10-Q: Cluster Group Holdings Reports Increased Q1 Loss Amidst Developmental Stage and Search for Business Combination

Cluster Group Holdings Limited Co., a developmental stage company, reported a net loss of $8,763 for the first quarter of 2025, an increase from the prior year, as it continues to seek a merger or acquisition in the food industry.

Summary

• Reported a net loss of $8,763 for the three months ended March 31, 2025, compared to a net loss of $1,053 for the same period in 2024.
• Operating expenses increased to $8,763 in Q1 2025 from $1,053 in Q1 2024, primarily due to professional fees and general & administrative expenses related to registration filing and being a reporting company.
• The company had no revenues for the three months ended March 31, 2025, or 2024.
• As of March 31, 2025, the company had no cash and a working capital deficit of $98,143.
• Accumulated deficit reached $7,617,215 as of March 31, 2025.
• Outstanding amount due to related parties, specifically Mr. Sheng Yan Ping (CEO), increased to $91,086 as of March 31, 2025, from $72,623 as of December 31, 2024.
• A 1-for-100,000 reverse stock split of common stock became effective on January 28, 2025.
• Subsequent to the quarter, on June 13, 2025, Mr. Yan Ping Sheng agreed to convert $80,000 of outstanding payables into 40,000,000 shares of common stock at $0.002 per share, satisfying the amount payable to him.

Sentiment

Score: 2

Explanation: The company is a pre-revenue blank check entity with significant accumulated losses and no cash. It faces substantial doubt about its ability to continue as a going concern and has identified a material weakness in internal controls. While it has a stated business plan to acquire a food industry company and has received ongoing related-party funding, its current financial state is highly precarious.

Positives

• Management is actively seeking a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses, specifically targeting the food industry.
• The company's CEO, Mr. Sheng Yan Ping, continues to advance necessary working capital to cover expenses, demonstrating ongoing support.
• A significant portion of related party debt ($80,000) was converted into equity subsequent to the quarter, reducing liabilities and demonstrating a commitment from the CEO.

Negatives

• The company generated no revenues for the three months ended March 31, 2025, or 2024.
• Net loss increased significantly to $8,763 for Q1 2025 from $1,053 for Q1 2024.
• Operating expenses rose to $8,763 in Q1 2025 from $1,053 in Q1 2024.
• The company has no cash as of March 31, 2025, and a working capital deficit of $98,143.
• An accumulated deficit of $7,617,215 as of March 31, 2025, raises substantial doubt about the company's ability to continue as a going concern.
• The company relies entirely on debt and equity raised in private offerings and shareholder loans to finance operations.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to accumulated deficit and lack of revenues.
• The company's cash position may not be significant enough to support daily operations.
• No assurance that the business plan to engage in cluster consumption in the food industry or to find a merger/acquisition will be successfully implemented.
• The company expects to continue to incur moderate losses each quarter until a suitable transaction is effectuated.
• Reliance on debt and equity raised in private offerings and shareholder loans to finance operations, with no other sources of capital identified.
• Risk of having to limit research and development activities if a shortfall in operating capital occurs.
• Inherent risks in the establishment of a new business enterprise, including limited capital resources, possible delays in generating revenues and cash flows, and potential new regulations.
• Potential for increased US and China governmental regulations following a transaction.
• The utilization of net operating loss carryforwards may be subject to limitations based on past and future changes in ownership pursuant to Internal Revenue Code Section 382.
• Material weakness in internal control over financial reporting related to the segregation of duties due to limited staff.

Future Outlook

The company is a developmental stage and blank check company with no current significant operations. It intends to seek a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses, specifically targeting the food industry for "cluster consumption." The company expects to continue incurring moderate losses each quarter until such a transaction is effectuated and hopes to raise capital to fund acquisitions.

Management Comments

• Management intends to raise additional funds by public or private offering.
• The Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
• The Company's related party will continue to advance the necessary capital to pay the expenses of the Company and there are no formal financing agreements in place.
• Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of our organization at the current time.
• Management expects to continue to use reasonable care in following and seeking improvements to effective internal control processes that have been and continue to be in use at the Company.

Industry Context

Cluster Group Holdings Limited Co. operates as a blank check company, a common structure for entities seeking to acquire or merge with an operating business. Its stated focus on "cluster consumption in the food industry" aligns with a broad and dynamic sector, but without specific targets or operations, it remains speculative. The company's reliance on related party funding and lack of revenue is typical for a pre-operational blank check company, distinguishing it from established players in the food industry.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Not a party to any material legal proceeding, and none are contemplated or threatened.

Related Party Transactions

• Mr. Sheng Yan Ping, the company's CEO, Secretary, Treasurer, and Director, has advanced working capital to pay company expenses.
• Outstanding amount due to related parties was $91,086 as of March 31, 2025, up from $72,623 as of December 31, 2024.
• During the three months ended March 31, 2025, expenses paid by Mr. Sheng totaled $18,463.
• Subsequent to the quarter, on June 13, 2025, Mr. Yan Ping Sheng agreed to convert $80,000 of outstanding payables owed to him into 40,000,000 shares of the company's common stock at $0.002 per share, satisfying the amount payable.

Stakeholder Impact

• Shareholders: Existing shareholders face significant dilution risk from potential future capital raises and the recent debt-to-equity conversion. The company's going concern issues and lack of operations pose a high risk to investment value. The reverse stock split reduced the number of outstanding shares, but the underlying value remains dependent on a successful business combination.
• Creditors: The primary creditor is the related party (Mr. Sheng Yan Ping), whose debt has been partially converted to equity, indicating a willingness to support the company but also a reliance on his continued funding.
• Employees: The document implies a very limited staff, and the company is not operational, so direct impact on employees is minimal beyond management.
• Customers/Suppliers: Not applicable as the company has no operations or revenues.

Next Steps

• Seek a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.
• Implement the business plan to engage in cluster consumption in the food industry.
• Raise additional funds through public or private offerings to fund acquisitions.
• Management will continue to evaluate and seek improvements to internal control processes, despite current limitations.

Key Dates

Recommendation

Keywords

Developmental Stage Company, Blank Check Company, Merger and Acquisition, Food Industry, SEC 10-Q, Quarterly Report, Financial Deficit, Going Concern, Related Party Transactions, Reverse Stock Split, Corporate Governance, Internal Control Weakness, Capital Raise