UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended August 31, 2015
 
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                    to                   
 
Commission File Number:  333-148385

 

Lans Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   47-4426774
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)

 

801 Brickell, Miami, Florida 33133
(Address of principal executive offices)

 

305-755-7451
(Registrant’s telephone number)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days ☐ Yes  ☒ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). 
☐ Yes  ☒ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

☐ Large accelerated filer

☐ Non-accelerated filer

☐ Accelerated filer

☒ Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☒ Yes  ☐ No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

133,300,000 common shares as of October 20, 2015.

 

 

 

 

 

  TABLE OF CONTENTS  

Page

       
  PART I – FINANCIAL INFORMATION    
       
Item 1: Financial Statements   1
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations   2
Item 3: Quantitative and Qualitative Disclosures About Market Risk   5
Item 4: Controls and Procedures   5
       
  PART II – OTHER INFORMATION    
       
Item 1: Legal Proceedings   6
Item 1A: Risk Factors   6
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds   6
Item 3: Defaults Upon Senior Securities   6
Item 4: Mine Safety Disclosures   6
Item 5: Other Information   6
Item 6: Exhibits   7

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

Lans Holdings, Inc.

August 31, 2015

 

    Index
Balance Sheets as of August 31, 2015 and November 30, 2014 (unaudited); F–1
   
Statements of Operations for the three and nine months ended August 31, 2015 and 2014 (unaudited); F–2
     
Statement of Cash Flows for the nine months ended August 31, 2015 and 2014 (unaudited); F–3
     
Notes to the Financial Statements (unaudited)  F–4

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended August 31, 2015 are not necessarily indicative of the results that can be expected for the full year.

 

1

 

  

LANS HOLDINGS, INC.

BALANCE SHEETS

AS OF AUGUST 31, 2015 AND NOVEMBER 30, 2014

(UNAUDITED)

 

    August 31,     November 30,  
    2015     2014  
ASSETS            
             
Current Assets            
             
Cash   $ 16,377     $  
                 
TOTAL ASSETS   $ 16,377     $  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities                
                 
Accounts payable and accrued expenses   $ 66,020     $ 7,892  
Stock payable     45,000        
Stock payable to related party     45,000        
Short-term loans payable     125,000        
Short-term loan payable to related party     25,000       25,000  
Due to related parties     153,887       150,000  
                 
Total Liabilities     459,907       182,892  
                 
Stockholders’ Deficit                
                 
Preferred stock, 100,000,000 shares authorized, $0.001 par value;
599,859 Series A preferred shares issued and outstanding
    600        
Common stock, 500,000,000 shares authorized, $0.001 par value;
133,300,000 shares issued and outstanding
    133,300       133,300  
Additional paid-in capital     2,175,214       75,814  
Accumulated deficit     (2,752,644 )     (392,006 )
                 
Total Stockholders’ Deficit     (443,530 )     (182,892 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 16,377     $  

 

(See accompanying notes to unaudited financial statements)

 

F-1

 

 

LANS HOLDINGS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2015 AND 2014

(UNAUDITED)

 

    For the Three Months Ended     For the Nine Months Ended  
    August 31,
2015
    August 31,
2014
    August 31,
2015
    August 31,
2014
 
                         
REVENUES   $     $     $     $  
                                 
OPERATING EXPENSES                                
                                 
General and administrative   $ 160,306     $ 7,736     $ 207,718     $ 14,818  
Impairment of intangible asset                 2,150,000        
Interest expense     1,965             2,920        
                                 
TOTAL OPERATING EXPENSES     162,271       7,736       2,360,638       14,818  
                                 
NET LOSS   $ (162,271 )   $ (7,736 )   $ (2,360,638 )   $ (14,818 )
                                 
LOSS PER SHARE: BASIC AND DILUTED   $ (0.00 )   $ (0.00 )   $ (0.02 )   $ (0.00 )
                                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED     133,300,000       133,300,000       133,300,000       133,300,000  

 

(See accompanying notes to unaudited financial statements)

 

F-2

 

 

LANS HOLDINGS, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED AUGUST 31, 2015 AND 2014

(UNAUDITED)

 

    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES            
             
Net loss   $ (2,360,638 )   $ (14,818 )
Adjustments to reconcile net loss to net cash used in operating activities:                
  Impairment of intangible asset     2,150,000        
  Stock-based compensation     90,000        
Change in operating assets and liabilities:                
Prepaid expenses           (1,900 )
Accounts payable and accrued expenses     58,128       (3,308 )
                 
Net Cash Used In Operating Activities     (62,510 )     (20,026 )
                 
CASH FLOWS TO INVESTING ACTIVITIES                
                 
Purchase of intangible asset     (50,000 )      
                 
Net Cash Provided by Financing Activities     (50,000 )      
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
                 
Advances from related party     3,887       20,026  
Proceeds from loans payable     125,000        
                 
Net Cash Provided by Financing Activities     128,887       20,026  
                 
Net Increase in cash and cash equivalents     16,377        
                 
Cash, beginning of period            
                 
Cash, end of period   $ 16,377     $  
                 
SUPPLEMENTARY CASH FLOW INFORMATION:
               
Interest paid   $     $  
Income taxes paid   $     $  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Issuance of preferred stock for acquisition of assets   $ 2,100,000     $  

 

(See accompanying notes to unaudited financial statements)

 

F-3

 

 

 LANS HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED AUGUST 31, 2015

(UNAUDITED)

 

NOTE 1 – NATURE OF BUSINESS

 

Nature of Business

Lans Holdings, Inc. (the “Company”) was incorporated in Nevada on November 13, 2007. In 2014, The Company acquired a license to a software payment platform which allows merchants to advertise and sell goods and process payments so that they can cash in sales of their goods at the Company’s online store.

 

The Company has incurred losses since inception, has negative working capital, and has not yet generated revenues from sales of products or services. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

These financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Company’s fiscal year end is November 30.

 

Interim Financial Statements

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end November 30, 2014 have been omitted.

 

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes 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. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Financial Instruments

The Company’s financial instruments consist of cash, accounts payable and accrued expenses, loans payable and an amount due to an officer. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less to be cash equivalents. At August 31, 2015 and November 30, 2014, the Company had $16,377 and $0 of cash, respectively.

 

F-4

 

 

LANS HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED AUGUST 31, 2015

(UNAUDITED)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Intangible Assets

Software, licenses and other rights have been capitalized in accordance with ASC 350-40 “Intangibles – Goodwill and Other – Internal-Use Software.” Amortization is calculated on a straight line basis over its estimated useful life of 20 years.

 

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying value over the fair value of the asset.

 

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

 

Any deferred tax asset is considered immaterial and has been fully offset by a valuation allowance because at this time Company believes that it is more likely than not that the future tax benefit will not be realized as the Company has no current operations.

 

Revenue Recognition

The Company will recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Subsequent Events

The Company has evaluated all transactions through the date the financial statements were issued for subsequent event disclosure consideration.

 

Loss Per Common Share

Basic earnings per share is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of August 31, 2015 and November 30, 2014, the Company has no potentially dilutive securities outstanding.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements- Going Concern. The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.

 

NOTE 3 – INTANGIBLE ASSETS

 

  a) On November 21, 2014, the Company entered into a license agreement (the “License Agreement”) with PayFlex Systems (“Payflex”). The President of PayFlex is also, the Company’s Chief Executive Officer. Pursuant to the License Agreement, the Company obtained an exclusive worldwide license to use all of PayFlex’s payment processor codes, patent and intellectual rights, contracts, permits and licenses. The license is for twenty years unless terminated earlier as provided for in the License Agreement.

 

In exchange for the license, the Company is required to pay PayFlex $150,000 in cash for the license and raise $200,000 for its own working capital needs within 90 days of closing the License Agreement. The Company is also required to issue a number of shares of the Company’s common stock necessary to give 55% of the total issued and outstanding shares of the Company to PayFlex or its nominees within 90 days of closing the License Agreement.

 

F-5

 

 

LANS HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED AUGUST 31, 2015

(UNAUDITED)

 

NOTE 3 – INTANGIBLE ASSET (CONTINUED)

 

In addition, the Company would be required to issue a number of shares of the Company’s common stock necessary to give 70% of the total issued and outstanding shares of the Company to PayFlex or its nominees on the anniversary of the License Agreement in which the Company’s audited filed financial statements for gross annual revenues attributable to the business exceeds $5,000,000.

 

The Company has not made the required cash and share payments. The cash requirement of $150,000 was recorded by the company as expense and payable to related party. The Company has not raised the $200,000 required by the License Agreement. As of the date of the financial statements, the amount has not been paid and the Company has obtained an extension until December 31, 2015.

 

The Company evaluated this transaction by reviewing the ownership percentages of the new shareholders as of the acquisition date and SAB Topic 5G. The Company is determined to be both the legal acquirer and the accounting acquirer of these assets. Since the new shareholders simultaneously obtained the control of the Company, with an overall ownership percentage of approximately 55%, the assets acquired from PayFlex were recorded at the cash requirement of $150,000.

 

At November 30, 2014, due to the Company’s uncertain future revenues generated by the license, the Company performed impairment tests as prescribed by ASC 350. As a result, the Company recorded an impairment charge totaling $150,000.

 

  b) On April 17, 2015, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Transaction Data USA Inc. (“Transaction Data”). Pursuant to the Agreement, the Company acquired the various assets (the “Assets”) from TDUSA.

 

In consideration for the Assets, the Company agreed to issue to TDUSA 400,000 shares of its newly created Series A Preferred Stock and 19,985,000 shares of its common stock.

 

As part of the transaction, the Company’s officer and director, agreed to exchange his 7,000,000 shares of common stock into 100,000 shares of Series A Preferred Stock and a significant shareholder agreed to exchange its 12,985,000 shares of common stock into 99,859 shares of Series A Preferred Stock.

 

In addition, pursuant to the Purchase Agreement, the Company agreed to use its best efforts to raise $375,000 for working capital needs and to develop the business surrounding the Assets; grant TDUSA the right to appoint two persons to the Company’s board of directors; and grant TDUSA a revenue share of the business.

 

During 2015, the Company paid TDUSA $50,000 of the working capital requirement.

 

The Company evaluated this transaction by reviewing the ownership percentages of the new shareholders as of the acquisition date and SAB Topic 5G. The Company is determined to be both the legal acquirer and the accounting acquirer of these assets. The assets acquired from TDUSA were recorded at the cash consideration of $50,000 and the fair value of the shares issued of $2,100,000.

 

During the quarter ended May 31, 2015 due to the Company’s uncertain future revenues generated by the assets, the Company performed impairment tests as prescribed by ASC 350. As a result, the Company recorded an impairment charge totaling $2,150,000.

 

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses of $66,020 and $7,892 at May 31, 2015 and November 30, 2014, respectively, consist of amounts owed to the Company’s service providers for services rendered.

 

NOTE 5 – LOANS PAYABLE

 

  a) On November 24, 2014, the Company issued a $25,000 promissory note to a director of the Company pursuant to the Agreement of Conveyance, Transfer and Assignment of Obligations described in Note 7. The promissory note is unsecured, non-interest bearing and due within six months of the date of issuance. As of August 31, 2015, the note was not yet repaid. The Company is currently in renegotiations to adjust the terms of the note.

 

  b) On March 26, 2015, the Company entered into a $75,000 loan agreement with a non-related party. The loan is unsecured, bears interest at 7.5% per year, and is due on March 31, 2016. At August 31, 2015, the Company had accrued interest of $2,373.

 

  c) On August 7, 2015, the Company entered into a $50,000 loan agreement with a non-related party. The loan is unsecured, bears interest at 8.5% per year, and is due on August 7, 2016. At August 31, 2015, the Company had accrued interest of $547.

 

F-6

 

 

LANS HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED AUGUST 31, 2015

(UNAUDITED)

 

NOTE 6 – CAPITAL STOCK

 

The Company’s authorized capital stock consists of 500,000,000 shares of common stock, with a par value of $0.001 per share, and 100,000,000 shares of preferred stock, par value $0.001 per share.

 

On April 21, 2015, the Company designated a class of Series A Preferred Stock. The Series A Preferred Stock consists of 599,859 shares. The Series A Preferred Stock may bear quarterly dividends of 7% per annum in cash or common stock at the Company’s option. The Series A Preferred Shares have voting rights of 112 votes per share, liquidation preference of $5.00 per share, and are convertible into common shares on a 1:100 basis at $0.05 per share, with adjustments.

 

The Company issued 599,859 shares of Preferred Stock pursuant to the asset acquisition described in Note 3(b).

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

  a) During the nine months ended August 31, 2015, the Company incurred consulting fees of $13,500 (2014 - $nil) to a company whose CEO is the President of the Company.

 

  b) During the nine months ended August 31, 2015, the Company incurred consulting fees of $17,064 (2014 - $nil) to a company controlled by the Chief Technology Officer of the Company.

 

  c) During the nine months ended August 31, 2015, the Company incurred consulting fees of $16,687 (2014 - $nil) to the Chief Operations Officer of the Company.

 

  d) During the nine months ended August 31, 2015, the Company incurred consulting fees of $16,000 (2014 - $nil) to the Chief Revenue Officer of the Company.

 

  e) As at August 31, 2015, the Company owes $200 (November 30, 2014 - $nil) to the President of the Company, which is non-interest bearing, unsecured and due on demand.

 

  f) As at August 31, 2015, the Company owes $16,000 (November 30, 2014 - $nil) to a company controlled by the Chief Technology Officer of the Company, of which $1,000 is non-interest bearing, unsecured and due on demand and $15,000 will be settled by issuing 200,000 shares of the Company’s common stock at $0.075 per share. At August 31, 2015, $15,000 of stock payable was accrued by the Company.

 

  g) As at August 31, 2015, the Company owes $16,687 (November 30, 2014 - $nil) to the Chief Operations Officer of the Company, of which $1,688 is non-interest bearing, unsecured and due on demand and $15,000 will be settled by issuing 119,048 shares of the Company’s common stock at $0.126 per share. At August 31, 2015, $15,000 of stock payable was accrued by the Company.

 

  h) As at August 31, 2015, the Company owes $16,000 (November 30, 2014 - $nil) to the Chief Revenue Officer of the Company, of which $1,000 is non-interest bearing, unsecured and due on demand and $15,000 will be settled by issuing 119,048 shares of the Company’s common stock at $0.126 per share. At August 31, 2015, $15,000 of stock payable was accrued by the Company.

 

  i) On November 21, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with directors of the Company. Pursuant to the agreement, the Company transferred all assets and business operations associated with hexagon fishing nets to the directors of the Company. In exchange, the directors of the Company agreed to cancel 73,315,000 shares in the Company and assume and cancel all liabilities relating to the Company’s former business, including officer loans amounting to $100,814. A director of the Company will retain 1,085,000 shares of common stock in the Company. In consideration for the cancellation of amounts due to officer and the return of the shares, the Company issued a $25,000 promissory note to the director of the Company. Refer to Note 5. As a result of the forgiveness of the loans and cancellation of stock, the Company recognized $75,814 as a contribution to capital. As of August 31, 2015, the 73,315,000 shares had not been cancelled.

 

  j) On November 21, 2014, the Company entered into a License Agreement with the Chief Executive Officer of the Company (Note 3(a)). At November 30, 2014, the Company was indebted to the Chief Executive Officer of the Company for $150,000 related to the License Agreement. The amount was due on February 19, 2015. As of August 31, 2015, the amount has not been paid by the Company.

 

NOTE 8 – COMMITMENTS

 

  a) The Company neither owns nor leases any real or personal property. An officer of the Company has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors of the Company are involved in other business activities and most likely will become involved in other business activities in the future.

 

F-7

 

 

LANS HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED AUGUST 31, 2015

(UNAUDITED)

 

NOTE 8 – COMMITMENTS (CONTINUED)

 

  b) On November 19, 2014, the Company entered into an investor relations services agreement. Pursuant to the agreement, the Company will pay $2,500 a month for investor relations services for a term of one year.

 

  c) On June 25, 2015, the Company entered into a consultancy agreement with a company controlled by the Chief Technology Officer of the Company. Pursuant to the agreement, the Company will pay $1,000 a month for consulting services for a term of one year and issue 200,000 shares of the Company’s common stock on the date of the agreement. As of August 31, 2015, the shares had not been issued but were accrued as stock payable.

 

  d) On August 17, 2015, the Company entered into a consultancy agreement with the Chief Operations Officer of the Company. Pursuant to the agreement, the Company will pay $2,250 a month for consulting services for a term of one year and issue 119,048 shares of the Company’s common stock on the date of the agreement. As of August 31, 2015, the shares had not been issued but were accrued as stock payable.

 

  e) On August 17, 2015, the Company entered into a consultancy agreement with the Chief Revenue Officer of the Company. Pursuant to the agreement, the Company will pay $1,000 a month for consulting services for a term of one year and issue 119,048 shares of the Company’s common stock on the date of the agreement. As of August 31, 2015, the shares had not been issued but were accrued as stock payable.

 

  f) On August 17, 2015, the Company entered into an advisory board agreement with two Advisory Board Members of the Company for terms of one year each. Pursuant to the agreement, the Company will issue the Members 119,048 shares each of the Company’s common stock, valued at $15,000 each, on the date of the agreement. As of August 31, 2015, the shares had not been issued but were accrued as stock payable.

 

  g) On August 28, 2015, the Company entered into an advisory board agreement with an Advisory Board Member of the Company for a term of one year. Pursuant to the agreement, the Company will issue a total of 113,208 shares of the Company’s common stock, valued at $15,000, on the date of the agreement. As of August 31, 2015, the shares had not been issued but were accrued as stock payable.

 

  h) The Company entered into the agreement described in Note 3(a) with the Chief Executive Officer of the Company. Pursuant to the agreement, the Company is required to pay $150,000 in cash for the license and issue a number of shares of the Company’s common stock necessary to give 55% of the total issued and outstanding shares of the Company to PayFlex or its nominees. In addition, the Company would be required to issue a number of shares of the Company’s common stock necessary to give 70% of the total issued and outstanding shares of the Company to PayFlex or its nominees on the anniversary of the Licensing Agreement in which the Company’s audited filed financial statements for gross annual revenues attributable to the business exceeds $5,000,000. The President of PayFlex is also the Company’s Chief Executive Officer.

 

The Company is also required to raise $200,000 for its own working capital needs within 90 days of closing the License Agreement.

 

  i) Pursuant to the Asset Acquisition Agreement described in Note 3(b) the Company has agreed to use its best efforts to raise an additional $325,000 for its own working capital needs and to develop the business surrounding the acquired Assets.

 

NOTE 9 – SUBSEQUENT EVENTS

 

On September 22, 2015, the Company committed to enter a license agreement and to purchase supporting products in exchange for an amount totaling up to $73,212.

 

F-8

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Company Overview

 

Our plan is to develop a payment processor business. Despite having acquired a license from PayFlex Systems in late 2014 to use codes, intellectual property rights, contracts, permits and other items in a payment processor business, we have been unsuccessful in establishing a platform to sell payment processor services. This was in large part due to our inability to raise money to finance the project.

 

Since we acquired the license, we have been looking for ways to obtain financing. We have not made the required cash and share payments under the license agreement. The cash requirement of $150,000 was recorded by us as an expense and payable to related party. At November 30, 2014, as a result of uncertain future revenues derived by the license, we decided to impair the asset. As of the date of the financial statements, the amount has not been paid and we have obtained an extension until December 31, 2015.

 

On April 17, 2015, we acquired certain assets from Transaction Data USA Inc., namely its MCRd Application Framework and some existing customer files and accounts, in an effort to gain momentum in the pursuit of our business plan. We plan to use the acquired technology to deploy a new SaaS (Security as a Service) enterprise solution called CLOUDECRYPT. We believe this solution reduces the complex process for managing enterprise data encryption. Using this platform, we believe our potential customers will more easily migrate clients to a better security base to prevent credit card cloning and identity theft in retail locations. The platform should also enable providers to reduce compliance and management costs of data encryption for multiple customers.

 

In October 2015, the Payment Networks’ Liability Shift associated with EuroPay, MasterCard, and Visa (EMV) is due to take effect in the United States. It’s a major milestone for banks, credit card issuers, merchants, and more. This liability shift means that those financial institutions and merchants using non-EMV compliant devices that choose to accept transactions made with EMV-compliant cards assume liability for any and all transactions that are found to be fraudulent. The main driver behind the EMV migration is card-related financial fraud.

 

Many people are becoming aware of smart chips that are embedded within new EMV-compliant credit and debit cards. These chips interface with Point-of-Sale (POS) terminals. While many other places, such as Europe, Canada, Latin America, and the Asia/Pacific region, are all well on their way with migrating from the magstripe standard to EMV chip card technology, the U.S. has just begun the process.

 

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We intend to provide the next generation one stop solution for retail and ecommerce businesses. Merchants (businesses that accept credit cards) will be liable if a counterfeit transaction occurs when a card holder uses a chip card (EMV) to pay a merchant and the merchant is not using true, EMV Ready Point-of-Sale technology. We have been focusing on providing a certified and compliant solution we market to developers as “PaymentSandBox,” independent sales organizations and merchant service providers as “Paysperity,” and to acquirers and payment service providers a solution called “Payment-Engine” that we believe will be recognized by a council formed and managed by Visa, MasterCard, Discover, AMEX and JCB. Payment gateways and other companies that develop and market solutions to businesses that process credit cards can leverage the CLOUDECRYPT platform, which we believe will provide the most secure solution to meet compliance requirements at a fraction of the cost than doing it internally. The hardware and peripheral options are also more easily supported to reduce cost to commercialize encrypted payment solutions by service providers.

 

We are in process of certifying our Cloudecrypt, Payment-Engine, PaymentSandBox and Paysperity applications by our PCI Auditor - Dara Security. Dara Security is certified as a PCI QSA (Payment Card Industry Qualified Security Assessor), PA-QSA (Payment Application Qualified Assessor) and P2PE (Point-to-Point Encryption) organization. Dara Security is headquartered in Reno, Nevada and is the only Accredited PCI QSA and P2PE in Nevada.

 

We have combined the CLOUDECRYPT with the Open4Biz (cloud business management apps) and Payment-Engine (cloud based retail and ecommerce platform) all of which are “EMV ready” (meaning ready to support the latest card payment "chip and pin" security known as EMV (Europay, MasterCard and Visa). This combination has resulted in our EMV Merchant migration program we call the “EMV Launchpad”. The EMV Launchpad provides strategic partners and customers with two key items that we expect will satisfy these major concerns. First, we provide processor agnostic and developer friendly EMV technology. Second we provide cost-effective EMV terminals that fast track our development partners EMV certifications. We believe this new program will save companies lots of time and money to help software developers and merchants become EMV Ready ahead of the upcoming October EMV liability shift.

 

The EMV technology we provide is available based on the industry segment of our partner.

 

“Payment-Engine” is a solution we can brand and enable an acquirer or payment service provider to utilize the EMV ready platform. We partnered with Creditcall to leverage various components of its processing system that we have branded and bundled as “Payment-Engine” for our clients. Payment-Engine includes a virtual terminal, hosted payment pages, email invoicing, and shopping cart integration tools. It comes with over 25 power packed modules to enable businesses to better manage information critical to success including: lead automation, sales management and automation, full scale accounting for revenue, purchases and inventory management, as well as module to manage human resources like expense reports, time sheets and fleet management.

 

“PaymentSandBox” is the EMV Ready solution packaged for developers providing device software development kits to integrate. We add value to developers by providing them a single integration toolkit for all peripherals including: bar code scanners, weight scales, pole displays, receipt printers, cash drawers, and now EMV payment terminals using our PaymentSandBox.

 

“Paysperity” is the above solutions ‘bundled’ together into a package that is ready for sale by an independent sales organization or merchant service provider.

 

EMV Launch Pad is a name of a program we offer to help our partners to implement one of the above scenarios based on who they are.

 

We have selected CardWare International to provide its EMV terminal warehousing and logistics services to enable rapid deployment of interoperable EMV POS terminals to POS developers and integrators.

 

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On August 14, 2015, we signed a Distribution Agreement with SureGate LLC to enable their resellers to provide merchants EMV retail processing solutions ahead of the upcoming October migration date. We believe that SureGate will help us to introduce our payment solution to the market and obtain subscribers. The distribution agreement will enable SureGate’s customers to use EMV compatible devices that process all payment types like credit and debit cards, as well the popular Apple Pay. As of the date of this filing, we have five merchant profiles boarded to our EMV ready platform and we have the capability to add approximately 10 more per week. We have started the migration of several additional merchants but we are waiting on equipment to arrive to complete the process. In all, we have 70 businesses qualified for our EMV migration program and ready to start, but we lack the equipment and means to services them all at once.

 

In order to implement our business plan, we will need to raise additional capital. We estimate that we will need approximately $325,000 in the next twelve months. These funds will be used to cover our contractual obligations and for general working capital needs. If we are unable to raise money, we will not be able to able to provide prospective customers with an EMV ready payment processor solution.

 

Results of operations for the three and nine months ended August 31, 2015 and 2014

 

We have not earned any revenues since our inception on November 13, 2007. We do not anticipate earning revenues until such time that we have fully developed and are able to market our payment processor business.

 

We incurred operating expenses in the amount of $162,271 for the three months ended August 31, 2015, compared with operating expenses of $7,736 for the three months ended August 31, 2014. We incurred operating expenses in the amount of $2,360,638 for the nine months ended August 31, 2015, compared with operating expenses of $14,818 for the nine months ended August 31, 2014. Our operating expenses for the nine months ended August 31, 2015 increased over the same periods ended August 31, 2014 and mainly consisted of a $2,150,000 impairment of our license agreement with TDUSA and general and administrative expenses.

 

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to undertaking development of our payment processor business and the professional fees associating with being a reporting company under the Securities Exchange Act of 1934.

 

We incurred a net loss in the amount of $162,271 for the three months ended August 31, 2015, as compared with a net loss in the amount of $7,736 for the three months ended August 31, 2014. We incurred a net loss in the amount of $2,360,638 for the nine months ended August 31, 2015, as compared with a net loss in the amount of $14,818 for the nine months ended August 31, 2014. Our losses for each period are attributable to operating expenses together with a lack of any revenues.

 

Liquidity and Capital Resources

 

As of August 31, 2015, we had $16,377 in current assets consisting entirely of cash. Our total current liabilities as of August 31, 2015 were $459,907. As a result, we have a working capital deficit of $443,530 as of August 31, 2015.

 

Operating activities used $62,510 in cash for the nine months ended August 31, 2015. Our negative operating cash flow was mainly the result of our net loss of $2,360,638, offset by a $2,150,000 impairment to our license agreement along with a $90,000 adjustment for stock-based compensation and a $58,128 increase in accounts payable and accrued expenses. We primarily relied on cash from loans to fund our operations during the period ended August 31, 2015.

 

Investing activities used $50,000 in cash for the nine months ended August 31, 2015 in connection with the purchase of intangible assets.

 

Financing activities provided $128,887 in cash for the nine months ended August 31, 2015. Of this amount, $125,000 was proceeds from loans payable and $3,887 was from related party advances.

 

On March 26, 2015, we borrowed $75,000 from an unrelated third party. The loan is unsecured, bears interest at 7.5% per year and is due on March 31, 2016.

 

On August 7, 2015, we borrowed $50,000 from an unrelated third party. The loan is unsecured, bears interest at 8.5% per year, and is due on August 7, 2016.

 

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The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of August 31, 2015, there were no off balance sheet arrangements.

 

Going Concern

 

We have negative working capital and have not yet received revenues from sales of products. These factors have caused our accountants to express substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on our generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2015.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2015, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of August 31, 2015, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting.  During the period covered by this quarterly report on Form 10-Q, we have hired a CFO, which we believe provides better segregation of duties and additional staff to monitor our disclosures, but we have otherwise been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending November 30, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

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Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the nine months ended August 31, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A:Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On June 25, 2015, we entered into a consultancy agreement with a company controlled by our Chief Technology Officer. Pursuant to the agreement, we will be issuing 200,000 shares of our common stock.

 

On August 17, 2015, we entered into a consultancy agreement with our Chief Operations Officer. Pursuant to the agreement, we will be issuing 119,048 shares of our common stock.

 

On August 17, 2015, we entered into a consultancy agreement with our Chief Revenue Officer. Pursuant to the agreement, we will be issuing 119,048 shares of our common stock.

 

On August 17, 2015, we entered into an advisory board agreement with two of our Advisory Board Members. Pursuant to the agreement, we will be issuing the Members 119,048 shares each of our common stock, valued at $15,000 each.

 

On August 28, 2015, we entered into an advisory board agreement with our Advisory Board Member. Pursuant to the agreement, we will be issuing a total of 113,208 shares of our common stock, valued at $15,000.

 

The above securities are to be issued pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder. The Company believes that the investor had adequate information about the Company as well as the opportunity to ask questions and receive responses from management.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

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Item 6. Exhibits

 

Exhibit Number   Description of Exhibit
10.1   Loan Agreement
31.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**   The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2015 formatted in Extensible Business Reporting Language (XBRL).

 

**Provided herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Lans Holdings Inc.
     
Date: October 20, 2015
     
By:

/s/ Trevor Allen

    Trevor Allen
Title: Chief Executive Officer and Director

 

 

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