The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q. Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward-looking statements are based
upon estimates, forecasts, and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward-looking statements made by us, or on our
behalf. We disclaim any obligation to update forward-looking statements.
Overview
We were incorporated in the State of Nevada under the name "UA Granite
Corporation" on February 14, 2013. Our Articles of Incorporation initially
authorized us to issue up to 75,000,000 shares of common stock, par value
$0.00001 per share. On April 30, 2018, upon approval by our Board of Directors
and majority stockholders on April 27, 2018, we filed Amended and Restated
Articles of Incorporation with the Nevada Secretary of State, with a delayed
effective date of May 15, 2018, increasing the number of authorized shares of
common stock from 75,000,000 shares to 200,000,000 shares. In connection with
the amendment and restatement of our Articles of Incorporation, our Board of
Directors and majority stockholders also approved and adopted the Amended and
Restated Bylaws of the Company on April 27, 2018. Effective May 31, 2018,
pursuant to our Amended and Restated Articles of Incorporation and upon
completion of processing by the Financial Industry Regulatory Authority
("FINRA"), we changed the name of our Company from "UA Granite Corporation" to
"Vortex Blockchain Technologies Inc." in anticipation of a change of our
business plan and direction. Also effective May 31, 2018, we effected a 15-for-1
forward stock split of all our issued and outstanding common stock, which
increased the number of issued and outstanding shares of common stock from
1,400,000 to 21,000,000.
We are a development-stage company with limited revenues and less than one
million dollars in assets, and we have incurred losses since inception. Our
limited start-up operations have consisted of the formation of our Company,
development of our business plan, efforts to raise capital and maintaining our
public company reporting requirements. In October of 2018 we completed a reverse
merger with Vortex Network LLC and are now operating as a cryptocurrency holding
company engaged in the business of mining crypto assets. In addition to its
mining operation, Vortex is developing a variety of applications in the
cryptocurrency space, in both the software and hardware spheres, including cloud
mining, blockchain hardware and software development, and a cryptocurrency
wallet and exchange.
Share Exchange Agreement
On October 17, 2018, the Registrant entered into a Share Exchange Agreement (the
"Exchange Agreement") with Vortex and the Selling Members. Pursuant to the terms
and conditions of the Exchange Agreement, the Selling Members agreed to
voluntarily exchange all of the outstanding membership interests of Vortex for
65,000,000 shares of common stock of the Registrant. The Exchange Agreement was
approved by the boards of directors or managers of each of the Registrant and
Vortex, and by the Selling Members.
The Exchange Agreement includes customary representations, warranties and
covenants of the Registrant, Vortex and the Selling Members made to each other
as of specific dates. The assertions embodied in those representations and
warranties were made solely for purposes of the Exchange Agreement and are not
intended to provide factual, business, or financial information about the
Registrant, Vortex and the Selling Members. Moreover, some of those
representations and warranties (i) may not be accurate or complete as of any
specified date, (ii) may be subject to a contractual standard of materiality
different from those generally applicable to stockholders or different from what
a stockholder might view as material, (iii) may have been used for purposes of
allocating risk among the Registrant, Vortex and the Selling Members, rather
than establishing matters as facts, or (iv) may have been qualified by certain
disclosures not reflected in the Exchange Agreement that were made to the other
party in connection with the negotiation of the Exchange Agreement and generally
were solely for the benefit of the parties to that agreement. The Exchange
Agreement should not be read alone, but should instead be read in conjunction
with the other information regarding the Registrant and Vortex that has been, is
or will be contained in, or incorporated by reference into, the Forms 10-K,
Forms 10-Q, Forms 8-K, proxy statements and other documents that the Registrant
files with the Securities and Exchange Commission (the "SEC").
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The Exchange Agreement provides for the resignation of Angel Luis Reynoso
Vasquez from all positions as an officer and director of the Registrant, and the
appointment of new officers and directors, effective as of the closing of the
Exchange Transaction (the "Closing").
Results of Operations
During the three-month period ended December 31, 2018, we focused on carrying
out the Share Exchange with Vortex and satisfying our ongoing obligations as a
public reporting company.
From February 14, 2013 (the date of our inception) to December 31, 2018, we have
earned limited revenues. We expect to continue to incur losses over the next
twelve months, or until we are able to fully develop and carry out our new
business opportunity that enables us to generate sufficient operating revenues.
Comparison of Three Months Ended December 31, 2018 and December 31, 2017
Our operations for the three-months ended December 31, 2018 and December 31,
2017 can be summarized as follows:
During the three months ended December 31, 2018 we had no revenue.
During the three-months ended December 31, 2018, we incurred $214,006 in
operating expenses, compared to $22,500 in operating expenses during the
three-months ended December 31, 2017. The increase operating expenses was mainly
due to an increase in salaries and depreciation.
During the three-months ended December 31, 2018, we incurred an impairment of
our DPT asset in the amount of $280,000.
During the three months ended December 31, 2018, we incurred interest expense in
the amount of $11,173.
We incurred a net loss of $505,179 for the three-months ended December 31, 2018,
compared to a net loss of $22,550 for the three-month period ended December 31,
2017. The increase in net loss was due to the items discussed above.
Our operations for the nine months ended December 31, 2018 and December 31, 2017
can be summarized as follows:
During the nine months ended December 31, 2018 we had $81,200 in revenue.
During the nine months ended December 31, 2018, we incurred $827,783 in
operating expenses, compared to $22,500 in operating expenses during the
three-months ended December 31, 2017. The increase operating expenses was mainly
due to an increase in salaries depreciation and legal expenses related to our
recent name change, stock split, and the proposed Share Exchange with Vortex.
During the nine months ended December 31, 2018, we incurred an impairment of our
DPT asset in the amount of $280,000.
During the nine months ended December 31, 2018, we incurred interest expense in
the amount of $32,023.
We incurred a net loss of $1,058,606 for the three-months ended December 31,
2018, compared to a net loss of $22,550 for the three-month period ended
December 31, 2017. The increase in net loss was due to the items discussed
above.
Liquidity and Capital Resources
Balance Sheets
As of December 31, 2018, we had $39 in cash and total assets of $456,632. As of
March 31, 2018, we had $308,387 in cash and total assets of $1,502,235.
As of December 31, 2018, we had total liabilities in the amount of $1,108,703,
compared to total liabilities in the amount of $889,194 as of March 31, 2018.
The increase in our total liabilities and working capital deficit is due to an
increase in accounts payable and accrued liabilities and amounts due to our
director, as we had limited cash flows to repay outstanding obligations as they
became due.
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As of December 31, 2018, our accumulated deficit was $1,196,581, compared to an
accumulated deficit of $137,977 as of March 31, 2018.
Cash Flows
Cash Used in Operating Activities
During the nine months ended December 31, 2018, we used $882,683 in cash for
operating activities, compared to $0 in cash used for operating activities
during the period from August 14, 2013 (inception) to December 31, 2017
Cash Used in Investing Activities
During the nine months ended December 31, 2018, cash provided from investing
activity was $353,714 to $0 in cash used for operating activities during the
period from February 14, 2013 (inception) to December 31, 2017
Cash Flows from Financing Activities
During the nine months ended December 31, 2018, we received $220,621 in cash
from financing activities, compared to $0 in cash received from financing
activities during the period from August 14, 2013 (inception) to December 31,
2017.
Recent Developments and Future Financing Activities
In order to execute on our business strategy, we will require additional working
capital. We anticipate that we will require a minimum of approximately
$2,500,000 in debt and/or equity financing to proceed with our plan of
operations over the next twelve months. As we had cash and working capital in
the amount of $0 as of December 31, 2018, we do not have sufficient working
capital to enable us to carry out our operations for the next twelve months.
We expect to use debt and/or equity financing to fund operations for the
foreseeable future, including, without limitation, the sale of up to $2,500,000
of our capital stock pursuant to a private placement for the purpose of
financing the contemplated ongoing operations of the Company and Vortex, as
previously disclosed on our Current Report on Form 8-K filed with the SEC on
April 2, 2018.
Any future sale of additional equity and/or debt securities will result in
dilution to current stockholders. We may also seek additional loans where the
incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would
restrict our operations. Financing may not be available in amounts or on terms
acceptable to us, if at all. Any failure by us to raise additional funds on
terms favorable to us, or at all, could limit our ability to expand business
operations and could harm our overall business prospects.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future effect on our financial
condition, changes in our financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our stockholders and investors.
Critical Accounting Policies
Our financial statements are affected by the accounting policies used and the
estimates and assumptions made by management during their preparation. A
complete listing of these policies is included in Note 2 of the notes to our
financial statements for the three-month period ended December 31, 2018. We
believe the accounting policies utilized in preparing our financial statements
conform to the generally accepted accounting principles in the United States
("US GAAP").
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the balance sheet and reported amounts of revenues and expenses during the
reporting period. We base our estimates and assumptions on current facts,
historical experience and various other factors that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the accrual of
costs and expenses that are not readily apparent from other sources. By their
nature, these estimates are subject to an inherent degree of uncertainty, and
actual results could differ from
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such estimates. The actual results experienced by our Company may differ
materially and adversely from our Company's estimates. To the extent there are
material differences between the estimates and the actual results, future
results of operations will be affected.
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