|TEV||2,852||TEV/EBIT||-3,003||TTM 2019-06-30, in MM, except price, ratios|
|Note 1 - Description of Business and Basis of Presentation|
|Note 2 - Going Concern|
|Note 3 - Summary of Significant Accounting Policies|
|Note 4 - Advance To Related Entity|
|Note 5 - Deposit with Related Party|
|Note 6 - Whisky Inventory and Deferred Revenue|
|Note 7 - Loan Payable|
|Note 8 - Private Whisky Collections|
|Note 9 - Note Payable - Related Party|
|Note 10 - Common Stock|
|Note 11 - Subsequent Events|
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations|
|Item 3. Quantitative and Qualitative Disclosures About Market Risk|
|Item 4. Controls and Procedures|
|Part II. Other Information|
|Item 1. Legal Proceedings.|
|Item 1A. Risk Factors|
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.|
|Item 3. Defaults Upon Senior Securities.|
|Item 4. Mine Safety Disclosures|
|Item 5. Other Information|
|Item 6. Exhibits.|
|Balance Sheet||Income Statement||Cash Flow|
Rev, G Profit, Net Income
Ops, Inv, Fin
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2019
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-55678
FAH MAI HOLDINGS, INC.
(Exact name of Registrant as Specified in Its Charter)
|(State or other jurisdiction of |
incorporation or organization)
|1000/196,199 Liberty Buildings, 3rd Floor,|
|Sukhumvit 55 Road, Klongton Nua,|
|(Address of principal executive offices)||(Zip Code)|
Registrant’s telephone number, including area code: +66 807 0617
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol(s)||Name of each exchange on which registered|
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 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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, and/or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).
|Large accelerated filer [ ]||Accelerated filer [ ]||Non-accelerated filer [X]||Smaller Reporting Company [X]|
Emerging Growth Company [X]
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 Act). [ ] Yes [X] No
As of March 10, 2020, 56,855,280 shares of the Registrant’s common stock, par value $0.0001 per share, were issued and outstanding.
Fah Mai Holdings, Inc.
Quarterly Report on Form 10-Q
Period Ended September 30, 2019
Table of Contents
|PART I. FINANCIAL INFORMATION|
|Item 1. Condensed Consolidated Financial Statements:|
|Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)||1|
|Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (Unaudited)||2|
|Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (Unaudited)||3|
|Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)||4|
|Notes to Unaudited Condensed Consolidated Financial Statements||5|
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations & Plan of Operations||9|
|Item 3. Quantitative and Qualitative Disclosures About Market Risk||10|
|Item 4. Controls and Procedures||10|
|PART II. OTHER INFORMATION|
|Item 1. Legal Proceedings||10|
|Item 1A. Risk Factors||10|
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds||11|
|Item 3. Defaults Upon Senior Securities||11|
|Item 4. Mine Safety Disclosures||11|
|Item 5. Other Information||11|
|Item 6. Exhibits||11|
FAH MAI HOLDINGS, INC.
|September 30, 2019||December 31, 2018|
|Total Current Assets||1,881,442||415,589|
|Advance to Related Entity - in anticipation of merger||4,920||6,380|
|Deposit with Related Party||289,402||-|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accounts Payable and Accrued Liabilities||$||61,925||$||9,493|
|Loan Payable – Current Portion||14,912||-|
|Note Payable - Related Party||288,000||-|
|Deferred Revenue - Cask Fractions||74,169||75,158|
|Total Current Liabilities||439,006||84,651|
|Private Whisky Collection Payable|
|Private Whisky Collection Payable – Related Party|
|Preferred Stock; $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding||-||-|
|Common stock; $0.0001 par value, 100,000,000 shares authorized; 56,278,730 and 53,000,889 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively||5,628||5,300|
|Additional Paid-in Capital||3,225,430||950,474|
|Accumulated Other Comprehensive Loss||(57,752||)||(4,773||)|
|Total Stockholders’ Equity||784,499||337,318|
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY||$||2,175,764||$||421,969|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FAH MAI HOLDINGS, INC.
|For the Three Months Ended||For the Nine Months Ended|
|September 30, 2019||September 30, 2018||September 30, 2019||September 30, 2018|
|COST OF GOODS SOLD||140,093||9,633||142,624||9,633|
|General and Administrative Expenses||1,018,028||163,793||1,803,160||385,746|
|Total Operating Expenses||(1,018,028||)||(163,793||)||(1,803,160||)||(385,746||)|
|Other Income (Expense)|
|Total Other Income/(Expense)||17,233||(13,689||)||24,353||(10,265||)|
|NET LOSS BEFORE INCOME TAXES||(997,231||)||(171,753||)||(1,775,124||)||(390,282||)|
|Provision for Income Taxes||-||-||-||-|
|BASIC AND DILUTED LOSS PER SHARE||$||(0.02||)||$||(0.00||)||$||(0.03||)||$||(0.01||)|
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING||55,441,151||45,192,235||54,286,500||42,947,443|
|Other Comprehensive Loss|
|Exchange Differences arising on translating Foreign Operations||(22,393||)||(8,345||)||(52,979||)||(25,045||)|
|Total Comprehensive Loss||$||(1,019,624||)||$||(180,098||)||$||(1,828,103||)||$||(415,327||)|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FAH MAI HOLDINGS, INC.
Three and Nine Months Ending September 30, 2019 and 2018
|Preferred Stock||Common Stock||Additional Paid-In||Deficit||Accumulated Other Comprehensive||Total Stockholders’|
|Balance, December 31, 2018||-||$||-||53,000,889||$||5,300||$||950,474||$||(613,683||)||$||(4,773||)||$||337,318|
|Common stock issued for cash||-||-||242,369||24||135,909||-||-||135,933|
|Common stock acquired with cash and cancelled per repurchase agreements||-||-||(2,200||)||-||(1,100||)||-||-||(1,100||)|
|Common stock issued for services||-||-||516,124||52||256,821||-||-||256,873|
|Foreign currency translation||-||-||-||-||-||-||(11,271||)||(11,271||)|
|Net loss for the period||-||-||-||-||-||(392,294||)||-||(392,294||)|
|Balance, March 31, 2019||-||-||53,757,182||5,376||1,342,104||(1,005,977||)||(16,044||)||325,459|
|Common stock issued for cash||-||-||812,189||81||335,557||-||-||335,638|
|Common stock acquired with cash and cancelled per repurchase agreements||-||-||(24,860||)||(2||)||(12,428||)||-||-||(12,430||)|
|Common stock issued for services||-||-||42,912||4||21,804||-||-||21,808|
|Foreign currency translation||-||-||-||-||-||-||(19,315||)||(19,315||)|
|Net loss for the period||-||-||-||-||-||(385,599||)||-||(385,599||)|
|Balance, June 30, 2019||-||-||54,587,423||5,459||1,687,037||(1,391,576||)||(35,359||)||265,561|
|Common stock issued for cash||-||-||1,171,171||118||1,029,119||-||-||1,029,237|
|Common stock acquired with cash and cancelled per repurchase agreements||-||-||(3,847||)||(1||)||(2,170||)||-||-||(2,171||)|
|Common stock issued for services||-||-||523,983||52||511,444||-||-||511,496|
|Foreign currency translation||-||-||-||-||-||-||(22,393||)||(22,393||)|
|Net loss for the period||-||-||-||-||-||(997,231||)||-||(997,231||)|
|Balance, September 30, 2019||-||$||-||56,278,730||$||5,628||$||3,225,430||$||(2,388,807||)||$||(57,752||)||$||784,499|
|Balance, December 31, 2017||-||$||-||41,290,970||$||4,129||$||397,649||$||(43,249||)||$||(780||)||$||357,749|
|Common stock issued for cash||-||-||289,150||29||130,807||-||-||130,836|
|Foreign currency translation||-||-||-||-||-||-||3,742||3,742|
|Net loss for the period||-||-||-||-||-||(38,667||)||-||(38,667||)|
|Balance, March 31, 2018||-||-||41,580,120||4,158||528,456||(81,916||)||2,962||453,660|
|Common stock issued for cash||-||-||1,422,018||142||338,919||-||-||339,061|
|Common stock issued for services||-||-||140,259||14||70,116||-||-||70,130|
|Common stock issued for acquisition of subsidiary||-||-||400,000||40||(412,266||)||-||-||(412,226||)|
|Foreign currency translation||-||-||-||-||-||-||(20,442||)||(20,442||)|
|Net loss for the period||-||-||-||-||-||(179,862||)||-||(179,862||)|
|Balance, June 30, 2018||-||-||43,542,397||4,354||525,225||(261,778||)||(17,480||)||250,321|
|Common stock issued for cash||-||-||317,149||32||167,552||-||-||167,584|
|Common stock issued for services||-||-||8,617,289||862||7,707||-||-||8,569|
|Foreign currency translation||-||-||-||-||-||-||(8,345||)||(8,345||)|
|Net loss for the period||-||-||-||-||-||(171,753||)||-||(171,753||)|
|Balance, September 30, 2018||-||$||-||52,476,835||$||5,248||$||700,484||$||(433,531||)||$||(25,825||)||$||246,376|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FAH MAI HOLDINGS, INC.
|For the Nine Months Ended|
|September 30, 2019||September 30, 2018|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Common stock issued for services||790,177||78,699|
|Changes in operating assets and liabilities|
|Accounts payable and accrued liabilities||52,432||5|
|Private whisky collection payable||861,077||-|
|Private whisky collection payable - related party||44,284||-|
|Net Cash Used in Operating Activities||(1,005,020||)||(423,511||)|
|Recapitalization with acquisition of subsidiary||-||(240,678||)|
|Deposit with related party||(289,402||)||-|
|Issuance of funds to related party||1,460||-|
|Net Cash Used in Financing Activities||(287,942||)||(240,678||)|
|Proceeds from note payable - related party||288,000||-|
|Repayment of note payable - related party||-||(30,549||)|
|Proceeds from loan payable||61,506||-|
|Repayment of common stock refund for cash||(15,701||)||-|
|Proceeds from sale of common stock||1,500,808||637,481|
|Net Cash Provided by Financing Activities||1,834,613||606,932|
|Effect of Exchange Rate Changes on Cash||(54,653||)||1,521|
|NET INCREASE (DECREASE) IN CASH||486,998||(55,736||)|
|CASH AT BEGINNING OF PERIOD||18,575||81,118|
|CASH AT END OF PERIOD||$||505,573||$||25,382|
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:|
|CASH PAID FOR:|
|NON-CASH DISCLOSURES OF CASH FLOW INFORMATION:|
|Common stock issued for acquisition of subsidiary and recapitalization||$||-||$||171,548|
|Cancellation of repurchased shares of common stock||$||15,701||$||-|
FAH MAI HOLDINGS, INC.
September 30, 2019
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Nature of Operations
Fah Mai Holdings, Inc. (formerly Finch Street Acquisition Corporation) (“Fah Mai” or the “Company”) was incorporated on July 22, 2016 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On June 8, 2018, the Company entered into a merger agreement (the “Merger Agreement”) with Fah Mai Holdings Co., Ltd., a private company organized under the laws of the Thailand (“Fah Mai Thailand”). Under the Merger Agreement, the Company issued to the shareholders of Fah Mai Thailand 400,000 shares of its common stock, valued at $0.0001 per share, in exchange for all of the issued and outstanding equity securities of Fah Mai Thailand (the “Merger”). On November 7, 2017, the Company acquired all outstanding shares of Fah Mai Holdings Limited and Platinum Cask Limited from Louis Haseman at his cost and they became wholly owned subsidiaries of the Company. These companies had no operations and neither assets nor liabilities. On June 8, 2018, the Company entered into a merger agreement (the “Merger Agreement”) with Fah Mai Holdings Co., Ltd., a private company organized under the laws of Thailand (“Fah Mai Thailand”). Mr. Louis Haseman, who is an officer, director and shareholder of the Company, was an officer and equity holder of Fah Mai Thailand prior to the Merger. As a result of the Merger, Fah Mai Thailand has merged into the Company and ceased to exist and the Company has taken over the operations and business plan of Fah Mai Thailand. This was a merger of net assets between entities under common control. Accordingly, net assets and liabilities of Fah Mai Thailand were recorded on the books of the Company at their historical costs.
Basis of Presentation
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements. The Company has not earned any revenue from operations since inception. The Company chose December 31st as its fiscal year end.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission, including the instructions to Form 10-Q and Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2018. Operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Fah Mai Holdings, Inc. and its wholly owned subsidiaries, Fah Mai Holdings Co., Ltd., Fah Mai Holdings Limited and Platinum Cask Limited (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
NOTE 2 – GOING CONCERN
The Company has begun to generate revenues but has sustained an operating loss of $1,775,124 for the nine months ended September 30, 2019. The Company had working capital of $1,442,436 and an accumulated deficit of $2,388,807 as of September 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations and from stockholders to meet its obligations and/or obtaining additional financing from its members or other sources, as may be required.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of 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 from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. The Company had $505,573 and $18,575 held in cash as of as of September 30, 2019 and December 31, 2018, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. However, most of the Company’s cash is held outside of the United States of America. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of September 30, 2019 or December 31, 2018.
Foreign Currency Translation
The Company has functional currencies in the United States dollar and British Pounds Sterling and its reporting currency is the United States dollar. Management has adopted ASC 830-20, Foreign Currency Matters – Foreign Currency Transactions. All assets and liabilities denominated in foreign currencies are translated into the United States dollar using the exchange rate prevailing at the balance sheet date. For revenues and expenses, the weighted average exchange rate for the period is used. Gains and losses arising on translation of foreign currency denominated items are included in Other Comprehensive Income (Loss), while gains and losses on foreign currency transactions are recorded in the period of settlement as Other Income (Expense).
The following rates were used to translate the accounts of Fah Mai Holdings Co., Ltd., Fah Mai Holdings Limited and Platinum Cask Limited into USD at the following balance sheet dates.
|Balance Sheet Dates|
|September 30, 2019||December 31, 2018|
|British Pound to USD||0.812935||0.783686|
|Thailand Baht to USD||0.032681||0.030941|
The following rates were used to translate the accounts of Fah Mai Holdings Co., Ltd., Fah Mai Holdings Limited and Platinum Cask Limited into USD for the following operating periods.
|For the Nine Months Ended|
|September 30, 2019||September 30, 2018|
|British Pound to USD||0.786053||0.738416|
|Thailand Baht to USD||0.031948||0.031109|
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize a liability representing future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company entered into two lease arrangements during the nine months ended September 30, 2019. These lease arrangements were for an apartment and an office location, both with agreements of less than 12 months. As such, the Company elected to not recognize right-of-use assets or lease liabilities, pursuant to short-term lease exemption provisions of Topic 842. The Company adopted ASU 2016-02 effective January 1, 2019, which had no impact on the Company’s financial statements.
The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:
|a.||the customer simultaneously receives and consumes the benefits as the entity performs;|
|b.||the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or|
|c.||the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.|
The Company sells bottles and casks of whisky to its customers. The Company records the revenue once the whisky is shipped and the Company’s obligations are completed. The Company also sells fractions of casks to customers in advance of selling the casks. The money from these cask fractions is recorded as deferred revenue until the cask is sold. Once these casks are sold the Company recognizes the revenue that has been deferred and removes the associated liability.
Other Comprehensive Loss
ASC 220, Other Comprehensive Loss, establishes standards for the reporting and display of other comprehensive loss and its components in the consolidated financial statements. At September 30, 2019 and December 31, 2018, respectively, the Company had $57,752 and $4,773 of accumulated other comprehensive loss, relating to foreign currency translation.
Fair Value of Financial Instruments
In accordance with ASC 820, Fair Value Measurement, the carrying value of cash and cash equivalents and accounts payable approximates fair value due to the short-term maturity of these instruments. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2- Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3- Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for cash, accounts payable, accrued expenses, advances and notes payable approximate their fair market value based on the short-term maturity of these instruments.
Stock Based Compensation
The Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the stock on the date of granting and recognized as services are provided.
The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period.
Under ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2019 and December 31, 2018, the Company had cumulative net operating losses of $2,382,952 and $613,683, respectively. As of September 30, 2019 and December 31, 2018, there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding during the periods presented. Potentially dilutive common stock equivalents such as stock options, warrants and convertible debt are included in the computation of diluted weighted average of common shares outstanding, unless their effect is anti-dilutive due to net losses. As of September 30, 2019 and December 31, 2018, there are no potentially dilutive common stock equivalents.
Basis of Valuing Inventory
The Company purchases rare Scotch whisky for collection and possible marketing and re-sale. The inventory is recorded at the lower of cost (purchase price including fees) or net realizable value.
NOTE 4 – ADVANCE TO RELATED ENTITY
As of September 30, 2019 and December 31, 2018, the Company had advanced non-interest bearing funds to a related party entity in the amount of $4,920 and $6,380, respectively, in anticipation of acquiring or merging the entity with the Company. All of these proceeds were loaned to a related party, Rare Whisky Auctions (“RWA”), a United Kingdom company controlled by the majority shareholders of the Company. The Company recorded an advance to a related entity – in anticipation of merger on its books for these funds.
NOTE 5 – DEPOSIT WITH RELATED PARTY
As of September 30, 2019 and December 31, 2018, the Company had deposited $289,402 and $0, respectively, in a related party entity, Rosewin Holdings, Inc. This is being reported currently as a deposit. The Company will eventually own an as yet undetermined percentage of the equity in this entity and will be recorded on its books using the equity method. For September 30, 2019 and December 31, 2018, the Company has recorded a gain on this investment of $0 and $0, respectively.
NOTE 6 – WHISKY INVENTORY AND DEFERRED REVENUE
As of September 30, 2019 and December 31, 2018, the Company had whisky inventory of $1,362,578 and $393,788, respectively. The inventory is made up of rare or special whisky that the Company is acquiring to collect, market, and sell. During the year ended December 31, 2018, the Company began selling Cask Fractions. Cask Fractions are fractions of casks that are in the whisky inventory and are sold to outside parties that would like to invest in rare or special whisky in smaller amounts of money than is required to purchase a complete cask. Upon the sale of these casks, the income associated with these cask fractions that have been purchased is passed on to the investors. The amounts of cask fractions sold totals $74,169 and $75,158 as of September 30, 2019 and December 31, 2018, respectively, and are recorded as deferred revenue.
NOTE 7 – LOAN PAYABLE
On August 22, 2019, the Company entered into a loan agreement with Barclay Bank and received proceeds of $61,506. The loan has a term of 60 months and carries an interest rate of 6.7 percent. It is a fixed payment loan and requires monthly payments of $1,243 (GBP 1,010.24). Balances owed totaled $61,810 and $0 at September 30, 2019 and December 31, 2018, respectively. The current portion of the loan payable was $14,912 and $0 at September 30, 2019 and December 31, 2018, respectively.
The following schedule shows the maturities schedule for the next five years;
NOTE 8 – PRIVATE WHISKY COLLECTIONS
In August and September 2019, the Company received $905,361 from three individuals to purchase and hold private whisky collections for them. One individual, who is a related party, has an agreement for five years, in the amount of $44,284 and the other two agreements are for ten years, in the amount of $861,077. The Company purchases whisky items, hold these assets and may sell the assets for the individuals. The Company will receive a percentage of any profits earned by the sale of whisky items. Balances owed under these agreements totaled $905,361 and $0 at September 30, 2019 and December 31, 2018, respectively.
NOTE 9 – NOTE PAYABLE - RELATED PARTY
During the nine months ended September 30, 2019 and 2018, the Company received $298,317 and $16,482, respectively, in loan proceeds from an officer and director. This loan is due on demand and non-interest bearing. Balances owed totaled $288,000 and $0 at September 30, 2019 and December 31, 2018, respectively.
NOTE 10 – COMMON STOCK
During the nine months ended September 30, 2018, the Company issued 2,028,317 shares of common stock to unrelated parties, at $0.45 - $0.75 per share and received $637,481 in cash.
On June 8, 2018, the Company issued 400,000 shares of common stock for the acquisition of Fah Mai Holdings, Co., Ltd. These shares were issued at par value of $0.0001 per share. The shares were issued at par value because the transaction was treated as a combination of entities under common control at historical costs.
During the nine months ended September 30, 2018, the Company issued 155,325 shares of common stock to unrelated individuals for services. The shares were issued between $0.50 and $0.65 per share and the Company recorded $78,699 in expenses.
During the nine months ended September 30, 2019, the Company issued 2,225,729 shares of common stock through 73 stock subscription agreements, which are all unrelated parties, at $0.42 - $1.00 per share and received $1,500,808 in cash.
On March 1, 2019, the Company issued 500,000 shares of common stock to one individual for services. The shares were issued at $0.50 per share and the Company recorded $250,000 in expenses as stock based compensation.
During the nine months ended September 30, 2019, the Company issued 583,019 shares of common stock to 97 individuals for investment services. The shares were issued from $0.30 to $0.65 per share and the Company recorded $540,177 in expenses as stock based compensation.
During the nine months ended September 30, 2019, the Company purchased 30,907 shares of common stock from four individuals for $0.50 per share for $15,701 in cash per repurchase agreements. These shares were immediately cancelled.
The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of September 30, 2019 and December 31, 2018, respectively, 56,278,730 and 53,000,889 shares of common stock and no shares of preferred stock were issued and outstanding.
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the unaudited consolidated financial statements were issued and there are no material subsequent events, except as detailed below:
From October 1, 2019 through March 5, 2020, the Company issued 134,985 shares of common stock to 32 unaffiliated individuals at $0.50 - $1.00 per share for investment services for a value of $116,951.
From October 1, 2019 through March 5, 2020, the Company issued 441,565 shares of common stock to 28 unaffiliated individuals at $0.43 - $1.00 per share for net proceeds of $337,266.
The following discussion should be read in conjunction with the financial statements and notes thereto included in this report. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risk and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions as of the date of this filing. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document. The Company’s actual results could differ materially from those discussed here.
Results of Operations
Nine months ended September 30, 2019
For the nine months ended September 30, 2019 and 2018, Fah Mai Holdings, Inc. (the “Company”) generated revenues of $146,307 and $15,362, respectively, and has had no significant income or positive cash flows from operations since inception. The Company sustained net losses of $1,775,124 and $390,282 during the nine months ended September 30, 2019 and 2018, respectively. The increase of $1,384,842 is due primarily to the Company incurring $861,669 in stock-based compensation and other professional services, payroll expenses of $200,419, office expense of $88,117, rent expense of $50,994, $20,090 in computer and internet expenses and $403,076 in advertising expenses. The loss is largely attributed to operating expenses incurred by the Company, for the purposes of paying for accounting, legal and audit fees, its operations in Thailand and the efforts to build its whisky inventory.
Three months ended September 30, 2019
For the three months ended September 30, 2019 and 2018, the Company generated revenues of $143,657 and $15,362, respectively, and has had no significant income or positive cash flows from operations since inception. The Company sustained net losses of $997,231 and $171,753 during the three months ended September 30, 2019 and 2018, respectively. The increase of $825,478 is due primarily to the Company incurring $550,988 in stock-based compensation and other professional services, payroll expenses of $97,079, office expense of $86,271, rent expense of $16,772, $1,858 in computer and internet expenses and $308,065 in advertising expenses. The loss is largely attributed to operating expenses incurred by the Company, for the purposes of paying for accounting, legal and audit fees, its operations in Thailand and the efforts to build its whisky inventory.
The Company’s independent auditors have issued a report on the Company’s December 31, 2018 audited financial statements raising substantial doubt about the Company’s ability to continue as a going concern. At present, the Company has no operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders and its ability to obtain necessary equity financing to continue operations.
Liquidity and Capital Resources
As of September 30, 2019 and December 31, 2018, the Company had $505,573 and $18,575, respectively, in cash.
Going Concern Consideration
As reflected in the accompanying unaudited condensed financial statements, the Company has an accumulated deficit of $2,388,807 as of September 30, 2019 and $613,683 as of December 31, 2018. This raises substantial doubt about its ability to continue as a going concern, which is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company used $1,005,020 and $423,511 in cash during the nine months ended September 30, 2019 and 2018, respectively, for operating activities. During the nine months ended September 30, 2019, the Company incurred a net loss of $1,775,124, offset by common stock issued for services of $790,177, an increase in inventory of $968,790, an increase in accounts payable and accrued liabilities of $52,432, an increase in private whisky collections payable of $905,361 and deferred revenue of $989, compared to the nine months ended September 30, 2018, the Company incurred a net loss of $423,512, offset by common stock issued for services of $78,699 and an increase in inventory of $106,671.
The Company issued funds to a related party in the amount of $0 and $0 and received funds back from a related party in the amount of $1,460 and $0 during the nine months ended September 30, 2019 and 2018, respectively. The Company also made a deposit for a pending equity purchase in a related party entity of $289,402 and $0 during the nine months ended September 30, 2019 and 2018, respectively. During the nine months ended September 30, 2018, the Company had a negative cash flow of $240,678 for a recapitalization with an acquisition of a subsidiary.
The Company received $298,317 and $16,482 in proceeds from a note payable with a related party and repaid $10,317 and $30,549 of this note payable during the nine months ended September 30, 2019 and 2018, respectively. The Company received $1,500,808 in cash for the issuance of 2,225,729 shares of common stock during the nine months ended September 30, 2019, and received $637,481 in cash for the issuance of 2,028,317 shares of common stock during the nine months ended September 30, 2018. The Company also paid $15,701 in cash for the repurchase and cancellation of 30,907 shares of common stock during the nine months ended September 30, 2019 per repurchase agreements. During the nine months ended September 30, 2019, the Company also received $60,506 in cash from a loan payable.
Disclosure Controls and Procedures
As of September 30, 2019 (the “Evaluation Date”), the Company’s management evaluated, with participation of its principal executive officer and its principal financial officer, the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15 of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on that evaluation, the Company’s principal executive officer and its principal financial officer concluded that the Company’s disclosure controls and procedures were ineffective as of September 30, 2019.
Management assessed the effectiveness of our internal control over financial reporting as of the Evaluation Date based on criteria for effective internal control over financial reporting described in Internal Control—Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. The material weaknesses identified during management’s assessment were (i) a lack of sufficient internal accounting resources; and (ii) a lack of segregation of duties to ensure adequate review of financial statement preparation. In light of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting at the Evaluation Date.
Change in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting, or in any other factors that could significantly affect these controls, during the Company’s quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
From time to time, the Company may be involved in litigation relating to claims arising out of commercial operations in the normal course of business. As of September 30, 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations.
In accordance with the requirements of Form 10-Q, the Company, as a smaller reporting company, is not required to make disclosure under this item.
During July 1, 2019 through the present, the Company issued 1,612,736 shares of common stock for net proceeds of $1,366,503 through 54 stock subscription agreements, which are all unrelated parties.
From July 1, 2019 through the present, the Company issued 658,968 shares of common stock to 80 individuals, which are all unrelated parties, for investment services. The shares were issued from $0.50 to $1.00 per share and the Company recorded $628,447 in expenses.
The shares described above were issued pursuant to the exemption from registration requirements relying on Section 4(a)(2) of the Securities Act of 1933 as there was no general solicitation, and the transactions did not involve a public offering.
|3.1||Certificate of Incorporation (incorporated by reference to our Registration Statement on Form 10-12G filed on August 9, 2016)|
|3.2||By-laws (incorporated by reference to our Registration Statement on Form 10-12G filed on August 9, 2016)|
|3.3||Certificate of Amendment to Certificate of Incorporation (incorporated by reference to our Registration Statement on Form S-1/A filed on November 27, 2018)|
|10.1||Lease agreement (incorporated by reference to our Registration Statement on Form S-1/A filed on November 27, 2018)|
|10.2||Agreement with Tiber Creek Corporation (incorporated by reference to our Registration Statement on Form S-1/A filed on November 27, 2018)|
|10.3||Letter Agreement with London City Bond Ltd. (incorporated by reference to our Registration Statement on Form S-1/A filed on March 29, 2019)|
|31.1*||Rule 15d-14(a) Certification by Principal Executive Officer and Principal Financial Officer|
|32.1*||Section 1350 Certification of Principal Executive Officer and Principal Financial Officer|
|101.INS*||XBRL Instance Document|
|101.SCH*||XBRL Taxonomy Extension Schema Document|
|101.CAL*||XBRL Taxonomy Extension Calculation Linkbase Document|
|101.DEF*||XBRL Taxonomy Extension Definition Linkbase Document|
|101.LAB*||XBRL Taxonomy Extension Label Linkbase Document|
|101.PRE*||XBRL Taxonomy Extension Presentation Linkbase Document|
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|Dated: March 10, 2020||FAH MAI HOLDINGS, INC.|
|By:||/s/ Louis Haseman|
|Chief Executive Officer|