The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As used in this "Management's Discussion and Analysis of Financial Condition and Results of Operation," except where the context otherwise requires, the term "we," "us," or "our," refers to the business of Buscar Company.
Our significant accounting policies are described in the notes to our accompanying financial statements.
Pursuant to the JOBS Act of 2012, as an emerging growth company, we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC.
We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the standard for the private company. This may make comparison of our financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible as possible different or revised standards may be used.
Although we are still evaluating the JOBS Act, it currently intends to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an "emerging growth company". We have elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company, we may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate us. As a result, investor confidence in us and the market price of our common stock may be adversely affected.
Financial statements prepared in accordance with U.S. GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management makes estimates relating to the fair value of financial instruments and the valuation allowance related to deferred income tax assets. Actual results could differ from those estimates.
We periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. We account for stock option and warrant grants issued and vesting to employees based on Financial Accounting Standards Board (FASB) ASC Topic 718, "Compensation - Stock Compensation", whereas the award is measured at its fair value at the date of grant and is amortized ratably over the service period. We account for stock option and warrant grants issued and vesting to non-employees in accordance with ASC Topic 505, "Equity", whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.
Operating expense increase to $539,116 from $157,402 for the periods ended June 30, 2016 and 2015, respectively. The increase in operating expenses is primarily due to the increase in management and consulting fees that resulted from stock issuances.
There is no assurance that we will ever be profitable. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
Liquidity and Capital Resources
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
Cash
|
|
$
|
1,874
|
|
|
$
|
-
|
|
|
$
|
1,874
|
|
|
|
-
|
|
Total Assets
|
|
$
|
56,382
|
|
|
$
|
-
|
|
|
$
|
56,382
|
|
|
|
-
|
|
Total Liabilities
|
|
$
|
248,424
|
|
|
$
|
222,926
|
|
|
$
|
25,498
|
|
|
|
11
|
%
|
Stockholders' Deficit
|
|
$
|
(192,042
|
)
|
|
$
|
(222,926
|
)
|
|
$
|
30,884
|
|
|
(14
|
)%
|
|
|
Three Months Ended June 30,
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|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Cash Flows used in Operating Activities
|
|
$
|
(17,366
|
)
|
|
$
|
-
|
|
|
$
|
(17,366
|
)
|
Cash Flows used in Investing Activities
|
|
|
(56,258
|
)
|
|
|
-
|
|
|
|
(56,258
|
)
|
Cash Flows from Financing Activities
|
|
|
75,498
|
|
|
|
-
|
|
|
|
75,498
|
|
Net Decrease in Cash During the Year
|
|
$
|
1,874
|
|
|
$
|
-
|
|
|
$
|
1,874
|
|
As of June 30, 2016 and 2015, we had cash of $1,874 and $0, respectively. Our cash position is insufficient and as such we plan to raise additional debt and equity financing to meet our obligations as they become due.
During the three months ended June 30, 2016, cash used in operating activities was $17,366. This was primarily the result of our net loss of $539,116 and a decrease in accrued liability of $5,000, offset by stock based compensation of $525,000 and depreciation of $1,750. During the three months ended June 30, 2015, cash used in operating activities was $0. This was primarily the result of our net loss of $157,402 and a decrease in due to related party of $5,254, offset by an increase in accrued liability of $30,656 and share based compensation of $132,000.
During the three months ended June 30, 2016, cash used in investing activities was $56,258. The Company purchased minority interest in two horses and a majority interest in a third horse, for a total of $56,258. During the three months ended June 30, 2015, cash used in investing activities was $0.
During the three months ended June 30, 2016, cash provided by financing activities amounted to $75,498. The Company received cash from issuance of common stock of $45,000 and loans from related party of $124,178 and repaid loans from related party of $93,680. During the three months ended June 30, 2015, cash provided by financing activities amounted to $0.
Off-Balance Sheet Arrangements
We did not have any off balance sheet arrangements as of June 30, 2016.
Timing needs for Funding
Immediate needs (current through December 2016)
$1,375,000: This capital is intended to be used to claim the 5-6 broodmares. The $1,375,000 is broken down as follows: $600,000 to acquire broodmares, $375,000 for stud fees, $141,000 for reserve for fees associated with the thoroughbreds acquired (i.e. training and vet) and $250,000 in working capital. The Company expects the monthly costs of the care of thoroughbreds to be approximately $5,000 per month. The Company's reserve of $141,000 for the thoroughbred's monthly costs.
The Company expects its on-going monthly expenses directly associated to the thoroughbreds in its breeding division to be approximately $10 to $17 per day for each broodmare.
The expenses directly associated to each thoroughbred acquired are $10-$17 per day depending on the trainer and the vet needs of each thoroughbred. The Company's current monthly burn rate is between $18,000 – 20,000 per month, which includes approximately $2,000 for training fees associated with the Company's thoroughbreds, $15,000 is general corporate expenses and approximately $2,000 associated with being a reporting company. The Company's monthly burn rate consists of the direct costs of the thoroughbreds the Company has acquired (such as training and vet fees) and the expected on-going general expenses of the Company (such as filing fees, audits and general administrative expenses).
The company has included the $141,000 reserve since the Company expects it will take approximately 12-24 months from the date a broodmare is acquired before revenue may be generated from sale of foal, depending if the foal is sold as a yearling or 2-year-old. The Company expects to begin generating revenue within 12 -24 months of the acquisition of the broodmare as such the on-going monthly burn rate should be covered by the revenue generated from the sale of foals. However, there is no guarantee that the Company's revenue would be able to cover the Company's monthly burn rate.
If the Company's revenue is not sufficient to cover the monthly burn rate, the Company would be required to raise additional funds to cover those expenses. The Company will not know the amount that would be required to be raised to cover the monthly burn rate until the Company is able to determine what its monthly revenue is.
If the Company's revenue is not sufficient to cover the monthly burn rate and the Company cannot raise additional funds to cover those expenses, then the Company would have to sell its broodmares. This may require the Company to sell its thoroughbreds for less than the Company purchased.
Short-term needs (January through December 2017)
$3,000,000: This capital is intended to be used to claim the 13-15 broodmares. The $3,000,000 is broken down as follows: $1,500,000 to acquire broodmares, $975,000 for stud fees, $275,000 for reserve for fees associated with the thoroughbreds acquires (i.e. training and vet) and $250,000 in working capital. The Company expects the monthly costs of the thoroughbreds to be approximately $5,000 per month. The Company's reserve of $275,000 for the monthly costs is intended for the expenses for the broodmares acquired.
The Company expects its on-going monthly expenses directly associated to the thoroughbreds in its breeding division to be approximately $10 to $17 per day for each broodmare.
The expenses directly associated to each thoroughbred acquired are $10-$17 per day depending on the trainer and the vet needs of each thoroughbred. The Company's current monthly burn rate is between $18,000 – 20,000 per month, which includes approximately $2,000 for training fees associated with the Company's thoroughbreds, $15,000 is general corporate expenses and approximately $2,000 associated with being a reporting company. The Company's monthly burn rate consists of the direct costs of the thoroughbreds the Company has acquired (such as training and vet fees) and the expected on-going general expenses of the Company (such as filing fees, audits and general administrative expenses).
The Company has included the $275,000 reserve since the Company expects it will take approximately 12-24 months from the date a broodmare is acquired before revenue may be generated from sale of foal, depending if the foal is sold as a yearling or 2-year-old. The Company expects to begin generating revenue within 12 -24 months of the acquisition of the broodmare as such the on-going monthly burn rate should be covered by the revenue generated from the sale of foals. However, there is no guarantee that the Company's revenue would be able to cover the Company's monthly burn rate.
If the Company's revenue is not sufficient to cover the monthly burn rate, the Company would be required to raise additional funds to cover those expenses. The Company will not know the amount that would be required to be raised to cover the monthly burn rate until the Company is able to determine what its monthly revenue is.
If the Company's revenue is not sufficient to cover the monthly burn rate and the Company cannot raise additional funds to cover those expenses, then the Company would have to sell its broodmares. This may require the Company to sell its thoroughbreds for less than the Company purchased.
Long-term needs (January through December 2018)
$5,500,000: This capital is intended to be used to claim the 30-40 broodmares. The $5,500,000 is broken down as follows: $2,700,000 to acquire broodmares, $2,000,000 for stud fees, $450,000 for reserve for fees associated with the thoroughbreds acquires (i.e. training and vet) and $250,000 in working capital. The Company expects the monthly costs of the thoroughbreds to be approximately $5,000 per month. The Company's reserve of $450,000 for the monthly costs is intended for the expenses for the broodmares acquired.
The Company expects its on-going monthly expenses directly associated to the thoroughbreds in its breeding division to be approximately $10 to $17 per day for each broodmare.
The expenses directly associated to each thoroughbred acquired are $10-$17 per day depending on the trainer and the vet needs of each thoroughbred. The Company's current monthly burn rate is between $18,000 – 20,000 per month, which includes approximately $2,000 for training fees associated with the Company's thoroughbreds, $15,000 is general corporate expenses and approximately $2,000 associated with being a reporting company. The Company's monthly burn rate consists of the direct costs of the thoroughbreds the Company has acquired (such as training and vet fees) and the expected on-going general expenses of the Company (such as filing fees, audits and general administrative expenses).
The Company has included the $450,000 reserve since the Company expects it will take approximately 12-24 months from the date a broodmare is acquired before revenue may be generated from sale of foal, depending if the foal is sold as a yearling or 2-year-old. The Company expects to begin generating revenue within 12 -24 months of the acquisition of the broodmare as such the on-going monthly burn rate should be covered by the revenue generated from the sale of foals. However, there is no guarantee that the Company's revenue would be able to cover the Company's monthly burn rate.
If the Company's revenue is not sufficient to cover the monthly burn rate, the Company would be required to raise additional funds to cover those expenses. The Company will not know the amount that would be required to be raised to cover the monthly burn rate until the Company is able to determine what its monthly revenue is.
If the Company's revenue is not sufficient to cover the monthly burn rate and the Company cannot raise additional funds to cover those expenses, then the Company would have to sell its broodmares. This may require the Company to sell its thoroughbreds for less than the Company purchased.
Dividend Policy
The Company has not paid dividends on its Common Stock in the past. The Company has decided to distribute at least 16% of its net purse winnings that the Company's thoroughbreds generate. However, our ability to pay dividends is subject to limitations imposed by Nevada law. Pursuant to Nevada Revised Statute 78.288, dividends may be paid to the extent that a corporation's assets exceed it liabilities and it is able to pay its debts as they become due in the usual course of business.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive exploration activities. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.
Accounting and Audit Plan
In the next twelve months, we anticipate spending approximately $20,000 - $30,000 to pay for our accounting and audit requirements.
Off-balance sheet arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a smaller reporting company, as defined by Rule 229.10(f)(1), is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of June 30, 2016, our disclosure controls and procedures were not effective.
Significant Deficiencies in Disclosure Controls And Procedures
The Company is a small organization with limited personnel. The Company was unable to implement an effective system of disclosure controls and procedures as of the evaluation date. Nevertheless, management believes that this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2016, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.