Item 1. Business.
Overview
Inspired Builders, Inc., a Nevada Corporation, was previously located in Boston, Massachusetts. On January 13, 2012, pursuant to the change of control transaction, we relocated to Santa Monica, California. Until the change of control transaction, we focused on repairing and providing home improvements for the homeowners. Until August 15, 2017 the Company was focused on acquiring, investing in, developing and managing real estate properties and related investments. On August 15, 2017, pursuant to another change in control transaction, we relocated to Miami, Florida and ceased all operations as a real estate company.
Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We are a shell company which is moving forward with the business of identifying and entering into a business combination with a privately held business or company, domiciled and operating in an emerging market that is seeking the advantages of being a publicly held corporation whose stock is traded on the OTC market place. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
In the next 12 months if we are unable to satisfy our cash requirements, our major shareholder has indicated that they are willing to loan additional funds to the Company to cover any shortfalls, although there is no written agreement or guarantee.
We plan to raise funds through equity financing in the next 12 months. If we successfully raise the funds, it will be used for our operations and to invest in potential joint venture or acquisition.
Employees
As of November 1, 2019, other than our Chief Executive Officer, we have no other employees.
Item 1A.
Item 1A. Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Properties.
Our principal executive office is now located at 401 Ryland St, Suite 200-A, Reno, NV 89502, and our telephone number is (917) 575-8927. We do not have a lease agreement for this property, and do not pay rent.
Item 3.
Item 3. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company, our common stock, or of our company’s officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock commenced quotation on the OTC Markets under the trading symbol “ISRB” on April 8, 2011. The OTC Markets is generally considered to be a less active and efficient market than the NASDAQ Global Market, the NASDAQ Capital Market or any national exchange and will not provide investors with the liquidity that the NASDAQ Global Market, the NASDAQ Capital Market or a national exchange would offer. Since being listed on the OTC Market in April 2011, our common stock has only had limited trading volume. We currently trade on the OTC Pink. At such time as the Company is current in its SEC filing the Company will apply to list on OTC Pink Current or OTCQB. The following chart is a summary of the quarterly trading history over the 12 months ended September 30, 2019:
Recent Sales of Unregistered Securities
None.
Holders
As of November 1, 2019, we had approximately 19 record holders.
Dividends
No dividends were declared on our common stock in the year ended September 30, 2019, no cash dividends have been declared since such time and it is anticipated that cash dividends will not be declared on our common stock in the foreseeable future. Our dividend policy is subject to the discretion of our board of directors and depends upon a number of factors, including operating results, financial condition and general business conditions. Holders of common stock are entitled to receive dividends as, if and when declared by our board of directors out of funds legally available therefor. We may pay cash dividends if net income available to stockholders fully funds the proposed dividends, and the expected rate of earnings retention is consistent with capital needs, asset quality and overall financial condition.
Securities Authorized for Issuance under Equity Compensation Plan
None.
Item 6.
Item 6. Selected Financial Data.
Smaller reporting companies are not required to provide the information required by this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Plan of Operations
Inspired Builders, Inc., a Nevada Corporation, was previously located in Boston, Massachusetts. On January 13, 2012, pursuant to the change of control transaction, we relocated to Santa Monica, California. Until the change of control transaction, we focused on repairing and providing home improvements for the homeowners. Until August 15, 2017 the Company was focused on acquiring, investing in, developing and managing real estate properties and related investments. On August 15, 2017, following another change in control transaction, we relocated to Miami, Florida and ceased all operations as a real estate company. On February 22, 2018, following the most recent change in control transaction, we relocated to Palo Alto, CA. On February 28, 2019, we located to Reno, NV.
Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We are a shell company which is moving forward with the business of identifying and entering into a business combination with a privately held business or company, domiciled and operating in an emerging market that is seeking the advantages of being a publicly held corporation whose stock is traded on the OTC Markets. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
In the next 12 months if we are unable to satisfy our cash requirements, our sole officer and director has indicated that he is willing to loan additional funds to the Company to cover any shortfalls, although there is no written agreement or guarantee of such actions.
Recent Development
Change of Control
On February 15, 2018, our company, the previous majority shareholder of our Company (JLL Capital Management, LLC) and our current majority shareholder (Santa Alba LLC) entered into a stock purchase agreement, whereby the Santa Alba purchased from JLL Capital Management 95,643,929 shares of common stock of the Company (the “Shares”), representing approximately 94.58% of the issued and outstanding shares of the Company, for an aggregate purchase price of $300,000.
Reverse Stock Split
On May 15, 2018, our board of directors and majority of shareholders approved a reverse stock split whereby each one hundred (100) shares of our common stock was converted automatically into one (1) share of common stock. To avoid the issuance of fractional shares of common stock, we issued an additional share to all holders of a fractional share. The effective date of the reverse stock split was July 9, 2018. Upon completion of the reverse stock split, we have 1,011,254 issued and outstanding shares of common stock. The reverse split is reflected retrospectively in the accompanying financial statements.
Limited Operating History
We have generated no independent financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.
Results of Operations
Comparison of the years ended September 30, 2019 and 2018
For the fiscal year ended September 30, 2019, we had revenues of $0, as compared to $0 in the same period in 2018. Operating expenses for the year ended September 30, 2019 totaled $58,207 and interest expense totaled $158, resulting in a net loss of $58,365, as compared to operating expenses of $148,433 and interest expense of $126 and a net loss of $148,569 for the year ended September 30, 2018. Expenses for the year ended September 30, 2019 consisted of $0 in officer compensation, as compared to $90,000 for the same period in 2018.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. We have been funding our operations through the sale of our common stock.
As of September 30, 2019, we have no revenue to fund our operating expenses and we had a cash balance of $101. As set forth in our business section we are currently pursuing merger opportunities and we will rely on our sole officer and director to fund business operations until we find a suitable acquisition candidate.
As reflected in the accompanying financial statements, the Company has a net loss of $58,365, an accumulated deficit of $1,513,885 and working capital deficit of $26,025 as of September 30, 2019. In addition, the Company has not had revenues since May 2011 and the only prospect for positive cash flow is through the issuance of common stock or debt. If the Company does not begin to generate sufficient revenue or raise additional funds through a financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently no plans or agreements in place to provide such funding. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in Note 2 to our financial statements for the year ended September 30, 2019, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Our financial statements have been 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 judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Such estimates and assumptions impact, among others, the following; estimates of the probability and potential magnitude of contingent liabilities the valuation allowance for deferred tax assets due to continuing operating losses, valuation of shares issued in connection with the purchase of real estate, the valuation of the real estate and the evaluation of any impairment on the real estate. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.
Revenue recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. For all revenue sources discussed below, in accordance with ASC 606 “Revenue from Contracts with Customers”, we recognize revenue net of amounts retained by third party entities pursuant to revenue sharing agreements. Our specific revenue recognition policies are as follows:
We have no source of revenue as we are currently a shell company which is moving forward with the business of identifying and entering into a business combination with a privately held business or company. As such, we recognize no revenue.
Stock-based compensation
We account for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. There were no options outstanding as of September 30, 2019. We account for non-employee share-based awards in accordance with ASC Topic 718.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.
In July 2018, the FASB issued accounting standard update (“ASU”) No. 2017-02, “Leases (Topic 842)”, (“ASU 2017-02”) and ASU2018-10, “Leases (Topic 842)”, (“ASU 2018-10”), respectively. These ASU’s require that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2018. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. The Company currently leases no equipment or property, and therefore, the adoption on October 1, 2019 of the new standard will have no effect on the Company’s financial statements.
In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740)”, (“ASU 2018-05”). This guidance seeks to address situations where the accounting under ASC Topic 740 is incomplete for certain income tax effects of the Tax Cuts and Jobs Act upon issuance of an entity’s financial statements for the reporting period in which the Act was enacted. Based on current estimates, we do not expect these provisions of the ASUs to have a material impact on our financial statements. The adoption by the Company of the new standard will have no effect on the Company’s financial statements.
Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Smaller reporting companies are not required to provide the information required by this item.
Item 8.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Inspired Builders, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Inspired Builders, Inc. (the Company) as of September 30, 2019 and 2018, and the related statements of income, stockholders’ deficit, and cash flows for the two years then ended and the related notes (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 September 30, 2019 and 2018, and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 in the financial statements, the Company has a net loss of $58,365, an accumulated deficit of $1,513,885 and a working capital deficit of $26,025. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty
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.
Liggett & Webb, P.A.
Certified Public Accountants
We have served as the Company’s auditor since 2014.
Boynton Beach, Florida
November 12, 2019
INSPIRED BUILDERS, INC
BALANCE SHEETS
See accompanying notes to financial statements.
INSPIRED BUILDERS, INC.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
INSPIRED BUILDERS, INC
STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements.
INSPIRED BUILDERS, INC
STATEMENT OF STOCKHOLDER’S DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018
See accompanying notes to financial statements.
Inspired Builders, Inc.
NOTES TO FINANCIAL STATEMENTS
As of September 30, 2019 and 2018
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Inspired Builders, Inc. (the “Company”) was incorporated in the State of Nevada in February 2010. Until August 15, 2017 the Company was directing it’s focus on acquiring, investing in, developing and managing real estate properties and related investments. On August 15, 2017, pursuant to a change in control transaction, we relocated to Miami, Florida and ceased all operations as a real estate company. On February 15, 2018, Inspired Builders (the “Company”), the majority shareholders of the Company (the “Sellers”) and Santa Alba, LLC (the “Purchaser”) entered into a stock purchase agreement (the “Stock Purchase Agreement”), whereby the Purchaser purchased from the Sellers 956,440 shares of common stock, par value $0.001 per share, of the Company (the “Shares”), representing approximately 94.58% of the issued and outstanding shares of the Company, for an aggregate purchase price of $300,000 (the “Purchase Price”). On February 15, 2018, the closing of the transaction occurred (“Closing Date”). Also, in connection therewith, Scott Silverman, the Company’s sole officer and Director, resigned from his positions and named Kai Zhao as sole director and to the positions of CEO, CFO, Chief Accounting Officer and Secretary on February 22, 2018. In connection with the change in control, the Company moved to Palo Alto, CA and plans to implement its business plan by acquiring a business in the technology and intellectual property industry. There is no assurance at this point, however, that such plan will be executed. In February, 2019, the Company moved to Reno, NV.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following; estimates of the probability and potential magnitude of contingent liabilities the valuation allowance for deferred tax assets due to continuing operating losses, valuation of shares issued in connection with services.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
Cash and Cash Equivalents
Cash and cash equivalents are reported in the balance sheet at cost, which approximates fair value. For the purpose of the financial statements cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased. There were no cash equivalents at September 30, 2019 and September 30, 2018.
Earnings (Loss) per Share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. As of September 30, 2019 and September 30, 2018, the Company did not have any outstanding dilutive securities.
Reverse Stock Split
On May 15, 2018, the Company’s board of directors and majority of shareholders approved a reverse stock split whereby each one hundred (100) shares of Company’s Common Stock was converted automatically into one (1) share of Common Stock. To avoid the issuance of fractional shares of Common Stock, the Company issued an additional share to all holders of a fractional share. The effective date of the reverse stock split was July 9, 2018, and as a result, the Company has 1,011,254 issued and outstanding shares of common stock. The reverse split is reflected retrospectively in the accompanying financial statements.
Income Taxes
The Company adopted FASB ASC 740, Income Taxes, at its inception. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. No deferred tax assets or liabilities were recognized as of September 30, 2019 or September 30, 2018, respectively. The Company’s 2011-2018 federal and state tax returns are subject to audit by the IRS and state tax authorities.
Provision for income taxes is comprised of the following:
A reconciliation of provision for income taxes at the statutory rate to provision for income taxes at the Company’s effective tax rate is as follows:
As of September 30, 2019 and 2018, the Company’s net operating loss carryforward of approximately $813,300 and $755,000, respectively, which may be offset against future taxable income through 2039 for losses before September 30, 2018 and indefinitely for losses after September 30, 2019. No tax benefit has been reported in the financial statements because the potential tax benefits of the net operating loss carryforwards of approximately $206,100 are offset by a valuation allowance of the same amount. Prior to the enactment of the Tax Cut and Jobs Act (the “Tax Act”) on December 22, 2017, the Company recognized potential tax benefits of the net operating loss carryforwards of approximately $319,972, offset by a valuation allowance of the same amount. The reduction in the potential tax benefit from $319,972 to $176,514 is a result of the change of the federal income tax rate from 35% to 21% due to the provisions of the Tax Act and due to an increase in additional net operating losses during the period.
Inspired Builders, Inc.
NOTES TO FINANCIAL STATEMENTS
As of September 30, 2019, and 2018
Due to the change in ownership provisions of Section 382 of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. As a result of the change in majority ownership, net operating loss carryforwards may be limited as to future use.
Fair Value of Financial Investments
The fair value of cash and cash equivalents, accounts payable, accrued liabilities, and notes payable approximates the carrying amount of these financial instruments due to their short-term maturity.
Share based compensation
The Company follows FASB ASC No. 718 - Compensation - Stock Compensation for share based payments to employees.
On December 18, 2017, the Company issued 900,000 common shares with a fair value of $90,000 to JJL Capital Management, LLC, a company beneficially owned and controlled by our former CEO for services rendered to the Company by our CEO. The shares were valued at $0.10 based on the fair value of the shares.
Recent accounting pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.
In July 2018, the FASB issued accounting standard update (“ASU”) No. 2017-02, “Leases (Topic 842)”, (“ASU 2017-02”) and ASU 2018-10, “Leases (Topic 842)”, (“ASU 2018-10”), respectively. These ASU’s require that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2018. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. The Company currently leases no equipment or property, and therefore, the adoption on October 1, 2019 of the new standard will have no effect on the Company’s financial statements.
In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740)”, (“ASU 2018-05”). This guidance seeks to address situations where the accounting under ASC Topic 740 is incomplete for certain income tax effects of the Tax Cuts and Jobs Act upon issuance of an entity’s financial statements for the reporting period in which the Act was enacted. Based on current estimates, we do not expect these provisions of the ASUs to have a material impact on our financial statements. The adoption of the new standard by the Company will have no effect on the Company’s financial statements.
Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements.
NOTE 3. GOING CONCERN
As reflected in the accompanying financial statements, the Company has a net loss of $58,365, an accumulated deficit of $1,513,885 and working capital deficit of $26,025 as of September 30, 2019. In addition, the Company has not had revenues since May 2011 and the only prospect for positive cash flow is through the issuance of common stock or debt. If the Company does not begin to generate sufficient revenue or raise additional funds through a financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently no plans or agreements in place to provide such funding. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4. LOAN PAYABLE - RELATED PARTY
On October 17, 2017, our former CEO loaned the Company $14,300. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On October 20, 2017, our former CEO loaned the Company $825. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 7, 2018, our former CEO loaned the Company $3,000. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 25, 2018, our CEO loaned the Company $1,562. The loan is interest free and is payable on demand. On April 6, 2018 the loan was repaid.
On January 25, 2018, our former CEO loaned the Company $109. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On February 13, 2018, our former CEO loaned the Company $3,885. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On February 22, 2018, our CEO loaned the Company $342. The loan is interest free and is payable on demand. On April 6, 2018, the loan was repaid.
On February 28, 2018, our CEO loaned the Company $346. The loan is interest free and is payable on demand. On April 19, 2018, the loan was repaid.
On February 28, 2018, our CEO loaned the Company $865. The loan is interest free and is payable on demand. On April 6, 2018 the loan was repaid.
On April 1, 2018, our CEO loaned the Company $167. The loan is interest free and is payable on demand. On April 19, 2018, the loan was repaid.
On April 19, 2018, our CEO loaned the Company $167. The loan is interest free and is payable on demand. On April 19, 2018, the loan was repaid.
On January 29, 2019, our CEO loaned the company $250 to pay for operational expenses. The loan is interest free and payable on demand.
On February 12, 2019, our CEO loaned the company $2,512 to pay for operational expenses. The loan is interest free and payable on demand.
On February 25, 2019, our CEO loaned the company $500 to pay for operational expenses. The loan is interest free and payable on demand.
NOTE 5. NOTES PAYABLE - RELATED PARTIES
On January 13, 2012, the Company entered into a 12-month unsecured promissory note in the amount of $211,000. Interest accrues in arrears on the outstanding principal at the rate of ten percent (10.00%) per annum. Interest shall be payable on the last day of each quarter, commencing March 30, 2012, and continuing until the maturity date. Should the maker fail to pay the entire principal and accrued interest by the maturity date, the maker agrees that the interest rate shall increase to twelve percent (12.00%) per annum. On May 10, 2013, the Company and the related party agreed to extend the maturity of the loan for an additional year or until January 13, 2014. The loan maturity dates were further extended to January 13, 2016. On May 22, 2012, the Company borrowed an additional $32,714 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On September 17, 2012, the Company borrowed an additional $22,032 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On February 7, 2013, the Company borrowed an additional $28,773 from the related party, with the same terms, and on July 31, 2013, the Company borrowed an additional $30,000 from the related party, with the same terms. The loans maturity dates were further extended to February 7, 2016 and July 31, 2016, respectively. On December 20, 2013, the Company borrowed $2,500, on January 7, 2014, the Company borrowed $5,000, on February 6, 2014, the Company borrowed $5,520, the loans maturity dates were further extended to December 20, 2015 and January 7, 2016. On February 17, 2014, the Company borrowed $4,400 and on June 26, 2014, the Company borrowed $3,080, the loans maturity dates were further extended to February 6, 2016 and February 17, 2016, respectively. On November 15, 2016, the Company and the related party entered into a Release and Settlement Agreement whereby $342,519 in principal and $149,258 in accrued interest was forgiven. The transaction was accounted for as contributed capital. The total outstanding principal at September 30, 2019 and September 30, 2018 amounted to $2,500 and $2,500, respectively. Accrued interest at September 30, 2019 and September 30, 2018, amounted to $694 and $537, respectively.
NOTE 6. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
NOTE 7. SHAREHOLDERS’ EQUITY
On December 18, 2017, the Board of Directors of the Company approved Articles of Amendment to our Articles of Incorporation which increased the Company’s authorized common shares from 50,000,000 shares, par value $0.001 to 250,000,000 common shares, par value $0.001. There was no change in the par value of our common stock.
On May 15, 2018 the Board of Directors approved and affected a reverse stock split of our issued and outstanding common stock on a one hundred (100) old for one (1) new basis. No cash was paid or distributed as a result of the reverse stock split and no fractional shares were issued. All fractional shares, which would otherwise be required to be issued as a result of the stock split, were rounded up to the nearest whole share. There was no change in the par value of our common stock. The split is reflected retrospectively in the accompanying financial statements.
The Company has 5,000,000 shares of preferred shares, par value $0.001 authorized, none of which have been issued.
Forgiveness of Loans
On October 17, 2017, our former CEO loaned the Company $14,300. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On October 20, 2017, our former CEO loaned the Company $825. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 7, 2018, our former CEO entered into an unsecured note payable for $3,000 with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 25, 2018, our former CEO entered into an unsecured note payable for $109, with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On February 13, 2018, our former CEO entered into an unsecured note payable for $3,885, with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
Capital Contributions
During the year ended September 30, 2018, our former CEO paid expenses on behalf of the Company of $370. The transaction was accounted for as contributed capital.
On December 18, 2017, the Company issued 900,000 common shares with a fair value of $90,000 to JJL Capital Management, LLC, a company beneficially owned and controlled by our former CEO for services rendered to the Company by our CEO. The shares were valued at $0.10 based on the fair value of the shares.
On February 15, 2018, our CEO contributed $57,033 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On March 19, 2018, our former CEO contributed $170 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On April 9, 2018, a company controlled by our CEO contributed $25,000 to the Company to fund operations. The transaction was accounted for as contributed capital.
On May 21, 2018, our former CEO contributed $2,500 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On July 23, 2018, a company controlled by our CEO contributed $13,000 to the Company to fund operations. The transaction was accounted for as contributed capital.
During the year ended September 30, 2019, a company controlled by our CEO contributed $34,900 to the Company to pay for operational expenses. It was accounted for as contributed capital.
NOTE 8. CONCENTRATION OF CREDIT RISK
The Company relies heavily on the support of its president and majority shareholder. A withdrawal of this support, for any reason, will have a material adverse effect on the Company’s financial position and its operations.
NOTE 9. RELATED PARTY TRANSACTIONS
On January 13, 2012, the Company entered into a 12-month unsecured promissory note in the amount of $211,000. Interest accrues in arrears on the outstanding principal at the rate of ten percent (10.00%) per annum. Interest shall be payable on the last day of each quarter, commencing March 30, 2012, and continuing until the maturity date. Should the maker fail to pay the entire principal and accrued interest by the maturity date, the maker agrees that the interest rate shall increase to twelve percent (12.00%) per annum. On May 10, 2013, the Company and the related party agreed to extend the maturity of the loan for an additional year or until January 13, 2014. The loan maturity dates were further extended to January 13, 2016. On May 22, 2012, the Company borrowed an additional $32,714 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On September 17, 2012, the Company borrowed an additional $22,032 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On February 7, 2013, the Company borrowed an additional $28,773 from the related party, with the same terms, and on July 31, 2013, the Company borrowed an additional $30,000 from the related party, with the same terms. The loans maturity dates were further extended to February 7, 2016 and July 31, 2016, respectively. On December 20, 2013, the Company borrowed $2,500, on January 7, 2014, the Company borrowed $5,000, on February 6, 2014, the Company borrowed $5,520, the loans maturity dates were further extended to December 20, 2015 and January 7, 2016. On February 17, 2014, the Company borrowed $4,400 and on June 26, 2014, the Company borrowed $3,080, the loans maturity dates were further extended to February 6, 2016 and February 17, 2016, respectively. On November 15, 2016, the Company and the related party entered into a Release and Settlement Agreement whereby $342,519 in principal and $149,258 in accrued interest was forgiven. The transaction was accounted for as contributed capital. The total outstanding principal at September 30, 2019 and September 30, 2018 amounted to $2,500 and $2,500, respectively. Accrued interest at September 30, 2019 and September 30, 2018, amounted to $694 and $537, respectively.
During the year ended September 30, 2018, our former CEO loaned the Company $370. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On October 17, 2017, our former CEO loaned the Company $14,300. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On October 20, 2017, our former CEO loaned the Company $825. The loan is interest free and is payable on demand. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On December 18, 2017, the Company issued 900,000 common shares with a fair value of $90,000 to JJL Capital Management, LLC, a company beneficially owned and controlled by our former CEO for services rendered to the Company by our CEO. The shares were valued at $0.10 based on the fair value of the shares.
On January 8, 2018, our former CEO entered into an unsecured note payable for $3,000 with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 25, 2018, our former CEO entered into an unsecured note payable for $109, with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On January 25, 2018, our CEO loaned the Company $1,562. The loan is interest free and is payable on demand. On April 6, 2018, the loan was repaid.
On February 13, 2018, our former CEO entered into an unsecured note payable for $3,885, with an interest rate of 0% due upon demand by the holder. On February 15, 2018, the loan was forgiven. The transaction was accounted for as contributed capital.
On February 15, 2018, our former CEO contributed $57,033 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On February 22, our CEO loaned $342 to the Company, with an interest rate of 0% and due on demand. On April 6, 2018, the loan was repaid.
On February 28, 2018, our CEO loaned the Company $346. The loan is interest free and is payable on demand. On April 19, 2018. the loan was repaid.
On February 28, 2018, our CEO loaned the Company $865. The loan is interest free and is payable on demand. On April 6, 2018, the loan was repaid.
On March 19, 2018, our former CEO contributed $170 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On April 9, 2018, a company controlled by our CEO contributed $25,000 to the Company to fund operations. The transaction was accounted for as contributed capital.
On April 1, 2018, our CEO loaned the Company $167. The loan is interest free and is payable on demand. On April 19, 2018, the loan was repaid.
On April 19, 2018, our CEO loaned the Company $167. The loan is interest free and is payable on demand. On April 19, 2018, the loan was repaid.
On May 21, 2018, our former CEO contributed $2,500 to the Company to pay for certain outstanding liabilities. The transaction was accounted for as contributed capital.
On July 23, 2018, a company controlled by our CEO contributed $13,000 to the Company to fund operations. The transaction was accounted for as contributed capital.
On January 29, 2019, our CEO loaned the company $250 to pay for operational expenses. The loan is interest free and payable on demand.
On February 12, 2019, our CEO loaned the company $2,512 to pay for operational expenses. The loan is interest free and payable on demand.
On February 25, 2019, our CEO loaned the company $500 to pay for operational expenses. The loan is interest free and payable on demand.
During the year ended September 30, 2019, a company controlled by our CEO contributed $34,900 to the Company to pay for operational expenses. It was accounted for as contributed capital.
NOTE 10. SUBSEQUENT EVENT
On October 1, the Company’s CEO loaned the company $3,000 to pay for operational expenses. The loan is interest free and payable on demand.
On October 31, the Company’s CEO loaned the company $1,834 to pay for operational expenses. The loan is interest free and payable on demand.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2019. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of September 30, 2019, the Company’s internal control over financial reporting was not effective for the purposes for which it is intended.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over our financial reporting as of September 30, 2019 the Company determined that the following items constituted a material weakness:
● The Company does not currently have an active Chief Financial Officer to oversee the day to day transactions and operations, which ensures the timely and accurate identification and reporting of all necessary transactions.
● The Company does not have an independent audit committee that can review and approve significant transactions and the reporting process and provide independent oversight of the Company.
● The Company is dependent on related parties for funding and decision making, which is provided on a very limited basis, therefore accurate accounting, record retention and financial disclosures are not performed in a timely and efficient manner.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Controls over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth the name and age of officers and director as of September 30, 2019. Our Executive Officers are appointed by our Board of Directors and hold their offices until they resign or are removed by the Board. Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws.
Kai Ming Zhao (age 36)
Mr. Zhao has over ten years’ experience in environmental consulting for a wide range of industries and over seven years’ experience in general project management including business development, marketing, team building and supervision, quality control and client management. Since March 2007, Mr. Zhao has worked in the San Francisco office of Ramboll Group, a global leading environmental, engineering, design and consultancy company, where he focused on helping businesses and government agencies resolving challenging environmental issues including but not limited to permitting, environmental impact assessment, carbon footprint, greenhouse gas and pollution mitigations. In 2015, Mr. Zhao was promoted to Managing Consultant at Ramboll Group.
Mr. Zhao received a B.S. in Science of Earth System from Cornell University in 2006 and an M.S. in Environmental Engineering from the University of California (Berkeley) in 2007.
Director Independence and Board Committees
We do not have any independent directors on our board of directors. Our board of directors solely consists of Kai Ming Zhao, our Chief Executive Officer, who is not independent. Our board of directors does not have any committees, as companies whose securities are traded on the OTC Markets are not required to have board committees. However, if, at such time in the future, we appoint independent directors on our board we expect to form the appropriate board committees.
We currently do not have a standing audit, nominating or compensation committee. Our board of directors handles functions that would otherwise be handled by each of the committees. We believe that there is not a need for a nominating committee at this time because our board of directors consists of solely one director who is not independent and who is the only decision maker. At such point when we have independent board of directors we will need to establish a nomination committee.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Code of Ethics
We have not adopted a code of ethics that applies to our principal executive officer and principal financial officer. We intend to adopt a Code of Ethics as we develop our business.
Item 11.
Item 11. Executive Compensation.
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us for fiscal years 2019 and 2018.
SUMMARY COMPENSATION TABLE
(1) Mr. Zhao’s compensation for the years ended September 30, 2019 and September 30, 2018 amounted to $0 and $0.
(2) Mr. Silverman resigned as the sole director and officer on February 22, 2018 as a result of a change of control transaction. His compensation for the year ended September 30, 2018 amounted to $90,000.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
The Company has no employment agreements with its CEO.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of November 1, 2019, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.
(1) Through Santa Alba, LLC which is beneficially owned and controlled by Kai Ming Zhao, our sole officer and director.
(2) Based on 1,011,254 shares of common stock outstanding as of November 1, 2019.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Other than below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:
(A) Any of our directors or officers;
(B) Any proposed nominee for election as our director;
(C) Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our common stock; or
(D) Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
● the director is, or at any time during the past three years was, an employee of the company;
● the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
● a family member of the director is, or at any time during the past three years was, an executive officer of the company;
● the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
● the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
● the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Scott Silverman was not considered independent at September 30, 2018 because he was an executive officer of the Company and Kai Ming Zhao is not considered independent because he is an executive officer at this time.
We do not currently have a separately designated audit, nominating or compensation committee.
Item 14.
Item 14. Principal Accounting Fees and Services.
Audit Fees
For the Company’s fiscal year ended September 30, 2019 and 2018, we have incurred $14,000 and $13,000 respectively, for professional services rendered for the audit and reviews of our financial statements.
All Other Fees (including, Audit Related Fees and Tax Fees)
None.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
● approved by our audit committee; or
● entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records addressing the percentage of pre-approved audit fees. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
Item 15.
Item 15. EXHIBITS
(a) Exhibits
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ Kai Ming Zhao
Chief Executive Officer, Chief Financial Officer and Sole Director
November 12, 2019
Kai Ming Zhao
(Principal Executive Officer and Principal Accounting Officer)