Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in the State of Nevada on July 1, 1999, and established a fiscal year end of December 31.
Going Concern
To date the Company has little operations or revenues and consequently has incurred recurring losses from operations. Minimal revenues are anticipated until we complete the financing we endeavor to obtain, as described in the Form 10-K, and implement our expanded business plan. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.
The Company plans to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through this or any other offerings.
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PLAN OF OPERATION
We generated revenues of $182.452 and $920,289 from our business for the year ended December 31, 2023 and 2022, respectively. We operate an online ticketing platform named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services.
The Company is operating a travel services businesses, which includes an online ticketing platform Gagfare, which provides to travelers a “Book Now, Pay Later” business model, for travelers to secure the best fares and reserve flights well ahead of time. The Company will also become the driving force behind a bold new hospitality concept that takes nature lovers and intrepid travelers to exciting new and established destinations. The curated collection of boutique properties, each with a focus on diving, sustainability, conservation, and cultural authenticity, offers a thoroughly contemporary travel experience that is intrinsically linked to the destination, its heritage and its culture.
RESULTS OF OPERATIONS
We are not required to obtain permission from the Chinese authorities to operate or to issue securities to foreign investors.
We are a development stage company and reported a net loss of $403,933 and $188,853 for the years ended December 31, 2023 and 2022, respectively. We had current assets of $37,598 and current liabilities of $721,874 as of December 31, 2023. As of December 31, 2022, our current assets and current liabilities were $115,109 and $599,557, respectively.
Our financial statements for the years ended December 31, 2023 and 2022 have been prepared assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability, the continuing financial support from our shareholders and raising of capital. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, issuance of promissory notes and short-term and long-term debts.
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Comparison of the Years ended December 31, 202 3 and 202 2
As of December 31, 2023, we suffered from a working capital deficit of $684,276. As a result, our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders or other capital sources in the next twelve months. Management believes that the continuing financial support from the existing shareholders and external financing will provide the additional cash to meet our obligations as they become due. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
The following table sets forth certain operational data for the years ended December 31, 2023 and 2022:
Years Ended December 31,
2023
2022
Revenues
$ 182,452
$ 920,289
Cost of revenue
(179,720 )
(913,882 )
Gross profit
2,732
6,407
Total operating expenses
(304,309 )
(197,126 )
Other (expense) income, net
(102,356 )
1,866
Loss before income taxes
(403,933 )
(188,853 )
Income tax expense
-
-
Net loss
(403,933 )
(188,853 )
Revenue . We generated revenues of $182,452 and $920,289 for the years ended December 31, 2023 and 2022 respectively, due to the decreased transactions in ticket booking during 2023 and the Company has ceased ticket sales from Sept 2023 to upgrade the platform.
Cost of Revenue . Cost of revenue for the years ended December 31, 2023 and 2022, was $179,720 and $913,882, respectively. Cost of revenue decreased primarily as a result of the decrease in our business volume.
Gross Profit . We achieved a gross profit of $2,732 and $6,407 for the years ended December 31, 2023 and 2022, respectively, due to the differing mix of customers who earned better margins during the period.
Other (Expense) Income . We incurred other (expense) income of $(102,356) and $1,866 for the years ended December 31, 2023 and 2022, respectively. The increase in other expense is primarily attributable to default sum and interest on convertible notes, increase in amortization of convertible notes discount and interest on convertible notes as most of the promissory notes were issued subsequent to June 2022 and matured in 2023.
General and Administrative Expenses (“G&A”) . We incurred G&A expenses of $304,309 and $197,126 for the years ended December 31, 2023 and 2022, respectively. The increase in G&A is primarily attributable to increase in legal and professional fee related to business development during 2023, as compared to 2022.
Income Tax Expense . Our income tax expenses for the years ended December 31, 2023 and 2022 were $0 and $0.
Net Loss . As a result of the above, during the year ended December 31, 2023, we incurred a net loss of $403,933, as compared to $188,853 for the same period ended December 31, 2022.
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Liquidity and Capital Resources
As of December 31, 2023, we had cash and cash equivalents of $16,776, accounts receivable of $906, deposits, prepayments and other receivables of $19,916.
As of December 31, 2022, we had cash and cash equivalents of $59,247, accounts receivable of $24,205, deposits, prepayments and other receivables of $31,657.
Years Ended December 31,
202 3
202 2
Net cash used in operating activities
$ (175,607 )
$ (144,178 )
Net cash provided by investing activities
-
-
Net cash provided by financing activities
133,712
187,315
Net Cash Used In Operating Activities.
For the year ended December 31, 2023, net cash used in operating activities was $175,607, which consisted primarily of net loss of $403,933, and a decrease in accounts payable of $5,233, offset by a decrease in accounts receivables of $23,299, a decrease in deposits, prepayments and other receivables of $11,741, amortization of convertible note discount of $9,848, depreciation of right-of-use asset of $26,710, non-cash expense related to lease liabilities of $2,079, non-cash financing cost of $94,504, and an increase in accrued liabilities and other payables of $65,378.
For the year ended December 31, 2022, net cash used in operating activities was $144,178, which consisted primarily of net loss of $188,853, an increase in accounts receivables of $8,432, an increase in deposits, prepayments and other receivables of $11,949, offset by amortization of convertible note discount of $6,652, depreciation of right-of-use asset of $24,954, non-cash expense related to lease liabilities of $1,278, non-cash financing cost of $7,314, an increase in accounts payable of $1,495 and an increase in accrued liabilities and other payables of $23,363.
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, however, to finance our operations and future acquisitions.
Net Cash Provided By Investing Activities.
For the year ended December 31, 2023, there is no net cash provided by investing activities.
For the year ended December 31, 2022, there is no net cash provided by investing activities.
Net Cash Provided By Financing Activities.
For the year ended December 31, 2023, net cash provided by financing activities was $133,712 consisting primarily of $156,469 advance from director and $5,366 advance from shareholder, offset by $28,123 payment of lease liabilities.
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For the year ended December 31, 2022, net cash provided by financing activities was $187,315 consisting primarily of $215,000 proceeds from issuance of convertible notes, offset by $26,840 payment of lease liabilities and $845 repayment to director.
Working Capital
We expect to incur significantly greater expenses in the near future as we expand our business or enter into strategic partnerships. We also expect our technology and development, sales and marketing expenses to increase as we enhance our e-commerce platform and spend more efforts in building up customers and community and incur additional costs in investors and partnerships relationship for long-term corporate development.
During the year, we did not pay dividends on our Common Stock. Our present policy is to apply cash to investments in business development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
Going Concern
Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms.
We require additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on raising capital to fund its business plans and ultimately to attain profitable operations. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
We expect to incur marketing and professional and administrative expenses as well expenses associated with maintaining our filings with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund its business by way of equity or debt financing and advances from related parties. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.
If we cannot raise additional funds, we will have to cease business operations. As a result, our common stock investors would lose all of their investment.
Material Cash Requirements
We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2024 to be significantly higher than 2023. As of December 31, 2023, we had an accumulated deficit of $5,435,394. Our material cash requirements are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months.
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Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Global Economic Climate
We continue to monitor the global tensions being presently experienced resulting in rising cost, shortage of fuel and potentially the global economic depression which could have a significant negative effect on our financial position and results of our operations, the specific impact of which is not readily determinable as of the date of this filing. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
·
Accounts receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2023 and 2022 there was no allowance for doubtful accounts.
·
Revenue recognition
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers.
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
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·
identify the contract with a customer;
·
identify the performance obligations in the contract;
·
determine the transaction price;
·
allocate the transaction price to performance obligations in the contract; and
·
recognize revenue as the performance obligation is satisfied.
The Company records its revenue from booking income upon the ticket booking service is rendered to travelers. The Company also records its revenue from the sale of air tickets upon the confirmation and issuance of tickets to the travelers.
The Company follows the guidance provided in ASC 606, Revenue from Contracts with Customers, for determining whether the Company is the principal or an agent in arrangements with customers that involve another party that contributes to the provision of goods to a customer. In these instances, the Company determines whether it has promised to provide the goods itself (as principal) or to arrange for the specified goods to be provided by another party (as an agent). This determination is a matter of judgment that depends on the facts and circumstances of each arrangement. The Company recognizes revenue from the sale of its air tickets on a gross basis as the Company is responsible for the fulfillment, controls the delivery of the promised goods, and has full discretion in establishing prices and therefore is the principal in the arrangement.
Subsequent Events
Subsequent to the financial year end, convertible notes with a principal plus default sum of $73,275 were converted to 305,433,566 shares at conversion prices ranging from $0.00026 to $0.00033 per share.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.
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