shareholder,
MCIG. The Company is headquartered in Jacksonville, Florida.
The
Company’s Primary Standard Industrial Classification Code (referred to as “SIC Codes”) is 7379, Computer Related
Services, not elsewhere classified. The Company’s primary NAICS CODE is 519130, Internet publishing and broadcasting
and web search portals. We publish and generate textual, audio, and/or video content on the Internet, and operate websites
that use a search engine to generate and maintain extensive databases of internet addresses and content.
GENERAL
OBITX
is engaged in the business of marketing and advertising through its proprietary software. We believe that our products will provide
our consumers in the tech, internet, blockchain, and cannabis markets with an advertising and marketing approach uniquely designed
for them. We provide consulting services in various approaches to marketing and advertising for each customer with an execution
plan for the promotion and growth of their business.
We
compete in a highly competitive market that includes other marketing companies, as well as traditional internet promotion companies.
In this highly fragmented market, we have focused on building brand awareness early through viral adoption and word of mouth.
In the future, we expect to employ additional marketing strategies.
Viral
Marketing is a technique that uses pre-existing social networking services and other technologies to try to produce increases
in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes.
Thus
far, we have been successful in driving traffic to our websites and building a client base by utilizing viral marketing strategies.
Specifically, we have built a presence on leading social-media sites such as Facebook and Twitter. Through these sites, we post
information about our services and make daily attempts to engage our target audience. This process is designed to drive traffic
to our websites and eventually leads to sales. The viral marketing strategy is cost-effective, and we do not anticipate any significant
costs arising from this strategy.
We
currently operate the following websites, which are not incorporated as part of this Form 10Q:
· www.ObitX.com
· www.ehesive.com
· www.latestPR.com
· www.Marketaro.com
· www.BlogCertified.com
Corporate
Information
Our
principal executive office is located at 4720 Salisbury Road, Jacksonville, Florida 32256 and our telephone number is (904) 748-9750.
Our fiscal year end is January 31 of each calendar year.
Implications
of Being an Emerging Growth Company
We
currently qualify as an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an
emerging growth company, we expect that we will take advantage of the reduced reporting requirements that are otherwise applicable
to public companies. These reduced reporting requirements include:
• not
being required to comply with the auditor attestation requirements of Section 404(b) of the SarbanesOxley Act of 2002, as amended
(the “SarbanesOxley Act”);
• reduced
disclosure obligations regarding executive compensation in this prospectus and in our future periodic reports, proxy statements
and registration statements; and
• not
being required to hold a non-binding advisory vote on executive compensation or to seek stockholder approval of any golden parachute
payments not previously approved.
We
may continue to take advantage of these reduced reporting obligations until March 30, 2022. However, if certain events occur prior
to such date, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion or
we issue more than $1.0 billion of non-convertible debt in any three year period, we would cease to be an emerging growth company.
We
have elected to take advantage of certain of the reduced disclosure obligations regarding executive compensation and other matters
in this prospectus and other filings we make with the SEC. As a result, the information that we provide to our stockholders is
different than the information you might receive from other public fully reporting companies in which you hold equity interests.
The
JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with
new or revised accounting standards. We have elected to avail ourselves of this exemption and, therefore, we are not subject to
the same new or revised accounting standards as other public companies that are not emerging growth companies.
INDUSTRY
A Blockchain is
a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot
be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. The blockchain system
has been designed to use nodes agreement to order transactions and prevent fraud so that records cannot be altered retroactively.
The network orders transaction by putting them together into groups called blocks, each block contains a definite amount of transactions
and a link to the previous block. Bitcoin, which is the name of the best-known cryptocurrency, is the one for which blockchain technology
was invented. Blockchain is, quite simply, a digital, decentralized ledger that keeps a record of all transactions that take
place across a peer-to-peer network.
Bitcoins
are not the only type of Digital Assets founded on math-based algorithms and cryptographic security, although it is considered
the most prominent as of the date of the filing of this Registration Statement. Over 1,000 other Digital Assets, (commonly referred
to as “altcoins”, “tokens”, “protocol tokens”, or “digital assets”), have been
developed since the Bitcoin Network’s inception, including Ethereum, Ripple, Litecoin, Dash, and Monero.
Blockchain
Technologies
Cryptocurrencies
Cryptocurrency is
an encrypted decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as
mining. As of September 2017, there are over 1,000 digital currencies in existence.
Blockchain
Value
Cryptocurrencies
are Digital Asset that is not a fiat currency (i.e., a currency that is backed by a central bank or a national, supra-national
or quasi-national organization) and is not backed by hard assets or other credit. As a result, the value of cryptocurrencies is
determined by the value that various market participants place on them through their transactions.
Exchange
Valuation
Due
to the peer-to-peer framework of cryptocurrencies, transferors and recipients of cryptocurrencies are able to determine the value
of the cryptocurrency transferred by mutual agreement or barter with respect to their transactions. As a result, the most common
means of determining the value of a cryptocurrency is by surveying one or more Exchanges where the cryptocurrency is publicly
bought, sold and traded.
Uses
of Cryptocurrencies
Global
Cryptocurrency Market
Global
trade in cryptocurrencies consists of individual end-user-to-end-user transactions, together with facilitated exchange-based trading.
There is currently no reliable data on the total number or demographic composition of users on the global exchanges.
Goods
and Services
Cryptocurrencies
can be used to purchase goods and services, either online or at physical locations, although reliable data is not readily available
about the retail and commercial market penetration of the various cryptocurrencies. To date, the rate of consumer adoption and
use of cryptocurrencies for paying merchants has trailed the broad expansion of retail and commercial acceptance of cryptocurrency.
Other markets, such as credit card companies and certain financial institutions are not accepting such digital assets. It is likely
that there will be a strong correlation between the continued expansion of the Cryptocurrency Network and its retail and commercial
market penetration.
Anonymity
and Illicit Use
The
Blockchain Network was not designed to ensure the anonymity of users, despite a common misperception to the contrary. All transactions
are logged on the Blockchain and any individual or government can trace the flow of cryptocurrencies from one address to another.
Off-Blockchain transactions occurring off the Network are not recorded and do not represent actual transactions or the transfer
of cryptocurrencies from one digital wallet address to another, though information regarding participants in an Off-Blockchain
transaction may be recorded by the parties facilitating such Off-Blockchain transactions. Digital wallet addresses are randomized
sequences of 27-34 alphanumeric characters that, standing alone, do not provide sufficient information to identify users; however,
various methods may be used to connect an address to a particular user’s identity, including, among other things, simple
Internet searching, electronic surveillance and statistical network analysis and data mining. Anonymity is also reduced to the
extent that certain Exchanges and other service providers collect users’ personal information, because such Exchanges and
service providers may be required to produce users’ information in order to comply with legal requirements. In many cases,
a user’s own activity on the Blockchain Network or on Internet forums may reveal information about the user’s identity.
Users
may take certain precautions to enhance the likelihood that they and their transactions will remain anonymous. For instance, a
user may send its cryptocurrencies to different addresses multiple times to make tracking the cryptocurrencies through the Blockchain
more difficult or, more simply, engage a so-called “mixing” or “tumbling” service to switch its cryptocurrencies
with those of other users. However, these precautions do not guarantee anonymity and are illegal to the extent that they constitute
money laundering or otherwise violate the law.
As
with any other asset or medium of exchange, cryptocurrencies can be used to purchase illegal goods or fund illicit activities.
The use of cryptocurrencies for illicit purposes, however, is not promoted by the Blockchain Network or the user community as
a whole. Furthermore, we do not believe our advertising, marketing, and consulting services has exposure to such uses because
the services we provide are curated by our management and team.
DESCRIPTION
OF SUBSIDIARIES
altCUBE,
Inc.
We
incorporated on June 4, 2018 in the state of Wyoming. altCUBE, Inc. was created to provide services in the arena of promoting
individual advertising solutions and enabling access to the financial crypto global market, providing modern, efficient, clean
and intuitive user interface. altCUBE was closed on January 11, 2019.
Campaign
Pigeon, LLC
We
incorporated on May 10, 2018 in the state of Wyoming. Campaign Pigeon, LLC was created to provide services in the arena of online
marketing and generating advertising.
Haute
Jobs, Inc.
We
incorporated on May 10, 2018 in the state of Wyoming. Haute Jobs, LLC was created to provide services in the arena of job marketing
and matching services, to perform an as an employment center.
BUSINESS
MODEL
OBITX
Inc. is an advertising company marketing products and services using digital technologies across the internet, mobile devices,
display advertisements, and other digital mediums. As a technology driven company, we do Software as a Service (SaaS) development,
deployment, and day-to-day operations. In addition, we provide website designs, copywriting, copyediting, social networking,
influencing and campaign management. OBITX has developed proprietary software and web presence for the promotion and development
of its business strategy.
We
have developed a proprietary cloud based social media platform. This software can be a white label social media cross-platform
service utilized in various industry to promote internal and external services and products. Clients may customize the parameters
in which the software operates in the promotion and advertisement of their respective business. The software was initially
launched under MCIG as its 420 Cloud software solution model. This software helps with managing social media by utilizing
the following:
•
Cloud - API / BackEnd: The HTTP and HTTPS API integration allow users greater cloud versatility. This cross-platform
APIs allows cloud tenants the ability to access resources from primary cloud providers and others. This system saves time and
development since organizations will be able to access the resources and workloads of different cloud providers and platforms.
•
Content delivery network (CDN): this service stores a cached version of its content in multiple geographical locations (a.k.a.,
points of presence, or PoPs). The PoPs contain a number of caching servers responsible for content delivery to visitors within
its proximity. This places your content in many places at once providing superior coverage to users.
• Single
Sign-on / Wallet: single sign-on portal allowing users to enter one set of credentials to access to their web apps in the
cloud only once – via desktops, smartphones, and tablets. The password security and multi-factor authentication ensure
that only authorized users to get access to sensitive data. This service also allows users to make secure electronic
transactions.
•
Cloud Cue: A prioritize matching system based on ratings and credentials bringing products and people together. This system uses
impression recognition and matching capabilities combined with the ability of mobile image capture to bring people to products
they need and even people they want.
•
Cloud Wise Buy: This takes cataloged data accompanying a product on an e-commerce portal and presents it in order to help a buyer
find the best deal based on the time and geolocation from where the information is sourced.
•
Lead Generation Software: Captures information at a point of contacts such as landing pages, white paper downloads, and email
openings. These leads are then scored and defined providing information on how customers interact with brands allowing the creation
of customer journeys to be used by sales teams to generate more sales.
•
Cloud Tienda eCommerce: A centralized e-commerce repository system using a multichannel product content management platform making
it easy to centrally manage product information and publish listings in a growing selection of channels and websites.
•
Media Processing: This system unifies the media processing chain offering a comprehensive software solution that transforms traditional
video preparation and delivery architectures into a cloud operation, accelerating the time it takes you to process photos and
videos.
•
Cardosur payment processing: An e-commerce business allowing payments and money transfers to be made through the Internet. This
gives users the ability to purchase from online vendors, auction sites, and other commercial users while making sure all private
user data is encrypted and secure.
In
addition to the software, the digital advertising based model utilizes marketing methods such as search engine optimization, search
engine marketing, content marketing, campaign marketing, social media optimization, influencer marketing, content automation,
and email direct marketing. These services are offered through a series of software platforms. These platforms include:
•
Ehesive: is a self-serve cost per thousand (CPM) platform that rents digital ad space to publishers to be filled with content
from a pool of advertisers. This platform uses content marketing, campaign marketing, and content automation to help users
reach the most potential viewers.
•
Marketaro: is our email service for developers and marketers with pre-built marketing automations to help send newsletters,
shipping notices, password resets, and promotional emails to clients personal email lists.
•
Latest PR: is a press release circulation service using SEO to place a press release high in google listing. When a user publishes
a press release through the website, they are given the following automation tools: Social Media Distribution, Search Engine Distribution,
Extended Marketaro Distribution, National Media Distribution, Premium International Distribution, Bulk Blast Industry Generic,
Blog Certified Sponsor Post, Published on 3rd party sites related to network, Images and Video Included within Post.
•
Blog Certified: is our digital ad service that uses influencers as publishers renting out ad space on their blogs to sell to
advertisers. This platform offers world-class advertising management, professional advertising implementation, custom
reporting dashboard, mobile optimization, access to all ad-types and tech, site and setup audits, dedicated ad-ops team,
priority testing and a data team.
We
intend on utilizing these software platforms in multiple industries; however, our management team is primarily focused on the
blockchain technology business as a key level of interest and future development.
EMPLOYEES
AND CONSULTANTS
As
of October 31, 2019, the Company has 2 employees
who provide programming services, offshore, for the Company. Our management team is currently employed under consulting
agreements with the anticipation to convert to employment contracts upon the raising of the necessary capital, or an increase
in revenue, to be able to make payroll. Current management is believed to have been compensated at below market levels since inception
in (March 2017).
Available
Information
All
reports of the Company filed with the SEC are available free of charge through the SEC’s Web site at www.sec.gov. In addition,
the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street,
N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330.
Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory
valuation, deferred compensation and contingencies.
We
base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances.
These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources.
We
believe the following accounting policies are our critical accounting policies because they are important to the portrayal of
our financial condition and results of operations and they require critical management judgments and estimates about matters that
may be uncertain. If actual results or events differ materially from those contemplated by us in making these estimates,
our reported financial condition and results of operations for future periods could be materially affected.
Results
of Operations for the three months ended October 31, 2019 and 2018
Our
operating results for the three months ended October 31, 2019 and 2018 are summarized as follows:
|
For the three months ended
October 31,
|
|
2019
|
|
2018
|
Sales
|
$
|
—
|
|
|
$
|
46,320
|
|
Total Cost of Sales
|
|
121,159
|
|
|
|
180,518
|
|
Gross (loss)
|
|
(121,159
|
)
|
|
|
(134,198
|
)
|
Total operating expenses
|
|
43,357
|
|
|
|
81,986
|
|
Net (loss) from operations
|
|
(164,516
|
)
|
|
|
(216,184
|
)
|
Revenue
For
the three months ended October 31, 2019 and October 31, 2018 there was revenue of $0 and $46,320, respectively.
Cost
of Goods Sold
Our
cost of goods sold for the three months ended October 31, 2019 was $121,159 compared to $180,518 for the three months ended October
31, 2018. The decrease of $59,359 is primarily due to the decrease of $3,382 in computer lease, $29,057 in cost of services, and
$26,920 in software maintenance.
Gross
Loss
Our
gross loss for the three months ended October 31, 2019 was $121,159 compared to a gross loss of $134,198 for the three months
ended October 31, 2018. This decrease in the gross loss is primarily attributed to the decrease in cost of goods sold of $59,359
offset by a decrease in sales of $46,320.
Operating
Expenses
Our
operating expenses decreased by $38,630 from $81,986 for the three months ended October 31, 2018 to $43,357 for the three months
ended October 31, 2019.
While
we had no sales for the three months ended October 31, 2019 we are still incurring operating costs to keep the company in operations.
Costs decreased over all areas when comparing the nine months ended October 31, 2019 and 2018, except for the increase in selling,
general, and administrative of $77. Decreases in operating expenses included professional fees of $28,650, marketing and advertising
of $7,240, payroll of $9,809, consultant fees of $28,000, and depreciation of $239.
Our
total operating expenses for the three months ended October 31, 2019 of $43,357 consisted of $711 of selling, general and administrative
expenses, consulting expense of $42,000, and $646 of amortization and depreciation expenses. Our general and administrative expenses
consist of computer and internet expenses.
Our
total operating expenses for the three months ended October 31, 2018 of $81,986 consisted of $11,156 of selling, general and administrative
expenses, $2,925 of professional fees, consulting expense of $57,477, payroll of $8,978, marketing and advertising of $804, and
$646 of amortization and depreciation expenses. Our general and administrative expenses consist of bank charges, telephone expenses,
meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.
Net
Loss
Our
net loss from operations of $164,517 for the three months ended October 31, 2019 decreased from $216,184 for the three month period
ending October 31, 2018. The decrease in net loss for the three months ended October 31, 2019 as compared to October 31, 2018
was attributed to the decrease in cost of sales of $13,039, and a decrease in operating expenses of $38,630.
Results
of Operations for the nine months ended October 31, 2019 and 2018
Our
operating results for the nine months ended October 31, 2019 and 2018 are summarized as follows:
|
For the nine months ended
October 31,
|
|
2019
|
|
2018
|
Sales
|
$
|
—
|
|
|
$
|
84,610
|
|
Total Cost of Sales
|
|
363,477
|
|
|
|
520,164
|
|
Gross (loss)
|
|
(363,477
|
)
|
|
|
(435,554
|
)
|
Total operating expenses
|
|
142,966
|
|
|
|
255,148
|
|
Net (loss) from operations
|
|
(506,443
|
)
|
|
|
(690,702
|
)
|
Revenue
There
was no revenue from operations for the nine months ended October 31, 2019 as compared to $84,610 for the nine months ended October
31, 2018. This decrease is primarily a result in the decrease in advertising revenue generated. We are currently looking
for ways to earn revenue with the products that we currently have created.
Cost
of Goods Sold
Our
cost of goods sold for the nine months ended October 31, 2019 was $363,477 compared to $520,164 for the nine months ended October
31, 2018. The decrease of $156,687 is primarily due to the decrease in labor cost and direct expenses associated with cryptocurrency
advertisers. The only cost for the nine months ended October 31, 2019 was related to depreciation expense attributable to cost
of goods sold.
Gross
Loss
Our
gross loss for the nine months ended October 31, 2019 was $363,477 compared to a gross loss of $435,554 for the nine months ended
October 31, 2018. This decrease in the gross loss is primarily attributed to the decrease in computer lease of $11,418, cost of
services of $65,479 and $79,792 in software maintenance.
Operating
Expenses
Our
operating expenses decreased by $112,183 from $255,148 for the nine months ended October 31, 2018 to $142,966 for the nine months
ended October 31, 2019.
While
we had no sales for the nine months ended October 31, 2019 we are still incurring operating costs to keep the company in operations.
Costs decreased over all areas when comparing the nine months ended October 31, 2019 and 2018, except for the increase in bad
debt of $4,500 and depreciation of $407. The decreases in operating expenses included professional fees of $18,777, selling general
and administrative of $14,779, marketing and advertising of $9,795, payroll of $30,761, and consultant fees of $42,977.
Our
total operating expenses for the nine months ended October 31, 2019 of $142,966 consisted of $5,272 of selling, general and administrative
expenses, $5,256 of professional fees, consulting expense of $126,000, bad debt expense of $4,500, and $1,938 of amortization
and depreciation expenses. Our general and administrative expenses consist of bank charges, telephone expenses, meals and entertainments,
computer and internet expenses, postage and delivery, office supplies and other expenses.
Our
total operating expenses for the nine months ended October 31, 2018 of $255,148 consisted of $20,051 of selling, general and administrative
expenses, $24,033 of professional fees, consulting expense of $168,977, payroll of $30,761, marketing and advertising of $9,795,
and $1,531 of amortization and depreciation expenses. Our general and administrative expenses consist of bank charges, telephone
expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.
Net
Loss
Our
net loss from operations of $142,966 for the nine months ended October 31, 2019 decreased from $255,148 for the nine-month period
ending October 31, 2018. The accumulated deficit recognized during the year ended January 31, 2019 of $1,431,050 to a total accumulated
deficit of $1,937,496. The decrease in net loss for the nine months ended October 31, 2019 as compared to October 31, 2018 was
attributed to the decrease of sales of $84,610, a decrease in cost of sales of $156,687, and a decrease in operating expenses
of $184,260.
Liquidity
and Capital Resources
Introduction
During
the nine months ended October 31, 2019 we utilized $0 in cash. Our cash on hand as October 31, 2019 was $0. Currently all operating
costs are being accrued.
Cash
Requirements
We
had cash available of $0 as of October 31, 2019. Based on our revenues, cash on hand and current monthly burn rate, we must
rely on financing to fund current operations on a daily basis. Currently all operating costs are being accrued as accounts payable.
Sources
and Uses of Cash
Operation
We
used $8,152 in cash by operating activities for the nine months ended October 31, 2019, as compared to cash used in the amount
of $56,140 for the nine months ended October 31, 2018.
Net
cash used by operations consisted primarily of the net loss of $506,446 offset by non-cash expenses of $365,412 in depreciation
and amortization of assets. Additionally, changes in assets and liabilities consisted of decreases of $4,500 in accounts receivable,
prepaid expenses of $149 and $128,233 in accounts payable.
Investments
There
was no increase in cash in investing activities for the nine months ended October 31, 2019 compared to using $122,319 for the
nine months ended October, 2018.
Financing
We
had an increase in net cash borrowing for financing activities of $8,152 in the nine months ended October 31, 2019 due to the
payment of invoices by MCIG which was offset by the amount due to MCIG. For the nine months ended October 31, 2018 the company
borrowed $162,148 from related parties.
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 we consider material.
Going
Concern
Our
financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets
and liquidation of liabilities in the normal course of business. Because the business is relatively new and has a short history
and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the three months
ended October 31, 2019 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. The working capital for the nine months ended October
31, 2019 is ($375,474).
Currently
the company has a negative working capital as there has been a significant loss when $1,250,000 of accounts receivable was written
off for the year ended January 31, 2019. The large accumulated deficit raises substantial doubt about its ability to continue
as a going concern.