Auto Parts 4Less Group, Inc. - Quarter Report: 2018 October (Form 10-Q)

Loss Per Common Share:

The weighted average number of common shares outstanding during each period is used to compute basic loss per share.  Diluted loss per common share are computed using the weighted average number of common shares and potentially dilutive common shares outstanding.  Potentially dilutive common shares are additional common shares assumed to be exercised. Potentially dilutive common shares are excluded from the diluted loss per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.

The Company had 37,500,000 warrants, 330,000 shares of Series A Preferred Stock and 1,000 shares of Series B Preferred Stock outstanding at October 31, 2018 and December 31, 2017, which were potentially dilutive common stock equivalents but would be antidilutive and are not included.  As the Company incurred a net loss during the three and nine months ended October 31, 2018 and December 31, 2017, the common stock equivalents were considered anti-dilutive.

Recently Issued Accounting Standards:

Revenue from Contracts with Customers: In May 2014, Accounting Standards Update No. 2014-09 (Topic 606) was issued related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard replaces most existing revenue recognition guidance under GAAP and permits the use of either the retrospective or cumulative effect transition method. This accounting standard update, as amended, was effective for reporting periods beginning after December 15, 2017. The Company adopted this standard as of February 1, 2018.  The new guidance did not have an impact on the Company’s consolidated financial statements.

There were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.

NOTE 2 – GOING CONCERN AND FINANCIAL POSITION

MedCareers’ financial statements are prepared using GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has incurred cumulative losses through October 31, 2018 of $14,163,990 and has a working capital deficit at October 31, 2018 of $7,613,502. As of October 31, 2018, the Company only had cash and cash equivalents of $7,234 and had short-term debt in default. The short-term debt agreements provide legal remedies for satisfaction of defaults, none of the lenders to this point have pursued their legal remedies. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

The potential proceeds from the sale of common stock and other contemplated debt and equity financing, and increases in operating revenues from new development and business acquisitions might enable MedCareers to continue as a going concern. However, revenues have not been sufficient to cover operating costs that would permit the Company to continue as a going concern historically and there can be no assurance that the Company can or will be able to complete any debt or equity financing, or develop or acquire one or more business interests on terms favorable to it.  MedCareers’ financial statements do not include any adjustments that might result from the outcome of this uncertainty. Refer to Note 9 - Subsequent Events for disclosure of the Stock Purchase Agreement completed with The 4 Less Corp on November 29, 2018.

NOTE 3 – DEPOSIT FOR PLANNED MERGER

On June 18, 2018, the Company entered into a Binding Letter of Intent (“Binding LOI”), with The 4Less Corp. (“4Less”). Pursuant to the agreement, the Company agreed to acquire all of the issued and outstanding shares of 4Less’ common stock by issuing (1) 19,000 shares of Series B preferred stock; (2) 6,750 shares of Series C preferred stock; (3) 750 shares of Series D preferred stock to shareholders and pay $150,000 to 4Less within 15 days of execution of the Binding LOI. The amount was subsequently reduced to $110,000 by verbal agreement between the parties. The Company paid the $110,000 in June 2018. Timothy Armes, CEO of the Company, agreed to return 60,000,000 shares of the Company’s common stock in exchange for 120 shares of the Company’s Series D preferred stock at the time of execution of a definitive agreement. The parties agreed to enter into mutually agreeable definitive agreement for the closing of the transaction within 120 days of the execution of this Binding LOI. On October 12, 2018, the parties agreed to extend the term by 30 days from 120 days to 150 days. On November 8, 2018, the Company entered into a Stock Purchase Agreement with The 4 Less Corp and closed the transaction on November 29, 2018. See disclosure at Note 9 - Subsequent Events.

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Net cash provided by financing activities for the nine months ended October 31, 2018 was $239,089 compared to $0 for the same period in 2017. The increase was due to the borrowings on Notes Payable in 2018 compared to no borrowings in 2017.

The Company does not have sufficient cash reserves or revenues to meet its contractual obligations under its outstanding notes payable and to pay its ongoing monthly expenses, which the Company anticipates totaling approximately $300,000 over the next 12 months.  The Company has been able to continue operating to date largely from loans made by its shareholders and other debt financings to date.  The Company is currently looking at short-term and more permanent financing opportunities, including debt or equity funding, bridge or short-term loans, and/or traditional bank funding, but we have not decided on any specific path moving forward.  Unless we raise sufficient funding to pay our ongoing expenses associated with being a public company, and we have sufficient funds to support our planned operations, the Company can provide no assurances that it will be able to meet its short and long term liquidity needs. The Company continues to generate revenue from the Nurses Lounge business, which the Company believes will increase to the point where the Company can cover its basis monthly obligations, of which there can be no assurance. Our financial statements contain information expressing substantial doubt about our ability to continue as a going concern.

We do not currently have any additional formal commitments or identified sources of additional capital from third parties or from our officers, director or significant shareholders. We can provide no assurance that additional financing will be available on favorable terms, if at all. If we are not able to raise the capital necessary to continue our business operations, we may be forced to abandon or curtail our business plan.

In the future, we may be required to seek additional capital by selling additional debt or equity securities, selling assets, if any, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.

Acquisition and Disposition

On June 18, 2018, the Company entered into a Binding Letter of Intent (“Binding LOI”), with The 4Less Corp. (“4Less”). The Company will acquire all of the issued and outstanding shares of common stock of 4Less. The Company shall issue (1) 19,000 shares of Series B preferred stock (2) 6,750 shares of Series C preferred stock (3) 750 shares of Series D preferred stock to shareholders and pay $150,000 to 4Less within 15 days of execution of the Binding LOI. The amount was subsequently reduced to $110,000 by verbal agreement between the parties. The Company paid the $110,000 in June 2018. Timothy Armes, CEO of the Company, agreed to return 60,000,000 shares of common stock of the Company in exchange for 120 shares of Series D preferred stock at the time of execution of the definitive agreement. The parties closed on the transaction on November 29, 2018. The former owners of The 4Less Corp. now control the Company. Additionally, on December 12, 2018, the Company transferred the operations of Nurses Lounge, Inc. to a company owned by Timothy Armes, the Chief Executive Officer of the Company, various debt holders and Series A Preferred Stockholders.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4. Controls and Procedures

(a)           Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), has concluded that as of the Evaluation Date and as disclosed in the Company’s Annual Form 10-K for the year ended January 31, 2018, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Moving forward, we hope that our Chief Executive Officer and Principal Financial Officer will be able to devote the additional time and effort required so that our disclosure controls and procedures are once again effective.  Notwithstanding the assessment that our internal controls and procedures were not effective, we believe that our financial statements contained in this Quarterly Report for the quarter ended October 31, 2018 fairly present our financial position, results of operations and cash flows for the years and months covered thereby in all material respects.

(b)           Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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