BDCC 10-Q
Blackwell 3D Construction Corp. (BDCC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter) |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
+1-
(Registrant’s telephone number, including area code)
30211 Avenida de Las Banderas
Suite 200-2002
Rancho Santa Margarita, CA, 92688
(Former name, former address and former fiscal year, if changed since last report)
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 ☒
Indicate by check mark whether the registrant has submitted electronically and 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller Reporting company | ||
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| Emerging Growth company |
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). No ☒ Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
TABLE OF CONTENTS
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Item 1. Financial Statements |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosure About Market Risk |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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| Table of Contents |
PART I—FINANCIAL INFORMATION
POWER AMERICAS RESOURCES GROUP LTD
CONSOLIDATED BALANCE SHEETS
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| November 30, 2022 |
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| May 31, 2022 |
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ASSETS |
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Current assets |
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Cash |
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Total current assets |
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Other assets |
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Licenses |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Derivative liability |
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Note payable |
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Convertible notes |
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Total current liabilities |
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Total liabilities |
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Stockholders' deficit |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
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See accompanying notes to the consolidated financial statements
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| Table of Contents |
POWER AMERICAS RESOURCES GROUP LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
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| November 30, 2022 |
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| November 30, 2021 |
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| November 30, 2022 |
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Revenue |
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Operating expenses |
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General and administration |
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Professional fees |
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Total operating expenses |
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Loss from operations |
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Other income (expenses) |
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Interest expense |
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Loss on change of derivative liability |
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Foreign currency translation |
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Gain on forgiveness of notes payable |
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Total income (expenses) |
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Net loss before tax provision |
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Tax provision |
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Net loss |
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Net loss per common share - basic and diluted |
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Weighted average number of common shares outstanding - basic and diluted |
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See accompanying notes to the consolidated financial statements
| 4 |
| Table of Contents |
POWER AMERICAS RESOURCES GROUP LTD
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
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| Paid-in Capital |
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Balance, May 31, 2022 |
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Net loss |
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Balance, August 31, 2022 |
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Shares issued for debt conversion |
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Share issued for settlement of accrued expenses |
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Shares issued for services |
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Shares issued for asset purchase agreement |
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Derivative liability written off to additional paid in capital |
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Net loss |
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Balance, November 30, 2022 |
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Balance, May 31, 2021 |
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Net loss |
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Balance, August 31, 2021 |
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Derivative liability written off to additional paid in capital |
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Net loss |
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Balance, November 30, 2021 |
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See accompanying notes to the consolidated financial statements
| 5 |
| Table of Contents |
POWER AMERICAS RESOURCES GROUP LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Cash Flows from Operating Activities |
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Net loss |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Gain/Loss on change in derivative liability |
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Amortization of debt discount |
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Shares issued for services |
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Gain on forgiveness of debt |
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Changes in assets and liabilities |
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Accounts payable |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Cash Flows from Financing Activities: |
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Proceeds from convertible notes payable |
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Proceeds from notes payable |
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Net cash provided by financing activities |
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Net increase in cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
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Cash paid for taxes |
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SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Conversion of convertible notes and accrued interest to notes payable |
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Shares issued for asset purchase agreement |
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Shares issued for conversion of notes payable |
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Notes payable converted to convertible notes |
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See accompanying notes to the consolidated financial statements
| 6 |
| Table of Contents |
POWER AMERICAS RESOURCES GROUP LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2022
NOTE 1 – NATURE OF BUSINESS AND OPERATIONS
Organization and Basis of Presentation
Organization
Power Americas Resources Group Ltd.. (the “Company”) was incorporated in the State of Florida on May 11, 2010 under the name Benefit Solutions Outsourcing Corp.
The Company was engaged in the marketing of a craft beer which was brewed, distributed, and marketed solely in Quebec, Canada until the change of control which occurred in March 2019, at which time it ceased business operations.
Going forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for its shareholders. The Company has no particular business combination in mind and has not entered into any negotiations regarding such a combination.
On February 11, 2019, pursuant to a Stock Purchase Agreement, dated November 21, 2017, by and among Stephan Pilon, Pol Brisset (the “Selling Stockholders”), and Redstone Ventures, LTD (the “Purchaser”), the Purchaser purchased an aggregate of
On September 13, 2022, the Company received notice of resignation from Kevin G. Malone from the positions of President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary and Sole-Director of the Corporation and appointed Mark Croskery to serve as President, Chief Executive Officer, Treasurer, Chief Financial Officer, and Director of the Corporation
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared in US dollars and in accordance with accounting principles generally accepted in the United States (“GAAP”) on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company commenced its craft brewing activities in September 2014. During the six months ended November 30, 2022, the Company has incurred net losses of $
Our current operations have been funded entirely from capital raised from our private offering of securities as well as additional funding received through the issuance of convertible notes and stock issuances. We are entirely dependent on our ability to attract and receive additional funding from either the sale of securities or outside sources such as private investment or a strategic partner. We currently have no firm agreements or arrangements with respect to any such financing and there can be no assurance that any needed funds will be available to us on acceptable terms or at all. The inability to obtain sufficient funding of our operations in the future will restrict our ability to grow and reduce our ability to continue to conduct business operations. Our failure to raise additional funds will adversely affect our business operations, and may require us to suspend our operations, which in turn may result in a loss to the purchasers of our common stock. If we are unable to obtain necessary financing, we will likely be required to curtail our development plans which could cause us to become dormant. Any additional equity financing may involve substantial dilution to our then existing stockholders.
The Company’s ability to continue as a going concern is dependent on its ability to achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations as they become payable. Management may seek additional capital through a private placement and public offering of its common stock. Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future.
COVID-19 Pandemic
In December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China (“COVID-19”) and has since spread worldwide, including to the Unites States, posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”). The COVID-19 Pandemic poses a threat to the health and economic wellbeing of our consultants and vendors. Like most businesses world-wide, the COVID-19 Pandemic has impacted the Company financially; however, management cannot presently predict the scope and severity with which COVID-19 will impact our business, financial condition, results of operations and cash flows.
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| Table of Contents |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements represent the results of operations, financial position and cash flows of Power Americas, Inc. prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America. The consolidated financial statements include the financial statements of the Company, and its 100% owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The cash account that is held in Canadian Dollar, and foreign exchange transaction gain (loss) resulting from fluctuations in the currency exchange rate between U.S. dollar and Canadian dollar has been recorded in the statements of operations. Translation gain (loss) is reported as a component of other accumulated comprehensive income, which was nil during the year ended November 30, 2022 and 2021.
Stock-based compensation
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50
Concentration of Credit Risk
The Company has no off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains all of its cash balances with two financial institutions in the form of demand deposits.
| 8 |
| Table of Contents |
Earnings per share
The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. There were no potential equivalent shares of Common Stock as of November 30, 2022.
Revenue Recognition
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Revenue related to contracts with customers is evaluated utilizing the following steps: (i) Identify the contract, or contracts, with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; (v) Recognize revenue when the Company satisfies a performance obligation.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Fair Value of Financial Instruments
The Company measures fair value in accordance with ASC 820 - Fair Value Measurements. ASC 820 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurements. ASC 820 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by ASC 820 are:
Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 - Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date
| 9 |
| Table of Contents |
The reported fair values for financial instruments that use Level 2 and Level 3 inputs to determine fair value are based on a variety of factors and assumptions. Accordingly, certain fair values may not represent actual values of the Company’s financial instruments that could have been realized as of November 30, 2022 or that will be recognized in the future, and do not include expenses that could be incurred in an actual settlement. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, receivables from related parties, prepaid expenses and other, accounts payable, accrued liabilities, and related party and third party notes payables approximate fair value due to their relatively short maturities. The Company’s notes payable to related parties approximates the fair value of such instrument based upon management’s best estimate of terms that would be available to the Company for similar financial arrangements at November 30, 2022 and May 31, 2022.
Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of November 30, 2022:
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Liabilities |
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|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Financial Instruments |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
As of November 30, 2022, the Company’s stock price was $
Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of May 31, 2022:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Financial Instruments |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
As of May 31, 2022, the Company’s stock price was $
The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:
|
| Amount |
| |
Balance May 31, 2022 |
| $ |
| |
Debt discount |
|
|
| |
Derivative liability written of to additional paid in capital |
|
| ( | ) |
Change in fair market value of derivative liabilities |
|
|
| |
Balance November 30, 2022 |
| $ |
| |
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We will do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
| 10 |
| Table of Contents |
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
3D/4D Printing Technology Asset Purchase Agreement
On September 9, 2022, the Company closed on an Asset Purchase Agreement pursuant to which the Company acquired certain assets relating to 3D/4D printing technology for use in the construction industry for the aggregate purchase price for the Assets is
Twin Infra Asset Purchase Agreement
On October 23, 2022, the Company entered into an Asset Purchase Agreement pursuant to which the Company acquired various proprietary assets and intellectual property for
The Company evaluated the Asset Purchase Agreement in accordance with ASC 805 – Business Combinations which notes the threshold requirements of a business combination that includes the expanded definition of a “business” and defines elements that are to be present to be determined whether an acquisition of a business occurred. No “activities” of the acquiree were acquired. Instead, the Company obtained control of a set of inputs (the acquired assets). Thus, the Company determined agreement is an acquisition of assets, not an acquisition of a business in accordance with ASC 805. The total purchase price of $
| 11 |
| Table of Contents |
NOTE 5 –PROMISSORY NOTES
Promissory notes payable at November 30, 2022 and May 31, 2022 consists of the following:
|
| November 30, 2022 |
|
| May 31, 2022 |
| ||
Dated March 31, 2018 |
| $ |
|
| $ |
| ||
Dated November 12, 2021 |
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| ||
Dated November 12, 2021 |
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| ||
Dated November 12, 2021 |
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Dated November 12, 2021 |
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| ||
Dated January 20, 2022 |
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Dated January 20, 2022 |
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Dated February 8, 2022 |
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Dated February 16, 2022 |
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Dated February 16, 2022 |
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Dated March 3, 2022 |
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Dated June 2, 2022 |
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Dated June 29, 2022 |
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Dated June 29, 2022 |
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Dated June 29, 2022 |
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Dated July 8, 2022 |
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Dated July 11, 2022 |
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Dated July 19, 2022 |
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| ||
Dated July 20, 2022 |
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Dated July 20, 2022 |
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Dated July 23, 2022 |
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Dated September 2, 2022 |
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| ||
Dated November 30, 2022 |
|
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| ||
Dated November 30, 2022 |
|
|
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|
| ||
Long-term promissory note payable |
| $ |
|
| $ |
| ||
On March 31, 2018, the Company issued a promissory note for proceeds of $
On November 12, 2021, the holders of certain convertibles notes issued on July ,13, 2018, March 23, 2018, December 31,2018 and February 15, 2019 assigned their balances to a new note holder (See Note 5). On the same date, the Company issued new promissory notes in replacement of the assigned notes. Under the new promissory notes the conversion feature was removed, the interest rate was changed to 0%, the due was updated to being due upon 10 days written notice.
On June 2, 2022, the noteholder of a certain convertible note dated September 2, 2021 converted his note and accrued interest amounting to $
On September 12, 2022, the noteholder of a certain notes payables dated November 12, 2021 converted his note amounting to $
On September 19, 2022, the Company issued a promissory note for proceeds of $
| 12 |
| Table of Contents |
On September 26, 2022, the Company issued a promissory note for proceeds of $
On October 3, 2022, the Company issued a promissory note for proceeds of $5,000 to an officer for the Company for working capital purposes. The note is due on demand and accrues interest at 10% per year. On October 17, 2022, the officer resigned and agreed to release and forgive the note payable and accrued interest. As such the Company recorded a gain on forgiveness of debt in the amount of $
On November 30, 2022, the Company issued a promissory note for proceeds of $
During the six months ended November 30, 2022, the Company issued various promissory notes with the same noteholders amounting to $
During the quarters ended November 30, 2022 and 2021, the Company recorded interest expense of $
NOTE 6 – CONVERTIBLE NOTES
Convertible notes payable at November 30, 2022 and May 31, 2021 consists of the following:
|
| November 30, 2022 |
|
| May 31, 2022 |
| ||
Dated February 17, 2017 |
|
|
|
|
|
| ||
Dated September 2, 2021 |
|
|
|
|
|
| ||
Dated September 12, 2022 |
|
|
|
|
|
| ||
Total convertible notes payable, gross |
|
|
|
|
|
| ||
Less: Unamortized debt discount |
|
|
|
|
|
| ||
Total convertible notes |
| $ |
|
| $ |
| ||
On February 17, 2017, the Company issued a convertible note for $
On September 2, 2022, the Company issued a convertible promissory note for proceeds of $
On September 12, 2022, the noteholder of a certain notes payables dated November 12, 2021 converted his note amounting to $
During the six months ended November 30, 2022 and 2021, the Company recorded interest expense of $
| 13 |
| Table of Contents |
NOTE 7 – STOCKHOLDERS’ EQUITY
The Company’s authorized common stock consists of
Reverse Stock Split
On September 14, 2022, the Company issued
On November 16, 2022, the Company issued
On November 23, 2022, the Company issued
On November 28, 2022, the Company issued
On September 12, 2012, a was issued
During the six months ended November 30, 2022, she Company issued
NOTE 8 – SUBSEQUENT EVENTS
On December 7, 2022, the Company issued a promissory note for proceeds of $
On December 7, 2022, the Company issued a promissory note for proceeds of $
On November 17, 2022, the Company entered into a settlement agreement with a vendor to settle $
| 14 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial statements of Power Americas Resource Group Ltd (the “Company”), which are included elsewhere in this Form 10-Q. Certain statements contained in this report, including statements regarding the anticipated development and expansion of the Company’s business, the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the future operating performance of the Company and the products it expects to offer and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by or with the approval of the Company, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.
All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Results of Operations for the Three Months Ended November 30, 2022 and 2021
Revenues
We did not earn any revenues during three months ending November 30, 2022 and 2021.
Operating Expenses
Operating expenses increased to $129,078 for the three months ended November 30, 2022, from $18,747 for the same period ended November 30, 2021.
Our operating expenses for the three months ended November 30, 2022, consisted mainly of professional fees of $53,614 and general and administrative costs of $75,464 and our operating expenses for the three months ended November 30, 2021, consisted mainly of professional fees of $18,737 and general and administrative costs of $10. The reason for the increase is primarily related to the additional cost associated our filings and stock based compensation that occurred during the year ended November 30, 2022.
Other Income (Expenses)
We had other expenses of $53 for the three months ended November 30, 2022, compared with other income of $77,275 for the three months ended November 30, 2021.
Our other expenses for the three months ended November 30, 2022 consisted mainly of $8,250 in interest expense, a gain on debt forgiveness of $8,593, and gain on foreign currency translation of 182, and a loss on derivative liability of 578 compared with the three months ended November 30, 2021 consisted mainly of $7,282 in interest expense and a gain on debt forgiveness of $84,557. The reason for the decrease in other income is primarily the result of an decrease in the debt forgiveness during the three month end November 30, 2022.
Net Loss
We recorded a net loss of $129,131 for the three months ended November 30, 2022, as compared with a net income of $58,528 for the three months ended November 30, 2021. The reason for the decrease in net income is primarily the result of an decrease in the debt forgiveness during the three month end November 30, 2022.
| 15 |
| Table of Contents |
Results of Operations for the Six Months Ended November 30, 2022 and 2021
Revenues
We did not earn any revenues during six months ending November 30, 2022 and 2021.
Operating Expenses
Operating expenses increased to $207,446 for the six months ended November 30, 2022, from $21,847 for the same period ended November 30, 2021.
Our operating expenses for the six months ended November 30, 2022, consisted mainly of professional fees of $$131,864 and general and administrative costs of $75,582 and our operating expenses for the six months ended November 30, 2021, consisted mainly of professional fees of $21,837 and general and administrative costs of $10. The reason for the increase is primarily related to the additional cost associated our filings and stock based compensation that occurred during the year ended November 30, 2022.
Other Income (Expenses)
We had other expenses of $1,955 for the six months ended November 30, 2022, compared with other income of $72,790 for the six months ended November 30, 2021.
Our other expenses for the six months ended November 30, 2022 consisted mainly of $11,533 in interest expense, a gain on debt forgiveness of $8,593, and gain on foreign currency translation of 1,620 and a loss on derivative liability of $635 compared with the six months ended November 30, 2021 consisted mainly of $11,576 in interest expense and a gain on debt forgiveness of $84,557. The reason for the decrease in other income is primarily the result of an decrease in the debt forgiveness during the six months ended November 30, 2022.
Net Loss
We recorded a net loss of $209,401 for the six months ended November 30, 2022, as compared with a net income of $51,123 for the six months ended November 30, 2021. The reason for the decrease in net income is primarily the result of a decrease in the debt forgiveness during the six months ended November 30, 2022.
Liquidity and Capital Resources
As of November 30, 2022, we had total current assets of $0 and total assets in the amount of $5,000,000. Our total current liabilities as of November 30, 2022 were $489,099. We had a working capital deficit of $489,099 as of November 30, 2022, compared with a working capital deficit of $377,569 as of May 31, 2022.
Cash Flows from Operating, Investing and Financing Activities
|
| Year ended November 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (125,351 | ) |
| $ | (21,847 | ) |
Net cash used in investing activities |
|
| - |
|
|
| - |
|
Net cash provided by financing activities |
|
| 125,034 |
|
|
| 25,000 |
|
Net increase/(decrease) in Cash |
|
| - |
|
|
| 3,153 |
|
Cash, beginning |
| 317 |
|
|
| - |
| |
Cash, ending |
| $ | - |
|
| $ | 3,153 |
|
| 16 |
| Table of Contents |
Operating activities
For the six months ended November 30, 2022, net cash flows used in operating activities consisted of a net loss of $209,401 loss on change in derivative liabilities of $635, gain on forgives of debt of $8,593, and a net increase in change of operating assets and liabilities of $18,218. For the six months ended November 30, 2021, net cash flows used in operating activities consisted of a net loss of $51,123 loss on change in derivative liabilities of $11, gain on forgives of debt of $84,557, and a net increase in change of operating assets and liabilities of $11,576.
Financing activities
Net cash provided by financing activities for the period ended November 30, 2022 was $125,034, as compared to $25,000 for the same period of 2021. The increase of net cash provided by financing activities was mainly attributable more cash raised from debt, equity, and royalty
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Going concern– The accompanying financial statements have been prepared in US dollars and in accordance with accounting principles generally accepted in the United States (“GAAP”) on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company commenced its craft brewing activities in September 2014. During the six months ended November 30, 2022, the Company has incurred net losses of $209,401 and accumulated deficits of $2,608,254. The Company expects losses to continue until it can achieve profitable operations from its craft beer operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
Off Balance Sheet Arrangements
As of November 30, 2022, there were no off balance sheet arrangements.
| 17 |
| Table of Contents |
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We will do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
| 18 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Smaller reporting companies are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of November 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that the Company’s disclosure and controls are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 19 |
| Table of Contents |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 1A. Risk Factors
Smaller reporting companies are not required to provide the information required by this Item 1A.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None not previously reported.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mining Safety Disclosures
Not applicable.
Item 5. Other information
None.
| 20 |
| Table of Contents |
Item 6. Exhibits
EXHIBIT NUMBER |
|
DESCRIPTION |
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| ||
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| ||
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| Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)(1) | |
|
|
|
| Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)(1) | |
|
|
|
| ||
|
|
|
| ||
|
|
|
101.INS* |
| Inline XBRL Instance Document |
|
|
|
101.SCH* |
| Inline XBRL Schema Document |
|
|
|
101.CAL* |
| Inline XBRL Calculation Linkbase Document |
|
|
|
101.DEF* |
| Inline XBRL Definition Linkbase Document |
|
|
|
101.LAB* |
| Inline XBRL Label Linkbase Document |
|
|
|
101.PRE* |
| Inline XBRL Presentation Linkbase Document |
|
|
|
104* |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
____________
(1) Filed Herewith
* Filed Herewith. Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
| 21 |
| Table of Contents |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Power Americas Resource Group Ltd. |
| |
|
|
| |
Date: January 23, 2023 | By: | /s/ Mark Croskery |
|
| Name: | Mark Croskery |
|
| Title: | Chief (Principal) Executive Officer, Chief Financial Officer (Principal Accounting Officer) and Director |
|
| 22 |