Motos America, Inc. - Quarter Report: 2022 January (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED January 31, 2022

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

Commission File Number 000-52879

MOTOS AMERICA INC.

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (385) 386-6700

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 2, 2023, the issuer had outstanding 7,136,416 shares of common stock.

TABLE OF CONTENTS

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company's business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation and other factors, most of which are beyond the control of the Company.

These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and, (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Company’s filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

PART I - FINANCIAL INFORMATION

ITEM 1 - Financial Statements

MOTOS AMERICA INC.

INDEX TO UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JANUARY 31, 2022

MOTOS AMERICA INC.

BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

MOTOS AMERICA INC.

STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

For the Three and Six Months Ended January 31, 2022

For the Three and Six Months Ended January 31, 2021

The accompanying notes are an integral part of these unaudited financial statements.

MOTOS AMERICA INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

MOTOS AMERICA, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

JANUARY 31, 2022

NOTE 1 – ORGANIZATION AND GOING CONCERN

Organization

The Company was incorporated under the laws of the State of Nevada on April 25, 2007 under the name “Contact Minerals Corp.”, and later changed its name to Weconnect Tech International, Inc. In November, 2021 the Company filed Articles of Amendment with the State of Nevada whereby it changed its name to “Motos America Inc.”

The Company considers itself as a lifestyle company. The Company buys and operates BMW Motorcycle, Triumph Motorcycle and Ducati Motorcycle dealerships. It is the belief of the Company that these brands are not sold as practical transportation; instead, they are luxury items that buyers consume as part of a more extensive and exclusive lifestyle choice. The Company has acquired four dealerships and plans to acquire more existing dealerships and develop new “open point” dealerships.

The Company’s business office is located at 510 South 200 West, Suite 110 Salt Lake City, Utah 84101.

Change of Control

On September 27, 2021, certain sellers of shares of our common stock, including our former sole executive officer and director, Shiong Han Wee (collectively, the “Seller”), and our current chief executive officer, Vance Harrison (the “Buyer”) entered into a Sale and Purchase Agreement dated September 24, 2021, pursuant to which the Buyer agreed to purchase from the Sellers an aggregate of 1,454,943 shares of common stock of the Company (the “Common Shares”) and 33,334 shares of Series A Preferred Convertible Stock (the “Preferred Shares”). The Preferred Stock was issued to the Seller on September 24, 2021, as payment in full of all amounts owed by the Company and disposition of the subsidiary to the Seller.

The transaction resulted in the Buyer having approximately 90% of the voting control.

Reverse Stock Split and Corporation Actions

On November 1, 2021, the Board of Directors of the Company authorized a one-for-three hundred (1-for-300) reverse stock split (the “Reverse Split”) of the Company’s issued and outstanding Common Stock, par value $0.001 per share, along with a name change, and elected to apply for a new trading symbol and CUSIP number for its common shares.

On November 17, 2021, the Company, filed with the Secretary of the State of Nevada Amended and Restated Articles of Incorporation. These Restated Articles changed the name of the Company to Motos America Inc., and the Reverse Stock Split. On December 14, 2021, the Company, filed with the Financial Industry Regulatory Authority (FINRA) and the Stock Split and corporate actions were effective as of June 16, 2022.

As a result of the Reverse Split, the number of authorized shares of Common and Preferred Stock was unchanged.

All share and per share information in these financial statements retroactively reflect this Reverse Stock Split, after giving adjustment to fractional shares.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As of January 31, 2022, the Company had an accumulated deficit of $8,018,631, and net loss of $351,406 for the six months ended July 31, 2022. Losses have principally occurred as a result of the substantial resources required for general and administrative expenses associated with our operations. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet with the Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company prepares its financial statements in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and Generally Accepted Accounting Principles (“GAAP”) in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended January 31, 2022, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended July 31, 2021, contained in the Company’s Form 10-K filed on October 26, 2021.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, fair value of equity instruments. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. As of January 31, 2022 and July 31, 2021, the Company had cash of $721,053 and $542, respectively, and did not have cash equivalents.

Financial Instruments

The Company follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1

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 carrying amounts shown of the Company’s financial instruments including current assets and liabilities approximate fair value due to their short-term nature.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, ASC 606 Revenue from Contracts with Customers requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Advertising and Marketing Expenses

Advertising and marketing costs are expensed as incurred and are included in sales and advertising expenses in the accompanying Statements of Operations. Advertising and marketing expenses were $2,481 and $0 for the six months ended January 31, 2022 and 2021, respectively,

Deferred Income Taxes and Valuation Allowance

The Company accounts for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

Net Loss per Share of Common Stock

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock are computed by dividing net earnings by the weighted average number of shares and potential shares outstanding during the period. Potential shares of common stock consist of shares issuable upon the conversion of outstanding convertible debt, preferred stock, warrants and stock options. For the six months ended January 31, 2022, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. For the six months ended January 31, 2021, there were no common stock equivalents.

For the six months ended January 31, 2022, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive.

There were no potentially dilutive shares of common stock outstanding for the six months ended January 31, 2021.

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes 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 year.

Recently Issued Accounting Pronouncements

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

NOTE 3 – ADVANCED PAYMENTS ON ACQUISITION

As of January 31, 2022, a deposit of $1,503,682 was paid towards the acquisition of 100% of the membership interests in two Oregon LLCs: Cascade Moto Eugene, LLC and Cascade Moto Portland. The acquisitions were completed in March 2022.

NOTE 4 – EQUITY

Authorized

On November 18, 2021, the Company filed Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Nevada to authorize one billion (1,000,000,000) shares of common stock having a par value of $0.001 per share, and thirty million (30,000,000) shares of preferred stock having a par value of $0.001 per share. All or any part of the capital stock may be issued by the Corporation from time to time and for such consideration and on such terms as may be determined and fixed by the Board of Directors, without action of the stockholders, as provided by law, unless the Board of Directors deems it advisable to obtain the advice of the stockholders.

Preferred Stock

The Company has designated one series of preferred stock, which is known as the Series A Preferred Stock (the “Series A Preferred”). The Board has authorized the issuance of 10,000,000 shares of Series A Preferred. The Series A Preferred Stock has the following rights and preferences: 

Dividends: Holders of Series A Preferred Stock are entitled to receive (a) dividends at a rate per annum to 3.5% plus all accrued and unpaid dividends that are payable on such share of Series A Preferred Stock, in each case as adjusted for any stock dividends, splits, combinations, and similar events, or (b) participating dividends of the same type as dividends or other distributions, whether cash, in-kind or other property payable or to be made on outstanding shares of Common Stock.

Liquidation Preference: The holders of Series A Preferred Stock have the first equitable right of distribution in the event of liquidation or winding up of the Company.

Voting Rights: The holders of Series A Preferred Stock have the voting rights equal to 100 votes per share on all matters submitted to a vote of the stockholders of the Corporation.

Voluntary Conversion Rights: Each share of Series A Preferred Stock is convertible into 100 shares of Common Stock at the option of the holder thereof.

Mandatory Conversion Right: The Company has the right to convert each share of Series A Preferred Stock into 100 shares of Common Stock at any time.

On September 24, 2021, the Company issued 33,334 shares of Series A Preferred Stock valued at $344,835 as part of the change of control and disposition of subsidiary (see Note 1). As a result, the Company realized a gain on deconsolidation of our subsidiary and settlement of debt of $2,323,897 which we recognized as part of additional paid in capital.

As of January 31, 2022 and July 31, 2021, 33,334 and 0 shares of Preferred Stock were issued and outstanding, respectively.

Common Stock

The Company has authorized 1,000,000,000 shares of Common Stock. Each share of Common Stock entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

During the six months ended January 31, 2022, the Company issued 90,258 shares of common stock as follows:

As of January 31, 2022 and July 31, 2021, the Company had 2,068,958 and 1,978,700 shares of common shares issued and outstanding, respectively.

Warrants

Pursuant to a private placement offering, the Company issued sixteen (16) Series A Warrants for $16, to related parties, which was assigned a value of $180,209 and was recorded as debt discount to convertible notes payable. The debt discount is amortized over the term of convertible notes payable. These Warrants were issued in conjunction with additional debt investments made by the recipients.

Each Series A Warrant is for the purchase of 10,000 shares of common stock at a price of $1.00 to $2.00 per share, which may be exercised for a period of 24 months beginning January 1, 2022 and ending December 31, 2023 at a strike price of $1.00 per share and a next period of 12 months beginning January 1, 2024 and ending December 31, 2024 at price of $2.00 per share. Unexercised Warrants shall expire on January 1, 2025.

All warrants issued were valued using the Black-Scholes pricing model. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement.

A summary of warrant activity during the six months ended January 31, 2022 is as follows:

The intrinsic value of the warrants as of January 31, 2022, is $0.

NOTE 5 – CONVERTIBLE NOTES PAYABLE 

During the six months ended January 31, 2022, the Company issued convertible notes payable totaling $1,770,000.

During the six months ended January 31, 2022, the Company issued Series A Convertible Debentures to related parties of $1,000,000.

During the six months ended January 31, 2022, the Company recorded interest expense of $40,438, amortization of debt discount of $7,261. As of January 31, 2022, the Company recorded accrued interest of $40,438.

Series A Convertible Bonds

Series A Convertible Bonds (“A-Bonds”) are $1,000 face value bonds, bear a 6% coupon rate. Interest is accrued and payable on the 31st of March, the 30th of June, the 30th of September, and the 31st of December each year from the date of issuance until the date of redemption or conversion into Shares. A-Bonds are convertible into Shares at the rate of 200 Common Shares each. The A-Bonds may be called or redeemed by the Company upon 60 days’ notice any time after July 1, 2024. Series A Convertible Bonds shall mature on December 31, 2028, on which date they shall be paid, together with any accrued interest to the registered owner, unless having been converted into Shares.

Series B Convertible Bonds

Series B Convertible Bonds (“B-Bonds”) are $1,000 face value bonds, with an 18% coupon rate. Interest shall be accrued and payable on the 31st of March, the 30th of June, the 30th of September, and the 31st of December each year from the date of issuance until the date of redemption or conversion into Shares. B-Bonds are convertible into Shares at the rate of 400 Shares each. B-Bonds shall mature on December 31, 2026. Series B Convertible Bonds are callable by the Company on 60 days' notice, any time after January 1, 2024.

Series A Convertible Debentures

Series A Convertible Debentures (“A-Debentures”) are $500,000 face value debentures. The A-Debentures bear an annual rate of 10% simple. Interest shall be accrued and payable on the 31st of March, the 30th of June, the 30th of September, and the 31st of December each year. A-Debentures are convertible into Shares at the rate of 150,000 Shares each. A-Debentures shall mature on December 31, 2026, date they shall be paid, together with any accrued interest to the registered owner, unless having been converted into Shares.

NOTE 6 – RELATED PARTY TRANSACTIONS

As discussed in Notes 1 and 4, as part of the change of control, the Company realized a gain on disposal of subsidiary and debt forgiveness to our former CEO, which was recorded to additional paid in capital.

As discussed in Notes 4 and 5, related parties contributed in the purchase of our private placement offering and purchase of warrants.

As discussed in Note 3, the Oregon dealerships were purchased from our CEO during August 2021.

Put Option

On December 31, 2021, the Company issued to our CEO, a put option to sell or put up to 200,000 shares at the price of $7.50 per share ($1,500,000). The put option is exercisable at any time during the four (4) year period, beginning on December 1, 2023 and ending on December 1, 2027. As of July 31, 2022, the Company has not recognized a liability for the option as it is currently not exercisable.

Due to Related Party

As of January 31, 2022, the Company was obligated to our CEO, for an unsecured, non-interest-bearing due on demand loan with a balance of $485,330. As of July 31, 2021, the Company was obligated to the former management for $1,248,070, which was forgiven in 2022 as a part of the change of control.

NOTE 7 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these financial statements were available to be issued.

Subsequent to January 31, 2022, the Company issued debt as follows:

Subsequent to January 31, 2022, the Company issued common stock as follow:

Acquisitions:

ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

Organization

The Company was incorporated under the laws of the State of Nevada on April 26, 2007, under the name “Contact Minerals Corp.”, and later changed its name to Weconnect Tech International, Inc. In November 2021 the Company filed Articles of Amendment with the State of Nevada whereby it changed its name to “Motos America Inc.”

Overview

The Company considers itself a lifestyle company. The Company develops new open points, buys and operates BMW Motorcycle, Triumph Motorcycle and Ducati Motorcycle dealerships. It is the belief of the Company that these brands are not sold as practical transportation; instead, they are luxury items that buyers consume as part of a more extensive and exclusive lifestyle choice. The Company has acquired four dealerships and plans to acquire more existing dealerships and develop new “open point” dealerships.

The Company’s business office is located at 510 South 200 West, Suite 110 Salt Lake City, Utah 84101.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended January 31, 2022, which are included herein.

Our operating results for the three and six months ended January 31, 2022, and 2021 and the changes between those periods for the respective items are summarized as follows:

Three Months Ended January 31, 2022, compared to the Three Months Ended January 31, 2022.

During the three months ended January 31, 2022 and 2021, the Company earned minor revenue from finance and insurance of $2,645 and $0, respectively.

Operating expenses for the three months ended January 31, 2022 and 2021 were $306,352 and $8,473, respectively.

During the three months ended January 31, 2022, the operating expenses, were primarily attributed to professional fees of $206,890, selling and general administrative expenses of $45,740, payroll expenses of $50,881 and sales and advertising expenses of $2,841. During the three months ended January 31,2021, the operating expenses, were primarily attributed to selling and general administrative expenses of $8,473.

Other expenses for the three months ended January 31, 2022 and 2021, represent interest expenses of $4,438 and $0 related to Series A and B Bonds and Series A Debentures, amortization of debt discount of $7,261 and $0 related to Series A warrants, and other expenses of $0 and $6,138, respectively.

We had a net loss of $315,406 and $14,611 for the three months ended January 31, 2022, and 2021, respectively. The increase in net loss of $300,795 was primarily due to an increase in operating expenses of $297,879 and other expenses of $5,561, reduced by an increase in revenues of $2,645.

 Six Months Ended January 31, 2022, compared to the Six Months Ended January 31, 2021.

During the six months ended January 31, 2022, and 2021, the Company earned minor financing operating revenues of $2,645 and $0, respectively.

We had a net loss of $351,406 and $28,206 for the six months ended January 31, 2022 and 2021, respectively. The increase in net loss of $323,200 was primarily due to an increase in operating expenses of $290,653 and interest expenses of 35,192, reduced by an increase in revenues of $2,645.

Operating expenses for the six months ended January 31, 2022, and 2021 were $306,352 and $15,699, respectively.

During the six months ended January 31, 2022, the operating expenses, were primarily attributed to professional fees of $206,890, selling and general administrative expenses of $45,740, payroll expenses of $50,881 and sales and advertising expenses of $2,841. During the six months ended January 31,2021, the operating expenses, were primarily attributed to selling and general administrative expenses of $15,699.

Other expenses for the six months ended January 31, 2022 and 2021, represent interest expenses of $40,438 and $0 related to Series A and B Bonds and Series A Debentures, amortization debt discount of $7,261 and $0 related to Series A warrants, and other expenses of $0 and $12,507, respectively.

Balance Sheet Data:

As of January 31, 2022, our current assets were $2,227,486, and our current liabilities were $2,225,878 which resulted in working capital of $1,608.

As of January 31, 2022, current liabilities were comprised of $143,496 in accounts payable and accrued liabilities, convertible notes payable of $1,597,052 and $485,330 in due to related party, compared to $1,053,145 in accounts payable and accrued liabilities, $1,248,070 in due to related party and $21,199 in current tax liabilities as of July 31, 2021.

As of January 31, 2022, our working capital increased by $2,323,480 from working capital deficiency of $2,321,872 as of July 31, 2021, to working capital of $1,608, primarily due to an increase in current assets of $2,226,944 and a decrease in current liabilities of $96,536.

Committed liquidity resources available

As of January 31,2022, the outstanding principal amount of indebtedness was $1597,052, summarized in the table below:

The following table sets forth a summary of our cash flows:

Cash Flows from Operating Activities

During the six months ended January 31, 2022, we have generated positive cash flows from operating activities of $274,193. For the six months ended January 31, 2022, net cash flows provided by operating activities was $274,193, consisting of a net loss of $351,406, reduced by accounts payable and accrued liabilities of $135,759, due to related party of $485,330, amortization of debt discount of $7,261 and increase by other current assets of $2,751. For the six months ended January 31, 2021, net cash flows used in operating activities was $2, consisting of a net loss of $28,206, reduced by accounts payable and accrued liabilities of $66,897, due to related party of $64,674, deferred tax of $499 and increased by foreign translation reserve of $103,866.

Cash Flows used in Investing Activities

For the six months ended January 31, 2022, the cash used in investing activities was $1,503,682 related to advance payment on acquisition. For the six months ended January 31, 2021, we had no cash used in investing activities.

Cash Flows from Financing Activities

Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities for the six months ended January 31, 2022, was $1,950,000 related to proceeds of $180,000 from private placement and $1,770,000 from convertible notes. For the six months ended January 31, 2021, we had no financing activities.

Off-Balance Sheet Arrangements

As of January 31, 2022, we did not have any 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, revenue or expenses, results of operations, liquidity, capital expenditures or material capital resources.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As of January 31, 2022, the Company had an accumulated deficit of $8,018,631, and net loss of $351,406 for the six months ended January 31, 2022. Losses have principally occurred as a result of the substantial resources required for general and administrative expenses associated with our operations. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet with the Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provide the opportunity for the Company to continue as a going concern.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.  

ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

ITEM 4 - Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that in light of the material weaknesses described below, our disclosure controls and procedures were not effective as of January 31, 2022. See material weaknesses discussed below in Management’s Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our internal control over financial reporting is a process designed under the supervision of our Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditure are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As of January 31, 2022, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Our management concluded that our internal controls over financial reporting were not effective as of January 31, 2022 due to the following identified material weaknesses:

Management believes that despite our material weaknesses, our financial statements for the quarter ended January 31, 2022 are fairly stated, in all material respects, in accordance with GAAP.

During the quarter ended January 31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations Over Internal Controls

Management, including our Principal Executive Officer and Principal Financial Officer, does not expect that disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are no resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

PART II - OTHER INFORMATION

ITEM 1 - Legal Proceedings

None.

ITEM 1A - Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds

During the six months ended January 31, 2022, the Company realized $180,000 from the unregistered sale of 90,000 shares of common stock (share information reflects 1 for 300 reverse stock split, effective on June 16, 2022).

The proceeds of this unregistered offering were used to fund the operating deficit of the Company, and to provide working capital to fund future operating losses, as well as for the business objectives of the Company.

The securities in the transaction described above were issued in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act for transactions not involving any public offering. All certificates evidencing the shares sold bore a restrictive legend. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.

ITEM 3 - Defaults upon Senior Securities

None.

ITEM 4 - Mine Safety Disclosures

Not applicable.

ITEM 5 - Other Information

None.

ITEM 6 - Exhibits

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.