CGS INTERNATIONAL, INC. - Quarter Report: 2022 January (Form 10-Q)

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

CGS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada

32-0378469

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

None

N/A

N/A

Large accelerated filer 

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Accelerated filer 

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Non-Accelerated filer 

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Emerging growth company 

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Smaller reporting company 

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Page 

Number 

PART I - FINANCIAL INFORMATION 

Item 1 

Financial Statements

Item 2 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3 

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4 

Controls and Procedures

23

PART II - OTHER INFORMATION 

Item 1 

Legal Proceedings

25

Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3 

Defaults Upon Senior Securities

25

Item 4 

(Removed and Reserved)

25

Item 5 

Other Information

25

Item 6 

Exhibits

26

CONDENSED BALANCE SHEETS 

4

CONDENSED STATEMENTS OF OPERATIONS 

5

STATEMENTS OF STOCKHOLDERS’ DEFICIT  

6

CONDENSED STATEMENTS OF CASH FLOWS 

7

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS 

8

ASSETS

Cash

Prepaid expenses

Total assets

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities

Accounts payable and accrued expenses

Due to related parties

Notes payable

Convertible notes payable, net

Total current liabilities

Total liabilities

Stockholders' deficit

Preferred shares, $0.001 par value; 76,000,000 shares authorized;

9,029,696 and 0 shares Issued and outstanding as of January 31, 2022 and

April 30, 2021 respectively

Preferred shares, Series A $0.001 par value; 10,000,000 shares authorized;

3,000,000 Issued and outstanding as of January 31, 2022

and April 30, 2021 respectively

Preferred shares, Series B $0.001 par value; 10,000,000 shares authorized;

6,029,696 and 0 shares issued and outstanding as of January 31, 2022 and

April 30, 2021 respectively

Preferred shares, Series C $0.001 par value; 10,000,000 shares authorized;

0 shares issued and outstanding as of January 31, 2022 and

April 30, 2021 respectively

Common shares, $0.001 par value; 300,000,000 shares authorized;

16,990,013 and 190,013 shares issued and outstanding

as of January 31, 2022 and April 30, 2021 respectively

Additional paid-in capital

Accumulated deficit

Total stockholders' deficit

Total liabilities and stockholders' deficit

Sales

Operating expenses

General and administrative

Professional fees

Total operating expenses

Loss from operations

Other expenses

Interest expense

Loss on asset acquisition

Loss on settlement of debt

Total other expense

Net loss

Net loss per common share: basic and diluted

Weighted average common shares outstanding - basic and diluted

Balance, April 30, 2021

Net loss

Balance, July 31, 2021

Shares issued for settlement of debt

Conversion of preferred stock to common stock

Shares issued for asset acquisition

Beneficial conversion feature of convertible debt

Net loss

Balance, October 31, 2021

Conversion of common stock to preferred stock

Net loss

Balance, January 31, 2022

Balance, April 30, 2020

Net Loss

Balance, July 31, 2020

Net Loss

Balance, October 31, 2020

Net Loss

Balance, January 31, 2021

Cash Flows from Operating Activities

Net loss

Adjustments to reconcile net loss to net cash provided by operating activities:

Loss on settlement of debt

Loss on asset acquisition

Amortization of Debt discount

Changes in assets and liabilities

Prepaid expense

Accounts payable and accrued liabilities

Net cash used in operating activities

Cash Flows from Investing Activities

Net cash from financing activities

Cash Flows from Financing Activities

Proceeds from notes payable

Net cash from financing activities

Net increase (decrease) in cash

Cash, beginning of period

Cash, end of period

Supplemental disclosure of cash flow information

Cash paid for interest

Cash paid for taxes

SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of loan payable to convertible notes payable

Preferred stock converted into common stock

1.

Nature of Operations and Continuance of Business

CGS International, Inc. (formerly Tactical Services Inc.) was incorporated in the State of Nevada as a for-profit Company on April 17, 2012.

2.

Summary of Significant Accounting Policies

a)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in the consolidated financial statements for the nine months ended January 31, 2022 should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the Company’s fiscal year ended April 30, 2021, as filed with the SEC.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the year ending April 30, 2022.

b)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of mineral properties, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

c)

Cash and Cash Equivalents

d)

Basic and Diluted Net Loss per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

e)

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Accounting for Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward.

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Accounting for Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

f)

Financial Instruments

 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820 and 825, the fair value of our cash and cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

g)

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.

Going Concern

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has a working capital deficit of $267,039 and has an accumulated deficit of $95,168,186. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management is currently looking at various options and investment opportunities. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavours or opportunities which could significantly and materially restrict the Company’s operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

4.

Due to Related Party

As of January 31, 2022, the Company has amounts of $68,383 (April 30, 2021 – $170,080) in loans and payment of expenses due to related parties. The amounts owing are unsecured, non-interest bearing, and due on demand. On August 24, 2021 the Company and one related party debt holder entered into an agreement to assign $101,697 of related party loans to a third party.

5.

Notes Payable

Notes payable consist of the following at:

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Note payable, secured, 10% interest, due on demand

Total notes Payable

On June 3, 2021, the Company received $ 9,000 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $9,000. Interest expense on the note was $1,396 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On July 8, 2021, the Company received $4,000as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $4,000. Interest expense on the note was $620 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On July 9, 2021, the Company received $6,000 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $6,000. Interest expense on the note was $930 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On July 21, 2021, the Company received $5,000 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $5,000. Interest expense on the note was $775 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On October 31, 2021, the Company received $24,420 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $24,420. Interest expense on the note was $616 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On December 31, 2021, the Company received $20,600 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $20,600. Interest expense on the note was $175 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

On January 31, 2022, the Company received $53,284 as a loan for payment of expenses from an unrelated party. The amount owing is unsecured carries and interest rate of 10% and is due within 10 days of demand. The note payable balance as of January 31, 2022 is $53,284. Interest expense on the note was $0 and $0 for the nine months ended January 31, 2022 and 2021, respectively.

6.

Convertible Notes Payable

Convertible Notes payable consist of the following at:

Convertible note payable, unsecured, 10% interest, due September 13, 2022, net

Convertible note payable, unsecured, 10% interest, due September 13, 2022, net

Convertible note payable, unsecured, 10% interest, due September 13, 2022, net

Total convertible notes

Unamortized discount

Convertible notes payable, net

On September 13, 2021,the Company issued a $10,000 10% unsecured convertible note. The note is due on September 13, 2023 and is convertible into shares of the company’s common stock at a price of $.002 per share. The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $10,000. On September 14, 2021 $2,800 of the note principal was converted into 1,400,000 shares of the Company’s common stock, valued at $142,800 and recorded a loss on settlement of debt of $1,425,200. On October 5, 2021 $4,400 of the note principal was converted into 2,200,000 shares of the Company’s common stock, valued at $7,656,000, and recorded a loss on settlement of debt of $7,651,600. The convertible note payable balance as of January 31, 2022 is $2,800, and shown net of unamortized debt discount of $2,263. Interest expense on the note was $7,844 and $0, including $7,737 and $0 of amortization of debt discount for the nine months ended January 31, 2022 and 2021, respectively.

7.

STOCKHOLDERS’ EQUITY

The Company is authorized  to issue 300,000,000 common shares and 76,000,000 preferred shares of stock, respectively.

On September 13, 2021, the Company designated a class of preferred stock, the “Series A Preferred Stock,” consisting of ten million 10,000,000shares, par value $0.001.

Under the Certificate of Designation, holders of the Series A Preferred Stock are entitled to vote together with the holders of the Company’s common stock on all matters submitted to shareholders at a rate of one hundred (100) votes for each share held. The holders are entitled to liquidation preference senior to common stock

On September 13, 2021, the Company designated a class of preferred stock, the “Series B Preferred Stock,” consisting of ten million 10,000,000 shares, par value $0.001.

Under the Certificate of Designation, holders of the Series B Preferred Stock are entitled at their option to convert their preferred shares into common stock at a conversion rate of five (5) shares of common stock for every one (1) share of Series B Preferred Stock. The holders of Series B Preferred stock are not entitled to voting rights. The holders are entitled to equal rights with our Preferred Series A stockholders as it relates to liquidation preference.

On September 13, 2021, the Company designated a class of preferred stock, the “Series C Preferred Stock,” consisting of ten million 10,000,000 shares, par value $0.001.

Under the Certificate of Designation, holders of the Series B Preferred Stock are entitled at their option to convert their preferred shares into common stock at a conversion rate of five (5) shares of common stock for every one (1) share of Series B Preferred Stock. The holders of Series B Preferred stock are not entitled to voting rights. The holders are entitled to equal rights with our Preferred Series A stockholders as it relates to liquidation preference.

As of January 31, 2022, and April 30, 2021 the Company had 16,990,013 and 190,013 shares of common shares issued and outstanding, respectively.

As of January 31, 2022, and April 30, 2021 the Company had 3,000,000 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

As of January 31, 2022, and April 30, 2021 the Company had 6,029,696 and 0 shares of Series B Preferred Stock issued and outstanding, respectively.

As of January 31, 2022, and April 30, 2021 the Company had 0 and 0 shares of Series C Preferred Stock issued and outstanding, respectively.

On September 14, 2021 a convertible debt holder converted $23,898 of debt into 2,389,898 shares of Preferred B Stock. The shares were valued at 12,188,479, or $5.09 per share, and a loss on settlement of debt of $12,164,581 was recorded.

On September 14, 2021 a convertible debt holder converted $23,899 of debt into 2,389,899 shares of Preferred B Stock. The shares were valued at 12,188,485, or $5.10 per share, and a loss on settlement of debt of $12,164,586 was recorded.

On September 14, 2021 a convertible debt holder converted $23,899 of debt into 2,389,899 shares of Preferred B Stock. The shares were valued at 12,188,485, or $5.10 per share, and a loss on settlement of debt of $12,164,586 was recorded.

On September 14, 2021, a convertible note holder converted $2,800 in principal into 1,400,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at 1,428,000, or $1.02 per share, and a loss on settlement of debt of $1,425,200 was recorded.

On September 22, 2021, a convertible note holder converted $3,000 in principal into 1,600,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at $1,530,000, or $1.02 per share, and a loss on settlement of debt of $1,527,000 was recorded.

On September 24, 2021, a convertible note holder converted $3,200 in principal into 1,600,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at 1,632,000 or $1.02 per share, and a loss on settlement of debt of $1,628,800 was recorded.

On September 27, 2021 a Preferred Series B stockholder converted 380,000 shares of Preferred Series B Stock into 1,900,000 shares of the Company’s common stock.

On September 27, 2021 a Preferred Series B stockholder converted 380,000 shares of Preferred Series B Stock into 1,900,000 shares of the Company’s common stock.

On September 29, 2021 the Company issued 30,000,000 shares of common stock valued at $30,600,000 or $1.02 per share per an asset purchase agreement. The value of the purchased assets was unidentifiable and the value of the shares were recorded as a loss on asset acquisition.

On September 27, 2021 a Preferred Series B stockholder converted 380,000 shares of Preferred Series B Stock into 1,900,000 shares of the Company’s common stock.

On October 5, 2021, a convertible note holder converted $4,400 in principal into 2,200,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at $7,656,000 or $3.48 per share, and a loss on settlement of debt of $7,561,600 was recorded.

On October 5, 2021, a convertible note holder converted $4,400 in principal into 2,200,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at $7,656,000 or $3.48 per share, and a loss on settlement of debt of $7,561,600 was recorded.

On October 5, 2021, a convertible note holder converted $4,400 in principal into 2,200,000 shares of common stock at a conversion price of $0.002 per share. The shares were valued at $7,656,000 or $3.48 per share, and a loss on settlement of debt of $7,561,600 was recorded.

On December 1, 2021 the Company exchanged 3,000,000 shares of series A preferred stock for 30,000,000 shares of common stock which were then returned and cancelled.

8.

Subsequent Events

On March 1, 2022, the Company issued 5,000,000 shares of common stock to its Chief Executive Officer for services.

·

As of January 23, 2017, Francisco Ariel Acosta resigned from all positions with the Company, including but not limited to those of President, Chief Executive Officer, Secretary and Director.

·

As of January 23, 20017, Thomas Li was appointed a member of the Company’s Board of Directors and as the Company’s President, Chief Executive Officer.

·

As of January 23, 20017, Nathan Xian was appointed a member of the Company’s Board of Directors and Chief Financial Officer and Secretary.

General and administrative

Professional fees

Other expenses

Net Loss

General and administrative

Professional fees

Interest expense

Net Loss

Current Assets

Current Liabilities

Working Capital (deficit)

Cash used in Operating Activities

Cash used in Investing Activities

Cash provided by Financing Activities

Net Increase in Cash

1.

Lack of formal policies and procedures necessary to adequately review significant accounting transactions. The Company utilizes a third-party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day-to-day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions.

2.

Audit Committee and Financial Expert. The Company does not have a formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.

25

Exhibit

No. 

Document Description 

3.1(a) 

Articles of Incorporation (incorporated by reference from our Registration Statement on Form S-1 filed on July 06, 2012) 

3.1(b) 

Amendment to Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K filed on November 12, 2013). 

3.1(c) 

Amendment to Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K filed on June 30, 2021). 

3.2 

Bylaws (incorporated by reference from our Registration Statement on Form S-1 filed on July 06, 2012) 

31.1 

Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer 

31.2 

Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer * 

32.1 

Section 1350 Certification of Chief Executive Officer 

32.2 

Section 1350 Certification of Chief Financial Officer ** 

101 

Interactive Data Files 

*

Included in Exhibit 31.1

**

Included in Exhibit 32.1

CGS International, Inc.

Dated: March 16, 2022

/s/ Ramon Mabanta

Ramon Mabanta

President, Secretary, Treasurer, 

Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer)