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[February 03, 2014]
MJP INTERNATIONAL LTD. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references "common shares" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our" and "our company", mean MJP International Ltd. and our wholly owned subsidiaries, MJP Lightings Solutions Ltd. a British Virgin Islands corporation and MJP Holdings Ltd., an Alberta (Canada) corporation.
General Overview Our company was incorporated in the State of Nevada on October 24, 2012. We are a development stage company; having entered into the development stage on October 24, 2012. Founded in Calgary, Canada, we aim to capitalize on new opportunities found in the North American market for LED lighting. With China as the manufacturing backbone of future LED products, we have set up office in Guangzhou, China in search of high quality products offered by reputable manufacturers to be introduced to Canada, the United States, and abroad. Our President and Chief Executive Officer, Chris Tong Tang spends more than 50% of his time in the Southern China region, including Guangzhou and Hong Kong. While there, he operates from our Guangzhou office. In addition to seeing suppliers and sourcing and inspecting products at factories, he is also actively seeking to develop a market for our products in that region.
Our executive offices are located at Suite 2806, 505 - 6th Street SW, Calgary, Alberta, Canada T2P 1X5. Our telephone number is (403) 237 - 8330.
Current Business On December 17, 2012, we entered into a share exchange agreement with MJP Lighting Solutions Ltd. and the shareholders of MJP Lighting Solutions pursuant to which we acquired MJP Lighting Solutions and MJP Holdings Ltd., as our wholly owned subsidiaries. As a result of the acquisition, we issued 12,000,000 shares of common stock in exchange for 100 percent of the outstanding common shares of MJP Lighting Solutions and MJP Holdings.
MJP Lighting Solutions, a British Virgin Islands company, with its main office located in Hong Kong, was incorporated in October 31, 2012. MJP Lighting Solutions operated through its then wholly owned subsidiary, MJP Holdings, of Alberta, Canada. MJP Holdings was incorporated on July 19, 2010 under the laws of the province of Alberta, Canada. MJP Holdings specializes in the sale and distribution of LED lighting and technology solutions.
11 -------------------------------------------------------------------------------- On January 1, 2012 we received a letter of authorization from Gysun Opto-Electronic Co. Ltd. pursuant to which we were designated as an authorized dealer in Canada for all LED products produced by Gysun Opto-Electronic. The letter of authorization entitles us to market and distribute products of Gysun Opto-Electronic in Canada. All purchase orders made by us are negotiated and determined on a case by case basis. The letter of authorization has no fixed term and is valid until revoked.
Products and Services Light-Emitting Diodes (LEDs) Light-emitting diode, commonly known as LED, is a solid-state semiconductor technology that is rapidly gaining momentum in the lighting industry. Early market for LEDs was driven by specific niche markets, mainly backlighting, that optimized on the products' coloured light and small package size. From backlighting, the product slowly made inroads into the automotive industry.
Today, the focus of the industry has largely been shifted towards general lighting. LED applications are evolving quickly into viable sources for general illumination as they promise many benefits over conventional lighting. Within the past few years, LED technology has improved significantly with respect to brightness, energy efficiency, and colour quality and consistency. Branded as a disruptive technology, LED has played a tremendous role in revolutionizing the lighting industry. LEDs have the following attributes: º Efficiency. LEDs have exceptionally high theoretical energy efficiency.
They can produce much higher lumen per watt than conventional technologies, thus providing energy savings up to 50 to 70 percent.
º Lifespan. The materials used in making LEDs are inherently stable. High quality LEDs may last for 50,000 to 100,000 hours or more. Unlike conventional lighting technologies, lifespan of an LED is unaffected by rapid cycling, its lifespan actually increases when the average current flowing through it is reduced.
º Controllability. LEDs have superior control over light colour, intensity, and direction. Newer white LEDs bring the potential to illuminate public spaces, homes and offices with light that mimics daylight. The controllability of LED- generated light enables intelligent light systems, making them better suited to smart controls than any previous light technology.
º Durability. LEDs are extremely durable; and are resistant to vibration, mechanical stress, and extreme weather conditions whereby conventional lighting solutions are at a disadvantage.
º Environmentally Friendly. LEDs do not contain toxic materials such as mercury, a necessary component of fluorescent bulbs.
Today's LEDs boast many benefits over conventional technologies. In addition to the many objective advantages mentioned above, they also provide social benefits that play an important role in enhancing human emotions, motivation, abilities, health, and perception of public safety.
MJP International's LED Products Through our Canadian subsidiary, MJP Holdings Ltd., we currently sell LED products in Canada primarily to retail clients (end users) or through agents. To date, the majority of our products sold in Canada have been sold through two independent agents, ECCOS Lifestyle Ltd. and PSL Enterprises Ltd., both of Calgary, Alberta. In June, 2013, through our wholly owned British Virgin Island subsidiary, MJP Lighting Solutions Ltd., we made a sale to an end user in Hong Kong. Our company has established relationships with and has purchased most of our products from two suppliers in Southern China, Gysun Opto-Electronic Co.
Ltd. and Odin Optoelectronics Technology Co., Limited. To date, our sales have consisted primarily of LED tube lights, LED par (parabolic aluminized reflector) lamps for spot lights, and LED down lights. These products, which are certified for sale in North America with UL® (Underwriters Laboratories) or CSA® (Canadian Standards Association) certifications are described in more detail below. All of these products have numerous applications in both commercial and residential structures and offer a number of benefits over both incandescent and fluorescent lighting products.
12 -------------------------------------------------------------------------------- Par Series The LED Par Series bulb is a replacement bulb for traditional Par 30/38 lamps, where typically halogen bulbs are used. Diameter and length are identical to traditional lighting products; however, the mid section is wider to allow necessary thermal management. Normally this difference is accommodated by the standard fixtures. The LED bulb is available with either a spot or wide beam lens and can be used in recessed, track and pendant lighting. Traditionally, the Par light series has two product alternatives: halogen lamps and compact fluorescent lamps (CFLs). LED Par Series are superior in many ways over these two product alternatives. Both the halogen and CFL bulbs operate at higher wattages resulting in higher yearly power consumption and heat emissions.
Furthermore, halogen and CFL lighting products are also deficient in luminosity (light intensity) and longevity.
Down Light The LED Down Light series is a complete lighting fixture with bulb and installation housing. The model has three variations: recessed, narrow spot, and wide beam; allowing for a wide range of applications. The LED Down Light series' lack of heat output and spot capabilities make this product ideal for display lighting. However the fixtures can also be used in any commercial office space or residential dwelling.
The Down Light series bulb is superior in many ways over the halogen and CFL lighting products. However, a feature that truly sets the LED Down Light product apart from its alternatives is that the bulb is available in both a wide and narrow beam model; allowing the product a greater amount of versatility over alternative lighting products.
Tube Series The LED Tube series products are designed to replace fluorescent lamps and fit into existing light fixtures. The new LED lighting products are easy to install and require only some minor wiring adjustments, which includes removing the now obsolete ballasts. As well, the LED Tube series pins can be configured for horizontal or vertical lighting and are available in either clear or frosted lenses.
The LED Tube series contains many advantages over traditional fluorescent tube lighting. Overall product performance is far superior; they are capable of starting at much colder temperatures, and do not flicker or hum like traditional fluorescent tubes tend to do. Quality of light is also much better, and both wattage and yearly power consumption is much lower. LED Tube series products also do not require a ballast like traditional fluorescent tubes do, and last significantly longer resulting in a substantial decrease in installation and maintenance costs.
Results of Operations Operating Expenses Our operating expenses for the three and six month periods ended December 31, 2013 and 2012 and for the period from July 19, 2010 (inception) to December 31, 2013 are outlined in the table below: Cumulative From Three Three Six Six July 19, Months Months Months Months 2010 Ended Ended Ended Ended (Inception) to December 31, December 31, December 31, December 31, December 31, 2013 2012 2013 2012 2013 Revenues $ 1,024 $ 3,303 $ 3,773 $ 13,136 $ 90,373 Cost of $ Nil $ (3,044 ) $ (1,139 ) $ (12,137 ) $ (63,925 ) Goods Sold Operating $ (26,439 ) $ (5,636 ) $ (43,275 ) $ (8,961 ) $ (168,117 ) Expenses Income $ Nil $ Nil $ Nil $ Nil $ (1,335 ) Tax Expense Net Loss $ (25,415 ) $ (5,377 ) $ (40,641 ) $ (7,962 ) $ (143,004 ) 13 -------------------------------------------------------------------------------- Revenues We earned revenues of $1,024 for the three month period ended December 31, 2013 compared to $3,303 for the three month period ended December 31, 2012 for a decrease of approximately 69%. The decrease in sales for the three month period ended December 31, 2013 is primarily due to increases in competition as more and more sellers entering the market in fiscal 2013. As well, there was a large order during the year ended 2012. Our gross profit for three month period ended December 31, 2013 was $1,024 compared to $259 for the three month period ended December 31, 2012 for an increase of approximately 295% due to lower cost of goods sold.
We earned revenues of $3,773 for the six month period ended December 31, 2013 compared to $13,136 for the six month period ended December 31, 2012 for a decrease of approximately 71%. The decrease in sales for the six month period ended December 31, 2013 is primarily due to increases in competition as more and more sellers entering the market in fiscal 2013. As well, there was a large order during the year ended 2012. Our gross profit for six month period ended December 31, 2013 was $2,634 compared to $999 for the six month period ended December 31, 2012 for an increase of approximately 164% due to lower cost of goods sold.
Operating Expenses Our consolidated expenses for the three month periods ended December 31, 2013 and December 31, 2012: Three Months Three Months Six Months Six Months Ended Ended Ended Ended December 31, December 31, December 31, December 31, 2013 2012 2013 2012 General and $ 12,874 $ 1,822 $ 25,935 $ 2,026 administrative expenses Professional fees $ 10,633 $ 706 $ 11,425 $ 706 Salaries and wages $ 2,932 $ 3,108 $ 5,915 $ 6,229 Total Expenses $ 26,439 $ 5,636 $ 43,275 $ 8,961 Our general and administrative expenses include rent, telephone and internet services, banking changes and miscellaneous office supply costs. Our professional fees include legal and accounting fees. The increase in expenses for the three month period ended December 31, 2013 is primarily due to increases in general and administrative expenses and professional fees.
The increase in expenses for the six month period ended December 31, 2013 is primarily due to increases in general and administrative expenses and professional fees.
Earnings after Taxes The net loss for the three month period ended December 31, 2013 was $25,415 compared to a net loss of $5,377 during the three month period ended December 31, 2012. The loss for the three month period ended December 31, 2013 is primarily due to increases in general and administrative expenses and professional fees offset by lower revenues.
The net loss for the six month period ended December 31, 2013 was $40,641 compared to a net loss of $8,961 during the six month period ended December 31, 2012. The loss for the six month period ended December 31, 2013 is primarily due to increases in general and administrative expenses and professional fees offset by lower revenues.
14 -------------------------------------------------------------------------------- Liquidity and Capital Resources At At December 31, June 30 2013 2013 Current Assets $ 15,408 $ 66,046 Current Liabilities $ 46,977 $ 57,399 Working Capital (Deficit) $ (31,569 ) $ 8,647 As at December 31, 2013, we were obligated to related parties, Tong Tang, our president, chief executive officer and director and a shareholder, for $39,082 in funds advanced to us for working capital. The advances are unsecured and no interest rate or payback schedule has been established.
At December 31, 2013, our company had a cash balance and total assets of $7,137 and $15,408 compared with cash balance and total assets of $57,677 and $66,046 as at June 30, 2013. The decrease in cash and total assets were attributed primarily to increases in general and administrative expenses and professional fees.
As at December 31, 2013, our company had total liabilities of $46,977 compared with $57,399 as at June 30, 2013. The decrease was attributed to decrease in trade and other payables.
As at December 31, 2013, our company had a working deficit of $31,569 compared with a working capital of $8,647 as at June 30, 2013.
Six Months Six Months Ended Ended December 31, December 31, 2013 2012 Net Cash Provided by (Used in) Operating Activities $ (50,965 ) $ (8,636 ) Net Cash Provided by Financing Activities $ Nil $ 121,076 Net Cash Provided by (Used In) Investing Activities $ Nil $ Nil Net Increase (Decrease) In Cash During The Period $ (50,540 ) $ 110,531 Cash Flow from Operating Activities During the six months ended December 31, 2013, our company used $50,965 of cash for operating activities compared with $8,636 used during the six months ended December 31, 2012. The decrease in the use of cash for operating activities was primarily due to increases in trades and other payables and an increase in net loss.
Cash Flow from Financing Activities During the six months ended December 31, 2013, our company received $Nil of cash for financing activities compared with $121,076 received during the six months ended December 31, 2012. The decrease in the cash for financing activities was primarily due to lack of cash received from acquisition and issuance of our common stock.
Cash Flow from Investing Activities We have not engaged in any investing activities since inception.
15 -------------------------------------------------------------------------------- Going Concern We incurred a cumulative net loss of $143,004 during the period from inception, July 19, 2010, to December 31, 2013. We have commenced limited operations, raising substantial doubt about our ability to continue as a going concern. We will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance that we will be successful in accomplishing our objectives.
Our ability to continue as a going concern is dependent on additional sources of capital and the success of our plan. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.
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 our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Estimated Expenses Our expenses for the twelve month period beginning from January 1, 2014 are estimated to be approximately $85,000. With our working capital of $40,641 as at December 31, 2013, we will need to raise additional capital to cover our expenses for this twelve month period beginning from January 1, 2014. We plan to raise additional funding either from new share issuance or from loans from shareholders.
Estimated Expenses For the Twelve Month Period Beginning January 1, 2014 General, Administrative, and Corporate Expenses $ 65,000 Operating Expenses $ 20,000 Total $ 85,000 At present, our cash requirements for the next 12 months (beginning January 1, 2014) outweigh the funds available to maintain or develop our business. Of the $85,000 that we require for the next 12 months, we have approximately $7,137 in cash as of December 31, 2013 and a working capital deficit of $31,569. In order to improve our liquidity, we plan to pursue additional equity financing from private investors or possibly a registered public offering. We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.
We have not investigated the availability of commercial loans or other debt financing to supplement or meet our cash requirements. In the uncertain event that any such debt financing alternatives were available to us on acceptable terms, they would increase our liabilities and future cash commitments.
If we are able to raise the required funds to fully implement our business plan, we plan to implement the business actions in the order provided below. If we are not able to raise all required funds, we will prioritize our corporate activities as chronologically as follows: 16 -------------------------------------------------------------------------------- January 1, 2014 to December 31, 2014: º Design our website.
º Design marketing materials.
º Participate at trade shows.
º Market our services to our various contacts.
º Establish a partnership or strategic relationship with other distribution companies.
Future Financings We will continue to rely on equity sales of our common shares and funding from directors and shareholders in order to continue to fund our business operations.
Issuances of additional shares will result in dilution to existing stockholders.
There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Critical Accounting Policies This summary of significant accounting policies is presented to assist in understanding the interim consolidated financial statements. The interim consolidated financial statements and notes are the representations of our company's management, who is responsible for their integrity and objectivity.
The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The interim consolidated financial statements should be read in conjunction with the annual consolidated financial statement and footnotes thereto included in our company's filed Form 10-K for the year ended June 30, 2013. There were no material changes to our company's significant accounting policies or the estimates made pursuant to those policies during the most recent quarter.
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