Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion should be read in conjunction with the Company’s financial statements, which are included elsewhere
in this Form 10-K.
Overview
We
were a shell company that was originally established to offer eco-friendly health and wellness products to the general public
via the internet. As we had previously disclosed, on November 20, 2012, we entered into the LOI with Real Aesthetic to acquire
all of the issued and outstanding shares of common stock in exchange for common stock of the Company. The closing of the transactions
contemplated by the LOI was subject to the completion of the due diligence investigation of both parties, execution and delivery
of documentation for the transaction, consents from the respective boards of directors of both companies and any third parties
and the delivery of audited financial statements by Real Aesthetic. Subsequently, we decided not to pursue the contemplated transaction
with Real Aesthetic.
Plan
of Operation
The
Registrant has recently determined, through its recently established, wholly-owned new Israeli subsidiary, Bengio Urban Renewals
Ltd to focus its limited resources in the area of real estate development, particularly focusing on the urban renewal market in
Israel. We believe, based upon the current real estate market in Israel, that urban renewal projects present an opportunity for
us to generate revenues and profits, which we have never experienced since our inception. The basis for our belief is that
in several major Israeli cities, there is virtually no more room to grow. As a result, several municipal governments have allowed
older buildings to be renovated, thereby giving their respective cities the opportunity to develop new apartments to be added
to or replacing existing buildings.
Additionally,
municipalities have express their concern that many buildings constructed before 1980 will be unable to withstand earthquakes.
In Israel, very few apartment buildings are owned by a single person or entity and since the majority of apartments within buildings
are privately owned, the burden to renovate buildings in order to render them safer in the event of a major earthquake primarily
falls on the the multiple owners of various apartment buildings and complexes.
“Tama
38” is an Israeli national zoning plan whereby a contractor assumes the responsibility of renovating an apartment building.
In exchange for covering all costs of renovations, securing building permits and paying requisite taxes, the contractor has is
granted the right to build additional floors to the existing building and sell the apartments built on these floors.
The
apartment owners benefit by receiving a modernized building, strengthened against earthquakes, as well as the additional apartments
added to their buildings. In some cases balconies, storage rooms, parking spaces and elevators may be added as well, further enhancing
the building’s value.
“Pinui
Binui” projects are defined as development where the residents of apartments are temporarily evacuated so that the buildings
may be demolished and rebuilt. The tenants then return to new apartments in the newly finished and renovated building.
The contractor pays all costs for demolition, construction, relocating apartment owners and renting their temporary homes during
construction. In exchange, the contractor adds new apartments in the building which are sold to generate profit.
As
with “Tama 38,” the value of the apartments in the building is increased thereby benefitting the owners and the tenants
return to a new, often larger and safer apartment in a building often with more amenities.
Since
February 2016, the Registrant’s Board of Directors authorized the establishment of a new wholly-owned Israeli
subsidiary, Bengio Urban Renewals Ltd (“Bengio Urban”) to focus its limited resources in the area of real estate development,
particularly focusing on the urban renewal market in Israel. To that end, the Registrant raised $150,000 from the sale of restricted
shares to investors to fund the new real estate development operations of Bengio Urban, which has hired employees and has signed
contracts with the current tenants of two buildings who have agreed to vacate the buildings so that they can be redeveloped into
modern state of the art new residential buildings.
Results
of Operations
For
the years ended July 31, 2018 and July 31, 2017
Revenues
The
Company did not generate any revenues during the years ended July 31, 2018 and July 31, 2017
Total
operating expenses
During
the year ended July 31, 2018, total operating expenses were $222,756, which consisted of professional fees , general and administrative
expenses and expenses relating to the new business operations in relation to Tama 38. During the year ended July 31, 2017, total
operating expenses were $310,955, which consisted of professional fees, general and administrative expenses and consulting fees.
Net
loss
During
the year ended July 31, 2018 and July 31 2017, the Company had a net loss of $378,263 and $369,672 respectively.
Liquidity
and Capital Resources
As
of July 31, 2018, the Company did not have a cash balance.
The
Company believes that its current cash is insufficient to fund its expenses over the next twelve months. There can be no assurance
that additional capital will be available to the Company. The Company currently has no agreements, arrangements or understandings
with any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements
or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability
to remain a viable company.
Going
Concern Consideration
The
Company had no revenues and incurred a net loss of $378,263 for the year ended July 31, 2018 and a net loss of $369,672 for the
year ended July 31, 2017. These factors raise substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent on our ability to raise additional capital. Our financial statements do not include
any adjustments that may be necessary if we are unable to continue as a going concern.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
For
revenue from product sales, the Company will recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue
Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial
Statements” (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and
(4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding
the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts
and rebates to customers, estimated returns and allowance, and other adjustments will be provided for in the same period the related
sales are recorded.
The
preparation of financial statements in conformity with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures
of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Item
8. Financial Statements.
DARKSTAR
VENTURES, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF
JULY
31,
2018
IN
U.S. DOLLARS
TABLE
OF CONTENTS
|
Page
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS:
|
|
Consolidated
Balance sheets as of July 31, 2018 and 2017
|
F-2
|
Consolidated
Statements of Comprehensive Loss
for the
years ended
|
|
July
31, 2018, and 2017
|
F-3
|
Consolidated
Statements of stockholders' equity (
deficiency
)
for the years ended
|
|
July
31, 2018, and 2017
|
F-4
|
Consolidated
Statements of cash flows
for the years ended
|
|
July
31, 2018, and 2017
|
F-5
|
Notes
to financial statements
|
F-6
|
REPORT
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of Darkstar Ventures Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Darkstar Ventures Inc. and its subsidiary (“the Company”) as of July
31, 2018 and the related statements of operations, changes in stockholders’ deficit and cash flows, for each of the periods
ended July 31, 2018, and the related notes and schedules (collectively referred to as the "financial statements"). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July
31, 2018, and the results of its operations and its cash flows for each of the periods ended July 31, 2018, in conformity with
generally accepted accounting principles in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has not established a source of revenue sufficient to cover its operating costs.
As of July 31, 2017, the Company does not have sufficient working capital and cash resources to meet its planned business objectives.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/
Weinstein & Co. C.P.A. (Isr)
We
have served as the Company's auditor since 2018.
Jerusalem,
Israel
November
15, 2018
DARKSTAR
VENTURES, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
July 31,
|
|
July 31,
|
|
|
2018
|
|
2017
|
A
s s e t s
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
—
|
|
|
$
|
34,205
|
|
Related
parties
|
|
|
3,667
|
|
|
|
135,644
|
|
Other
current assets
|
|
|
24,511
|
|
|
|
26,859
|
|
T
o t a l current assets
|
|
|
28,178
|
|
|
|
196,708
|
|
|
|
|
|
|
|
|
|
|
LAND
DEVELOPMENT COSTS
|
|
|
47,244
|
|
|
|
11,243
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
4,368
|
|
|
|
4,680
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
8,490
|
|
|
|
32,445
|
|
|
|
|
|
|
|
|
|
|
T
o t a l assets
|
|
$
|
88,280
|
|
|
$
|
245,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Short
term bank credit
|
|
$
|
7,016
|
|
|
$
|
—
|
|
Trade payables
|
|
|
18,227
|
|
|
|
24,001
|
|
Short term loans
|
|
|
44,760
|
|
|
|
—
|
|
Other
accounts payables and accrued expenses
|
|
|
34,646
|
|
|
|
13,478
|
|
T
o t a l current liabilities
|
|
|
104,649
|
|
|
|
37,479
|
|
|
|
|
|
|
|
|
|
|
LONG
TERM LOAN
|
|
|
712,376
|
|
|
|
583,574
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIENCY):
|
|
|
|
|
|
|
|
|
Preferred stock, 5,000,000
shares authorized, par value $0.0001, none issued and outstanding
Common shares par value $0.0001:
Authorized: 2,000,000,000
shares at July 31, 2018 and 2017.
Issued and outstanding: 647,345,000 shares at July 31, 2018 and 2017.
|
|
|
64,734
|
|
|
|
64,734
|
|
Additional
paid-in capital
|
|
|
575,851
|
|
|
|
575,851
|
|
Accumulated
other comprehensive income
|
|
|
(5,099
|
)
|
|
|
(18,033
|
)
|
Receivables
on account of shares issued
|
|
|
—
|
|
|
|
(12,561
|
)
|
Accumulated
deficit
|
|
|
(1,364,231
|
)
|
|
|
(985,968
|
)
|
T
o t a l Stockholders’ Equity (Deficiency)
|
|
|
(728,745
|
)
|
|
|
(375,977
|
)
|
T
o t a l liabilities and Stockholders’ Equity (Deficiency)
|
|
$
|
88,280
|
|
|
$
|
245,076
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
DARKSTAR
VENTURES, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
July 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Project development and general and administrative expenses
|
|
$
|
222,756
|
|
|
$
|
310,955
|
|
Operating loss
|
|
|
(222,756
|
)
|
|
|
(310,955
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(155,507
|
)
|
|
|
(58,717
|
)
|
Net loss
|
|
$
|
(378,263
|
)
|
|
$
|
(369,672
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss - Foreign currency gain (loss )
|
|
|
12,934
|
|
|
|
(17,171
|
)
|
Comprehensive loss
|
|
$
|
(365,329
|
)
|
|
$
|
(386,843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding during the period – basic and diluted
|
|
|
647,345,000
|
|
|
|
647,345,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
DARKSTAR
VENTURES, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
|
|
Common Stock, $0.0001 Par Value
|
|
Receivables on account of
|
|
Foreign currency translation
|
|
Additional paid-in
|
|
Accumulated
|
|
Total Stockholders'
|
|
|
Shares
|
|
Amount
|
|
shares issued
|
|
adjustments
|
|
Capital
|
|
deficit
|
|
Equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT JULY 31, 2016
|
|
|
647,345,000
|
|
|
$
|
64,734
|
|
|
|
(150,000
|
)
|
|
$
|
(862
|
)
|
|
$
|
511,116
|
|
|
$
|
(599,125
|
)
|
|
$
|
(174,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received on account of shares issued
|
|
|
|
|
|
|
|
|
|
|
137,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,439
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,171
|
)
|
|
|
|
|
|
|
|
|
|
|
(17,171
|
)
|
Value of obligation to issue shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,735
|
|
|
|
|
|
|
|
64,735
|
|
Net loss for the year ended July 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(386,843
|
)
|
|
|
(386,843
|
)
|
BALANCE AT JULY 31, 2017
|
|
|
647,345,000
|
|
|
$
|
64,734
|
|
|
|
(12,561
|
)
|
|
$
|
(18,033
|
)
|
|
$
|
575,851
|
|
|
$
|
(985,968
|
)
|
|
$
|
(375,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debtors on account of shares issued
|
|
|
|
|
|
|
|
|
|
|
12,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,561
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,934
|
|
|
|
|
|
|
|
|
|
|
|
12,934
|
|
Net loss for the year ended July 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(378,263
|
)
|
|
|
(378,263
|
)
|
BALANCE AT JULY 31, 2018
|
|
|
647,345,000
|
|
|
$
|
64,734
|
|
|
|
—
|
|
|
$
|
(5,099
|
)
|
|
$
|
575,851
|
|
|
|
(1,364,231
|
)$
|
|
$
|
(728,745
|
)
|
The
accompanying notes are an integral part of the consolidated financial statements.
DARKSTAR
VENTURES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Years ended
|
|
|
July 31,
|
|
|
2018
|
|
2017
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(378,263
|
)
|
|
$
|
(386,843
|
)
|
Adjustments required to reconcile net loss
|
|
|
|
|
|
|
|
|
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,654
|
|
|
|
632
|
|
Expenses in respect of loans
|
|
|
152,757
|
|
|
|
—
|
|
Accrued interest on loans to related party
|
|
|
—
|
|
|
|
(9,261
|
)
|
Changes in related party balances
|
|
|
131,979
|
|
|
|
100,409
|
|
Increase (decrease) in prepaid expenses and other current assets
|
|
|
2,348
|
|
|
|
(31,959
|
)
|
Increase in trade payables and other account payables
|
|
|
15,395
|
|
|
|
20,937
|
|
Net cash used in operating activities
|
|
|
(74,130
|
)
|
|
|
(306,085
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Increase in land development costs
|
|
|
(36,002
|
)
|
|
|
(11,243
|
)
|
Purchase of property and equipment
|
|
|
(1,343
|
)
|
|
|
(5,312
|
)
|
|
|
|
(37,345
|
)
|
|
|
(16,555
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from long term loan
|
|
|
—
|
|
|
|
309,351
|
|
Proceeds from receivables on account of shares
|
|
|
12,561
|
|
|
|
137,439
|
|
Proceeds from loan Payable
|
|
|
51,775
|
|
|
|
—
|
|
Loans granted to related parties
|
|
|
—
|
|
|
|
(126,383
|
)
|
Net cash provided by financing activities
|
|
|
64,336
|
|
|
|
320,407
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(47,139
|
)
|
|
|
(2,233
|
)
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES
|
|
|
12,934
|
|
|
|
(17,171
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
34,205
|
|
|
|
53,609
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
—
|
|
|
$
|
34,205
|
|
NON-CASH TRANSACTION:
|
|
|
|
|
|
|
|
|
Value of obligation to issue shares
|
|
|
—
|
|
|
|
64,735
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of the consolidated financial statement
NOTE
1 - GENERAL
Darkstar
Ventures, Inc. (“the Company” or “we”) was incorporated on May 8, 2007 under the laws of the State of
Nevada.
The
Company established a wholly-owned subsidiary in Israel, Bengio Urban Renewals Ltd ("Bengio")., to focus its limited
resources in the area of real estate development, particularly focusing on the urban renewal market in Israel.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding
to operationalize the Company’s current business plan.
NOTE
2 - GOING CONCERN
The
Company has not commenced planned principal operations. The Company had an accumulated deficit of $1,364,231 as of July 31, 2018.
In addition, the Company continues to have negative cash flows from operations. These factors raise substantial doubt about the
Company’s ability to continue as a going concern.
There
can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that
funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional
capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.
Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that
they will not have a significant dilutive effect on the Company’s existing stockholders.
The
accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
The
functional currency of the Company is the U.S. dollar (“$” or “dollar"), which is the currency of the primary
economic environment in which the operations of the Company are conducted. The functional currency of its foreign subsidiary is
the New Israeli Shekel ("NIS").
The
financial statements of the subsidiary were translated into dollars in accordance with the relevant standards of the Financial
Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from NIS to $ using year-end
exchange rates and income and expense items were translated at average exchange rates during the year.
Gains
or losses resulting from translation adjustments are reflected in stockholders' deficit, under “accumulated other comprehensive
income (loss)”.
Balances
denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date.
|
|
Year ended July 31,
|
|
|
2018
|
|
2017
|
Official exchange rate of NIS 1 to U.S. dollar
|
|
|
0.273
|
|
|
|
0.281
|
|
|
b.
|
Principles
of consolidation
|
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company balances
and transactions have been eliminated upon consolidation.
Cash
equivalents are short-term highly liquid investments which include short term bank deposit (up to three months from date of deposit),
that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less
as of the date acquired.
The
company’s cash and cash equivalents are maintained with major banking institutions in Israel.
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 expenses during the reporting period.
Actual results may differ from those estimates
Share-based
payments to employees are measured at the fair value of the options issued and amortized over the vesting periods. Share-based
payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments
issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the
goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest.
The offset to the recorded cost is to share-based payments reserve. Consideration received on the exercise of stock options is
recorded as capital stock and the related share-based payments reserve is transferred to share capital.
Net
loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number
of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common
shares and of common shares equivalents outstanding when dilutive. Common share equivalents include: (i) outstanding stock options
under the Company’s share incentive plan and warrants which are included under the treasury share method when dilutive,
and (ii) common shares to be issued under the assumed conversion of the Company’s outstanding convertible notes, which are
included under the if-converted method when dilutive. The computation of diluted net loss per share for the years ended July 31,
2016, and 2015, does not include common share equivalents, since such inclusion would be anti-dilutive.
Deferred
taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between
the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed
using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax
assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.
|
h.
|
Property,
plant and equipment
|
Property,
plant and equipment are stated at cost, less accumulated depreciation. Assets are depreciated using the straight-line method over
their estimated useful lives. Computers, software and electronic equipment are depreciated over three years. Tools and equipment
are depreciated over ten years.
|
i.
|
Land
development costs
|
Land
development costs, including estimated value of land, under TAMA 38 purchase agreements are capitalized when definite agreement
is signed with the tenants. Tax arising from such agreements is recorded as Obligation under construction agreements when the
Company can estimate the tax obligation.
|
j.
|
Fair
value measurements
|
The
Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the
price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded
at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based
risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent
in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which
prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the
lowest level of input that is available and significant to the fair value measurement:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level
3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
In
accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain
other items at fair value. The Company has not elected the fair value option for any eligible financial instruments.
As
of July 31, 2016 and 2015, the carrying value of accounts payable and loans that are required to be measured at fair value, approximated
fair value due to the short-term nature and maturity of these instruments
|
k.
|
Adoption
of New Accounting Standards
|
ASC
Update 2014-15
“Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern
"
In
August 2014, the FASB issued ASC Update 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"). ASU
2014-15 provide guidance on management’s responsibility in evaluating whether there are conditions or events, considered
in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year
after the date that the financial statements are issued (or within one year after the date that the financial statements are available
to be issued when applicable). ASU 2014-15 also provide guidance related to the required disclosures as a result of management
evaluation.
The
amendments in ASU 2014-15 became effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Management applied the guidance of ASU 2014-15 to these financial statements and has determined that there
is a substantial doubt about the Company’s ability to continue as a going concern. Certain disclosures were updated to conform
to the disclosures required under ASU 2014-15.
|
l.
|
Newly
issued accounting pronouncements
|
ASC
Update 2014-09
“Revenue from Contracts with Customers (Topic 606)” and Related Updates
In
May of 2014, the FASB issued ASC Update 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASC Update 2014-09
provides guidance for the recognition, measurement and disclosure of revenue related to the transfer of promised goods or services
to customers. This update was effective for fiscal years beginning after December 15, 2016, for which early adoption was prohibited.
However,
in August of 2015, the FASB issued ASC Update 2014-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date,” deferring the effective date of ASC Update 2014-09 to fiscal years beginning after December 15, 2017 (the
first quarter of fiscal year 2018 for the Company), and permitting early adoption of this update, but only for annual reporting
periods beginning after December 15, 2016, and interim reporting periods within that reporting period.
During
2016, the FASB issued several Accounting Standard Updates that focuses on certain implementation issues of the new revenue recognition
guidance including Narrow-Scope Improvements and Practical Expedients, Principal versus Agent Considerations and Identifying Performance
Obligations and Licensing.
An
entity should apply the amendments in this ASU using one of the following two methods: 1. retrospectively to each prior reporting
period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of
initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method,
it also should provide certain additional disclosures.
The
Company intends to adopt ASU 2014-09 as of January 1, 2018. The Company is in the process of evaluating the impact of ASU 2014-09
on its potential revenue streams, if any, and on its financial reporting and disclosures. Management is expecting to complete
the evaluation of the impact of the accounting and disclosure changes on the business processes, controls and systems throughout
2017. Since the company did not report any revenues since its inception, management believes that the adoption of ASU 2014-09
will not have significant impact on its financial statements.
Newly
issued accounting pronouncements (continue)
ASC
Update 2016 - 02 “
Leases (Topic 842): Section A – Leases: Amendments to the FASB Accounting Standards Codification;
Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification; Section C
– Background Information and Basis for Conclusions
”
In
February of 2016, the FASB issued ASC Update 2016 - 02, “Leases (Topic 842): Section A – Leases: Amendments to the
FASB Accounting Standards Codification; Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting
Standards Codification; Section C – Background Information and Basis for Conclusions.” ASC Update 2016-02 amends guidance
related to the recognition, measurement, presentation and disclosure of leases for lessors and lessees. This update is effective
for fiscal years beginning after December 15, 2018, including the interim periods within those years, with early adoption permitted.
The Company is in the process of evaluating the effect that ASU 2016-02 will have on the results of operations and financial statements.
ASC
Update 2017-13 “
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
”
In
June 2016, the FASB issued ASC Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments.” ASC Update 2016-13 revised the criteria for the measurement, recognition, and reporting
of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning
after December 15, 2019, including the interim periods within those years, with early adoption permitted for fiscal years beginning
after December 15, 2018, including interim periods within those years. Adoption is not expected to have a material effect on its
results of operations, financial position, and cash flows.
ASC
Update (ASU) No. 2016-09 "
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting
"
In
March 2016, the FASB has issued ASC Update (ASU) No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting". The amendments are intended to improve the accounting for employee share-based
payments and affect all organizations that issue share-based payment awards to their employees.
Several
aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b)
classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments
also simplify two areas specific to private companies.
For
public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. Early adoption is permitted in any interim or annual period periods (i.e., in the first quarter of 2017
for calendar year-end companies).
The
Company is in the process of assessing the impact, if any, of ASU 09-2016 on its financial statements.
NOTE
4 – LAND DEVELOPMENT COSTS
The
Company signed two definite agreements with tenants one under "Tama 38" Israeli national zoning plan ("Tama 38")
and another under “Pinui Binui” project.
According
to the Tama 38 signed project the Company assumes the responsibility of renovating 32 apartments in exchange for covering all
costs of renovations, securing building permits and paying requisite taxes. The Company was granted the right to build an additional
28 apartments connected to the existing building that would be sold upon completion of the project.
According
to the “Pinui Binui” project the residents of 12 apartments are temporarily evacuated so that the buildings may be
demolished and rebuilt. Under the agreement the Company will pay all costs for demolition, construction, relocating apartment
owners and renting their temporary homes during construction. In exchange, the Comapny intends to add 24 new apartments
to the building that would be sold upon completion of the project.
Both
agreements are conditional upon obtaining the final approval from the cities' planning institutions and other conditions set forth
in the agreements. As the Company could not estimate the land purchase taxes arising from the agreements such costs were not accrued
in this financial statements. Land purchase taxes are not due until final approvals are obtained.
NOTE
6 – PREFERRED STOCK
The
Company’s Board of Directors may issue authorized but unissued shares of preferred stock in series and at the time of issuance,
determine the rights, preferences and limitation of each series. The holders of preferred stock may be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of
the common stock. Furthermore, the board of directors could issue preferred stock with voting and other rights that could adversely
affect the voting power of the holders of the common stock.
NOTE
7 – COMMON SHARES:
On
February 16, 2016, the Board of Directors of the Company and the holder of a majority of the issued and outstanding shares of
common stock of the Company (the "Majority Consenting Stockholder"), together, executed a joint written consent to authorize
and approve a Certificate of Amendment to the Company's Articles of Incorporation to increase the authorized capital stock of
the Company from 505,000,000 shares (the "Capital Stock"), consisting of 500,000,000 shares of common stock, par value
$0.0001 (the "Common Stock") and 5,000,000 shares of preferred stock, par value $0.0001 (the "Preferred Stock"),
to an authorized capital stock of the Corporation of 2,005,000,000 shares consisting of 2,000,000,000 shares of Common Stock and
five million 5,000,000 shares of Preferred Stock. It was also decided that the Board of Directors shall have the authority to
establish one or more series of Preferred Stock and fix relative rights and preferences of any series of Preferred Stock, without
any further action or approval of our stockholders.
On
April 14, 2016 the Board of Directors of the Company approved the issuance of 270,000,000 restricted shares of common stock of
the Company to Avraham Bengio, the Company's shareholder, Sole Director, CEO and CFO in consideration for the conversion of $270,000
loan granted to the Company. In addition, the Board of Directors of the Company has issued 120,000,000 restricted shares of the
Company to Avraham Bengio as compensation for services in the amount of $120,000.
In
addition, the Board of Directors of the Company approved the grant of 200,000 restricted shares of the Company to a service provider
as compensation for consulting services in the amount of $200. The shares were valued at $0.001 per share based on the sale of
shares to third parties on the same date.
On
April 14, 2016, the Board of Directors of the Company has approved the issuance of 150,000,000 restricted shares under a subscription
agreement with investors for total consideration of $150,000. During the period ended July 31, 2017, the Company received $137,439
of such subscription amounts.
On
August 22, 2017 the Company received payment of $12,561 for shares issued from receivables on account of shares issued.
NOTE
8 – LONG TERM LOAN:
On
February 28, 2016, Bengio and TCSM INC signed a loan agreement according to which TCSM would grant the Company a loan of up to
$256,016 (NIS 1,000,000). By July 31, 2017, the Company received loan installments of NIS 925,000. The loan bears interest at
an annual rate of 25%. The principal and interest will be repaid at March 1, 2019.
On
February 28, 2016 TCSM INC assigned its rights in the above loan agreement to a third party. The loan is secured by Avraham Bengio,
the Company's majority holder of the issued and outstanding shares of common stock and its Sole Director, CEO and CFO in an amount
of up to $172,826 (NIS 650,000).
On
March 8, 2017 Bengio entered into a loan agreement with a third party (the "Lender") according to which the lender will
lend the company up to $207,240 (NIS750,000). The loan bears annual nominal interest of 25%. The loan and accrued interest matures
on March 15, 2020. In addition, the Company undertook to issue the Lender 1% of the outstanding common shares of the Company (6,473,450
common shares) and to finance the cost of its par value ($6,473). As of the balance sheet date such shares have not been issued
yet. The value of the obligation to issues shares was valued at $64,735 and was recorded as additional paid in capital and was
offset against the loan balance.
NOTE
9 – INCOME TAXES:
At
July 31, 2018 the Company had available net-operating loss carryforwards for Federal tax purposes of approximately $395,000, which
may be applied against future taxable income, if any, through 2038. Certain significant changes in ownership of the Company may
restrict the future utilization of these tax loss carryforwards.
At
July 31, 2018 the Company had a deferred tax asset of approximately $134,000 representing the benefit of its net operating loss
carryforwards. The Company has not recognized the tax benefit because realization of the tax benefit is uncertain and thus a valuation
allowance has been fully provided against the deferred tax asset. The difference between the Federal Statutory Rate of 34% and
the Company’s effective tax rate of 0% is due to an increase in the valuation allowance of approximately $14,000 and $10,000
for the years ended July 31, 2018 and 2017, respectively.
The
Company’s subsidiary has estimated total available carryforward operating tax losses for Israeli income tax purposes of
approximately $601,000 as of July 31, 2018, which may be carryforward to offset against future income for an indefinite period
of time.
The
Company has no uncertain tax positions that require the Company to record a liability.
The
Company had no accrued penalties and interest related to taxes as of July 31, 2018.
NOTE
10 – RELATED PARTY TRANSACTIONS:
Details
of transactions between the Company and related parties are disclosed below:
The
following entities, as of July 31, 2018, have been identified as related parties:
Mr.
Avraham Bengio
|
-
Director and greater than 10% stockholder
|
Yashva
Yasamut Mekarkein Ltd
|
-
Joint control company
|
Yashva
Mekor Chaim Investment Ltd
|
-
-Joint control company
|
|
Bengio
Urban Renewals Management Ltd
|
-
Joint control company
|
|
|
July 31,
|
|
July 31,
|
|
|
2018
|
|
2017
|
|
|
$
|
|
$
|
The following transactions were carried out with related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheets:
|
|
|
|
|
|
|
|
|
Loan to joint control companies
|
|
|
57,526
|
|
|
|
56,156
|
|
Loan (from) to related party - director
|
|
|
(45,255
|
)
|
|
|
118,087
|
|
As
of July 31, 2017 the balance of the related party includes loans to an officer of the. The loan is due twenty four months from
the date of the loan and bears an interest of 26% per annum. As of July 31, 2018 the loan was paid in full.
From
time to time, the director and stockholder of the Company provides advances to the Company for its working capital purposes. These
advances bear no interest and are due on demand.
From
time to time, the Company provides advances to joint control Companies for as advances for future services. These advances bear
no interest and are due on demand.
Income Statement:
|
|
|
|
|
Management services
|
|
|
165,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
On
November 1, 2017, Bengio and Bengio Urban Renewals Management Ltd ("Bengio Management"), a company controlled by the
Company's majority shareholder, signed a Management Service Agreement according to which the shareholder would provide management
services to Bengio the includes among other, locating potential projects, signing tenants and construction management. In consideration
for the services above the Company shall pay a monthly fee of $15,000 and $10,000 for each project signed and 1.5% of the projects
costs (as approved by the escorting bank).