ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
CORPORATE HISTORY
We were incorporated pursuant to the laws of the State of Nevada on April 11, 2005 under the name Toro Ventures Inc. We were initially in the fast food services industry.
In accordance with the terms and provisions of that certain stock purchase agreement dated December 31, 2013 (the "Stock Purchase Agreement") between Joe Arcaro, seller of control block of restricted shares of common stock of the Company and our sole officer and director ("Arcaro") and The World Financial Holdings Group Co., Ltd., purchaser of the control block of shares of ("World Financial"), there was a change in our control.
OUR BUSINESS
Management believes that agriculture is one of the fastest growing investment areas of the 21
st
century and is posturing the Company to embark on building an industry leading presence as one of China's walnut conglomerates. Based on management's research, management further believes that in order to capitalize on the growth potential of the walnut market, we will need to revolutionize the industry by building a large scale, all-inclusive, standardized industrial chain. Management intends to achieve this goal by fully utilizing a strong technical force and cultural awareness and heritage to build a strong marketing plan and achieve peak brand operational capability
.
Management has been identifying and seeking potential corporate partnerships with the Yangling Modern Agricultural Standardization Institute, which provides an array of technical support for us, as well as Shaanxi Yuanwangda Venture Capital Co., Ltd. in an effort to continue our operational plans. We have been researching an industry-wide chain of production standards for China's entire walnut industry to full realize the development potential that will lead the industry. We intend to incorporate national policy regulations into every step of our business as well as eco-friendly, yet markedly efficient, methods to ensure the very best product is available to our consumers, while also securing the appropriate profit margins for our investors.
As of the date of this Quarterly Report, we intend to meet the following milestones to prepare ourselves for complete self-sufficiency and dominance throughout the walnut industry:
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Successful cultivation of large-scale, eco-efficient walnut reserves (including seed bases and harvesting techniques)
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Independent development of a specialized compound, biological fertilizer that fights the most common forms of walnut disease and create a barrier to prevent future infection
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Acquisition and retention of a top-tier production management team to ensure continued success and growth
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PRODUCTS AND SERVICES
We will offer a high quality, new to market brand that encompasses expertly grafted walnut breeds including the American red spike-shaped walnut and premier fragrant walnuts. We will have a focus on providing all of our customers with the absolute pinnacle of walnut perfection while also offering our VIPs the ecologically sound, organic products that are in such high demand with our upper-level clientele.
We intend to provide the following products and services:
No.
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Items
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Individual Membership
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Corporate Membership
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Pre-paid consumer credit
RMB
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100--10,000
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1,000--20,000
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1
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Sales
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Pre-paid to enjoy double discount
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2
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Discount for special products
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15% off if paid by cash
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Double discount for corporate credit card
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3
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Discount for consuming in the Club
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15% off if paid by cash
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Double discount for corporate credit card
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4
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Discount for normal products
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10% off if paid by cash
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Double discount for corporate credit card
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5
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Service fee for group buying
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1%--3%
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6
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A variety of free workshop
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20 hours in total
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7
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Annual fruit-picking
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Not limited
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8
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Group trips
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Yes
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As special incentives to our long-term clients we will be prepared to offer the following programs through our retail location, the Baying Precious and Delicious Food Club:
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Rechargeable Membership Cards:
We will offer a discount to our members that choose to pre-pay for their products using a membership card system.
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Special Products:
Working in tandem with our cooperative business partners, we will be ready to offer our customers unique products only available through our collaboration.
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Glamorous VIP Reception Center:
At our physical location we will feature a VIP tasting experience within our established reception center. Our members will have an opportunity to host guests as they enjoy sampling our offerings at a discount.
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Superior Offerings:
With a focus on providing our clients with the very best walnuts and related products, we are committed to producing only the finest ecologically sound, organic products for our VIPs.
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Group Discount Purchasing:
Our VIPs will have the opportunity to purchase products as a group, thereby taking advantage of a bulk discount.
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Personal and Professional Development Opportunities:
The Fine and Delicious Food Club will be offering free lectures to our clients so as to expand their knowledge base about nutritional and dietary options, health related topics, finance and investment opportunities, as well as classic Chinese cultural studies.
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Group Enrichment Trips and Annual Fruit Picking Opportunities:
The agricultural hubs of the Baying Company are made available to our VIPs in an effort to offer true transparency to our top clients. We will also be offering group trips, organized with both leisure and education in mind, as well as a family-friendly annual fruit picking trip that will cultivate not only an appreciation of the richness of our products, but also a holistic approach to a family's health and nutrition.
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The Baying Precious & Delicious Food Club was an idea that will allow us to directly reach our customers as we market our products to them. Specializing in selling high-quality and organic fruits, vegetables, cereals, and precious oils, we believe that this aspect of our corporate strategy will be a strong solidifiers of profit and top-of-mind presence. In the end, the Club will have profit making applications and we intend to capitalize on these: (i) membership card sales; (ii) direct profits from product sales; (iii) cooperation base supply; (iv) public media advertising revenue; and (v) website and periodical advertisement income.
We also intend on applying for and accepting subsidies from the following national organizations/branches of government to enrich our products and our production standards: (i) Department of Commerce: 'Rural Construction Development' project which is designed to assist companies with operations in rural areas who help serve local populations; (ii) Ministry of Agriculture: where the government provides subsidies for the construction of pollution-free base and food deep-processing factories countrywide; (iii) Development and Reform Commission: subsidies from government for agricultural machinery equipment; (iv) The Provincial Labor Union; and(v) funds from SME Promotion Bureau.
As of the date of this Quarterly Report, our offices in China are located on the 6
th
Floor of Huihao Building, off of 3
rd
Keji Road, in the heart of Xi'an city. We have not yet commenced distribution of our products and thus may be considered a shell corporation.
RESULTS OF OPERATIONS
The following discussions are based on our financial statements. These charts and discussions summarize our financial statements for the nine months ended March 31, 2016 and March 31, 2015 and should be read in conjunction with the financial statements, and notes thereto, included with our most recent Form 10-K for fiscal year ended June 30, 2015.
SUMMARY COMPARISON OF OPERATING RESULTS
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Nine Month Period
ended March 31
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2016
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2015
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Revenues
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$
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-0-
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$
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-0-
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Total Operating Expenses
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33,135
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51,932
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Loss from Operations
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(33,135
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)
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(51,932
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)
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Total Other Income (Expenses)
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-0-
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-0-
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Net Loss
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(33,135
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(51,932
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Nine Month Period Ended March 31, 2016 Compared to Nine Month Period Ended March 31, 2015.
Our net loss for the nine month period ended March 31, 2016 was ($33,135) compared to a net loss of ($51,932) during the nine month period ended March 31, 2015 (a decrease in net loss of $18,797). We did not generate any revenue during the nine month periods ended March 31, 2016 and March 31, 2015, respectively.
During the nine month period ended March 31, 2016, we incurred operating expenses of $33,135 compared to $51,932 incurred during the nine month period ended March 31, 2015 (a decrease of $18,797). These operating expenses incurred during the nine month period ended March 31, 2016 consisted of: (i) professional fees of $16,500 (2015: $29,000); (ii) management fees of $13,500 (2015: $13,500); and (iii) general and administrative of $3,135 (2015: $9,432).
Operating expenses incurred during the nine month period ended March 31, 2016 compared to the nine month period ended March 31, 2015 decreased primarily due to the decrease in professional fees of $12,500.
Our loss from operations during the nine month period ended March 31, 2016 was ($33,135) compared to a loss from operations of ($51,932) during the nine month period ended March 31, 2015.
During the nine month periods ended March 31, 2016 and March 31, 2015, we did not incur other expenses. Therefore, we realized a net loss of ($33,135) or ($0.00) for the nine month period ended March 31, 2016 compared to a net loss of ($51,932) or ($0.00) for the nine month period ended March 31, 2015. The weighted average number of shares outstanding was 260,983 for both the nine month periods ended March 31, 2016 and March 31, 2015.
Three Month Period Ended March 31, 2016 Compared to Three Month Period Ended March 31, 2015.
Our net loss for the three month period ended March 31, 2016 was ($7,750) compared to a net loss of ($10,651) during the three month period ended March 31, 2015 (a decrease in net loss of $2,901). We did not generate any revenue during the three month periods ended March 31, 2016 and March 31, 2015, respectively.
During the three month period ended March 31, 2016, we incurred operating expenses of $7,750 compared to $10,651 incurred during the three month period ended March 31, 2015 (a decrease of $2,901). These operating expenses incurred during the three month period ended March 31, 2016 consisted of: (i) professional fees of $2,500 (2015: $5,000); (ii) management fees of $4,500 (2015: $4,500); and (iii) general and administrative of $750 (2015: $1,151).
Operating expenses incurred during the three month period ended March 31, 2016 compared to the three month period ended March 31, 2015 decreased primarily due to the decrease in professional fees of $2,500.
Our loss from operations during the three month period ended March 31, 2016 was ($7,750) compared to a loss from operations of ($10,651) during the three month period ended March 31, 2015.
During the three month periods ended March 31, 2016 and March 31, 2015, we did not incur other expenses. Therefore, we realized a net loss of ($7,750) or ($0.00) per share for the three month period ended March 31, 2016 compared to a net loss of ($10,651) or ($0.00) per share for the three month period ended March 31, 2015. The weighted average number of shares outstanding was 260,983 for both the three month periods ended March 31, 2016 and March 31, 2015.
LIQUIDITY AND CAPITAL RESOURCES
Nine Month Period Ended March 31, 2016
As at the nine month period ended March 31, 2016, our current assets were $1,890 and our current liabilities were $122,276, which resulted in a working capital deficit of $120,386. As at the nine month period ended March 31, 2016, current assets were comprised of $1,890 in cash. As at the nine month period ended March 31, 2016, current liabilities were comprised of:
(i) $10,600 in accounts payable and accrued expenses; and (ii) $111,676 in amounts due to related parties.
As of March 31, 2016, our total assets were $1,890 comprised of $1,890 in current assets. As of March 31, 2016, our total liabilities were $122,276 comprised of $122,276 in current liabilities.
Stockholders' deficit increased from ($90,251) for fiscal year ended June 30, 2015 to ($120,386) for the nine month period ended March 31, 2016.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the nine month period ended March 31, 2016, net cash flows used in operating activities was ($1,890) compared to net cash flows used in operating activities of ($-0-) for the nine month period ended March 31, 2015. Net cash flows used in operating activities consisted primarily of a net loss of $33,135 (2015: $51,932), which was adjusted by $3,000 (2015: $-0-) for contribution to additional paid-in capital. Net cash flows used in operating activities was further changed by $10,600 (2015: $-0-) in accounts payable and accrued expenses.
Cash Flows from Investing Activities
For the nine month periods ended March 31, 2016 and March 31, 2015, respectively, net cash flows used in investing activities was $-0-.
Cash Flows from Financing Activities
We have financed our operations primarily from debt or the issuance of equity instruments. For the nine month periods ended March 31, 2016 and March 31, 2015, net cash flows provided from financing activities was $21,425 and $51,932, respectively. Net cash flows provided from financing activities consisted primarily of funding from its related party.
PLAN OF OPERATION AND FUNDING
We have incurred losses for the past two fiscal years and had a net loss of $33,135 at March 31, 2016 and $51,932 at March 31, 2015. Our auditors have expressed substantial doubt that we can continue as a going concern. Management intends to finance our 2016 operations primarily through equity or debt financing, if available. We will need to continue to raise additional capital, both internally and externally, to cover cash shortfalls and to begin to compete in our market. At our current level management believes we will require an additional $1,000,000 in equity financing during the next 12 months to satisfy our cash requirements for operations and to facilitate our business plan.
These operating costs include potential cost of sales, general and administrative expenses and professional fees. We have insufficient financing commitments in place to meet our expected cash requirements for 2016 and we cannot assure you that we will be able to obtain financing on favorable terms. If we cannot obtain financing to fund our operations in 2016, then we may be required to reduce our expenses and scale back our operations.
Going Concern
We cannot assure you that we will be able to obtain financing on favorable terms. If we cannot obtain financing to fund our operations in 2016, then we may be required to reduce our expenses and scale back our operations. These factors raise substantial doubt of our ability to continue as a going concern. Footnote 2 to our financial statements provides additional explanation of Management's views on our status as a going concern. The audited financial statements contained in our Annual Report for fiscal year ended June 30, 2015 and our reviewed financial statements contained in this Quarterly Report do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result should we be unable to continue as a going concern.
Our financial statements for March 31, 2016 include an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure.
COMMITMENTS AND CONTINGENT LIABILITIES
One of our shareholders has advanced working capital to pay our expenses. The advances are due on demand and non-interest bearing. The outstanding amount due to related parties was $111,676 and $90,151 as of March 31, 2016 and June 30, 2015, respectively.
On October 2015, Mr. Patel, our President/Chief Executive Officer, has advanced $3,000 as working capital to pay expenses, which was contributed as additional paid-in capital of the Company.
OFF BALANCE SHEET ARRANGEMENTS
We do 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide this information.